China Begins Stockpiling Rare Earths, Draws WTO Attention

eldavojohn writes "A report by China Securities Journal claims that China is now stockpiling rare earths although it has not indicated when this stockpiling started. Many WTO members have complained about China's tightening restrictions on exports of rare earths while China maintains that such restrictions are an attempt to clean up its environmental problems. A WTO special conference scheduled for July 10th will hopefully decide if China's restrictions are unfair trade practices or if the US, the EU and Japan are merely upset that they can't export their pollution and receive rare earths at low prices. Last year, China granted its mining companies the right to export 30,200 tons but in actuality only 18,600 tons were shipped out of country."

Comments

Smart but not nice

[GameboyRMH]

China thinks ahead, but doesn't play nice.

They could be doing it not just for practical purposes but possibly for setting up a DeBeers of rare earth metals.

Re:Smart but not nice

[dutchwhizzman]

It's not as if there is no other source than Chinese land for those minerals. DeBeers just buys all the diamond mines to get a monopoly, China can't do that with rare earth mines, so that won't happen.

Re:Smart but not nice

[benjfowler]

They're tried.

The Chinese (through various proxies) tried buying Australian rare earth mines in Australia. There was political dissent within Australia, so the Chinese deployed viruses on the computers of MPs and Australian miners to get an inside track of the negotiations.

Can't remember how it ended, but I think that basically, the Chinese were caught doing the wrong thing, the negotiations ended, and the Chinese left in a huff and a blizzard of threats.

Re:Smart but not nice

[ShanghaiBill]

... setting up a DeBeers of rare earth metals.

Diamonds are valuable only because they are rare. If the DeBeers cartel fell apart, the value of diamonds could quickly collapse, because demand would likely go down with falling prices (the opposite of normal supply/demand). But rare earths are different, because they are actually useful. If they became more plentiful and the price started to decline, many alternative uses would open up, which would push demand back up, and provide price support. Rare earths are used in things like super-magnets, catalysts, specialty alloys, etc. These could be used much more widely if they were cheaper. There is very little risk of a price collapse.

 

Re:Smart but not nice

[Archangel Michael]

Diamonds aren't that rare. In fact, it is less expensive to create man made diamonds than it is to mine them. Diamonds are expensive because DeBeers has convinced women that they need a big fat expensive but utterly useless gem to get married. As for the manufactured diamonds, they are indistinguishable from real diamonds except for the fact that they are typically more "pure". DeBeers is now selling a machine that can tell the composition of diamonds and thus distinguish between natural vs man made diamonds, AND also verify if the diamonds are from their "legit" sources (no blood diamonds).

"Diamonds are a girls best friend" and "Diamonds are forever" indeed.

Re:Smart but not nice

[h4rr4r]

Because there are lots of them and more and more would open.

Re:Smart but not nice

[meddle99]

This is what happens when you present one fact and leave out the context. Most of the workers at the factory can't afford cars, and would probably drive them to work if they could. Are you suggesting that poverty is a good way to improve the environment?

Re:Smart but not nice

[h4rr4r]

Better yet, give her gold or silver.

They can be bought and sold via the oz price and she could get a fair price for them. Resale value of jewelry is horrible.

Re:Smart but not nice

[MaWeiTao]

Naturally occurring diamonds are rare. But the overall scarcity of diamonds is a man-made affair. It's easier, and cheaper, to produce diamonds artificially. Not only that, but lab produced diamonds can be made even more purely than what is normally found in nature. De Beers however, has managed to severely limit the production of artificial diamonds. Nearly a decade ago, De Beers even paid a paltry fine for colluding with GE to fix prices on industrial diamonds. Interestingly enough, diamonds have been discovered around the world in areas outside of De Beers control. So their decades long monopoly has eroded.

China, however, is not even close to being in the same situation when it comes to rare earths. Rare earths is relatively plentiful. Mining has stopped in the US moreso because of environmental regulation and cost than because of scarcity. China is gambling that it will be too difficult and costly for Western nations to reopen or start up new mines and that they'll eventually cave. The logistics of overseas manufacturing are getting to complex, inflexible and expensive. Given the rise to automated manufacturing the benefits of cheap labor are dwindling. This is giving rise to one of two scenarios: in-source manufacturing or move it where it's substantially cheaper. China is already trying to hedge its bets by expanding into Africa. But at that point why not just cut out the middle man?

The point being that China is getting too ambitious for it's own good; they're thinking too highly of their position in the world. Yes, the China owns a bit of American debt. What's the worst case scenario? The US defaults on it's debt? It's in China's best interest that the US continue to thrive. The US, on the other hand, just needs a cheap manufacturing base. That could be anywhere; Southeast Asia, India, Middle East, Africa, South America, Detroit.

The main thing China has going for it is experience and established infrastructure. But in the scheme of things those are easy challenges to address... I don't know about you, but I've been noticing an increasing number of products made some place other than China.

Why shouldn't they?

[Gothmolly]

The minerals are theirs; why shouldn't they keep them?

Re:Why shouldn't they?

[cockpitcomp]

Because they agreed to free trade in return for open access to markets in the WTO.

Re:Why shouldn't they?

[BMOC]

US: I think you should share the rare earths, China. Is that so hard?
China: Well, no.
China: ...and yes. Now it comes to it, I don't feel like parting with it. It's mine, I found it. It came to me!
US: There's no need to get angry.
China: Well, if I'm angry, it's your fault.
China: ...it's mine... my own... my precious...
US: Precious? It's been called that before, but not by you.
China: Oh, what business is it of yours what I do with my own things?
US: I think you've played god with the international economy quite long enough.
China: You want it for yourself!
US: China! Do not take me for some conjuror of cheap tricks! I am not trying to rob you. I'm trying to help you.

Re:Why shouldn't they?

[thePowerOfGrayskull]

The above best read using Cartman's voice for China, and Mr Mackey's voice for US.

Re:Why shouldn't they?

[fuzzyfuzzyfungus]

I think that he managed to suggest that, even after starting a land war in Asia, those terrifying greenies with their incredible political power would still rank among his serious concerns... Impressive.

Re:Why shouldn't they?

[Anonymous Coward]

Two pieces of advice:
Never get involved in a land war in Asia.
Never go against a Sicilian when death is on the line.

Perhaps appeasement for business & China was b

[sethstorm]

Even if it harms the businesses and the fellow travelers that aid and abet such a hostile regime, it is time that the world plays hardball on China.

Things like this are why Faustian deals of getting a pliant slave-labor workforce are always a bad idea. Trade is no excuse for appeasement.

Hmmmm

[Vinegar Joe]

So why isn't the WTO complaining about OPEC?

Re:Hmmmm

[cpghost]

Why should it? OPEC are exporting their oil while China is withholding its Rare Earths from being exported. WTO could complain about OPEC if OPEC refused to export oil (which it doesn't), and if it had a near monopoly on it (which it doesn't either).

Re:Hmmmm

[ColdWetDog]

The point being is that OPEC sets a ceiling on how much oil it pumps out each month. If you are interested in $2 / gallon gasoline, you want OPEC to produce flat out and, in fact, punch wells in every square foot of space you own.

If you're OPEC and trying to manage a non renewable resource, you don't want to do that. While OPEC isn't the only source of oil (and neither is China the only source of Rare Earths), they produce enough to partially control prices.

Same with China.

Buy cheap, sell dear.

Wait

[SaroDarksbane]

Just so I have this straight, China unfairly damages the US economy when they:

1. Trade low-cost goods with us.
2. Don't trade low-cost goods with us.

Those bastards! *shakes fist*

Re:Wait

[i kan reed]

They sell low cost consumer goods by manipulating exchange rates.
They don't see low cost raw materials by manipulating supply.

Both sides function as pro-Chinese manufacturing, anti-US manufacturing.

Re:Perhaps appeasement for business & China wa

[benjfowler]

They can't and won't. They're afraid of China.

The world will eventually regret not opposing the rise of China, because they will be bullies 100 times worse than the Americans at their worst, with the added bonus that the Chinese are fiercely xenophobic and have a massive chip on their shoulder from their "100 years of humiliation".

I'm looking forward to an age of oppression and tyranny under the boot of the Chinese Communist Party.

Double Standard

[Anonymous Coward]

I thought that this is what the Free Market is all about. Why do I have to hear my country's (USA) leaders complain ONLY when it doesn't benefit us? It's not like we're an impoverished nation. China can do whatever they want, and we can pay them for the resources or not buy them. It's not like we can't survive without them providing rare earth metals. So tired of the hypocritical whining ONLY when things don't go our way.

Re:Double Standard

[thrich81]

This is where the "free market" and "free trade" as practiced in the US now (everything done by private companies with short term profits above all) fails. When some entrepreneur tries to ramp up production of rare earths in the US, the Chinese will release enough of their stockpile to put him out of business, similar (but not exactly the same) as for solar panel production lately. The US should just close its market to Chinese produced goods which incorporate Chinese produced rare earths unless US manufacturers have the same access to the Chinese rare earths.

Re:Double Standard

[magarity]

I thought that this is what the Free Market is all about

There are always comments like this whenever articles about trade problems come up and I can never tell whether they're honestly in the dark about how free trade and markets work or if they're just snarky trolls.

The second sentence of the article clearly states that the Chinese government is buying up and stockpiling the material in question. Sometimes it's rare earths, sometimes some other material. Whatever the commodity, the definition of free market operations is that individual businesses buy and sell in competition with each other, When governments get involved then it stops being a free market to one degree or another .

Sure, the USA hardly has a model free market system due to regulatory oversight, taxation, subsidies, etc, but it is *relatively* free in comparison. The US government doesn't stockpile much and when it does, it's a rare case that it's trying to actively influence international markets. Mainly the US government just messes around with protectionist tarriffs with the international market and various subsidies for the domestic market but outright stockpiling to influence markets almost never happens. This stockpiling operation by the Chinese government is an extremely "up yours" move and thus all the fuss.

Meanwhile, if an individual non-governmental player decides to stockpile a resource as a competitive strategy against other players, that would be a free market action. Perhaps it's impossible to have free market operations in a country such as China where the government takes such a active role but that's a different problem. It's not a cause to make a snide remark about free markets.

Re:Except we may have just as much

[cheetah]

Yeah, but we also have environmental regulations that make it VERY difficult(costly) extract the Rare Earth Elements. It's these environmental regulations that is the only reason that China is the leading producer of these elements. Getting this stuff out of the ore is a rather nasty processes which is expensive to do in the US.

Also until recently it was not clear it was worth extracting these elements. I know that there was a large mine that used to produce much of the worlds supply in the 80's-90's located in California. They shutdown because of the regulations and the fact that they couldn't compete with the low cost of stuff coming out of China. At that time it wasn't clear that these elements were that vital. Long term this action will cause other countries to re-open old mines or start extraction of new deposits. Rare-Earth deposits aren't really that rare it's the concentration of these elements in the "ore" that are low which is why they are called "rare".

This action by the Chinese has only caused people to start looking for new deposits and different methods of extraction. Last I heard, the Californian mine is in the process of being re-opened and should start producing in 2013.

Molycorp already on line

[Animats]

Molycorp, which owns a big rare earths mine at Mountain Pass, California, is back on line. That mine used to supply 100% of US demand, plus exports. It was shut down in 2002 due to cheaper rare earths from China. Now it's back.

Rare earths aren't that rare. They're just present in small concentrations. So mining produces huge volumes of waste for small amounts of product. The big rare earths mine in China is an environmental disaster area. The one in California had to comply with US and California regulations. At current rare earths prices, that's not a problem. (They do, however, ship some of the sludge to Nevada through a 20 mile pipeline. Really).

A year from now, rare earth supplies won't be a problem. Then people will be bitching about the Molycorp monopoly.

Re:Molycorp already on line

[WindBourne]

Molycorp went out first time because China was dumping and CA was after them to clean up (but mostly China's dumping).
Right now, it appears that China is building a large stockpile so that they can dump it on the market and destroy Molycorp.

Pump and dump?

[erice]

Stockpiling does two things:

1) In the short term it limits supply, causing prices and profits to rise.
2) In the medium term, it gives the Chinese the means to flood the market, driving out new competitors and restoring their near monopoly.

Rinse, lather, repeat

Re:What the hell

[GameboyRMH]

You guessed my location wrong too.

I can now narrow your location to Alberta based on your sensitivity towards jokes about the US.

Re:What the hell

[Archangel Michael]

unfair places of the world full of stupid people doing it to themselves

Allowing people to do stupid shit to themselves is my idea of "fair". What is unfair is expecting the rest of us to bail out their stupidity in the name of "fairness" or whatever. Sorry, but trying to fix people's idiocy doesn't accomplish a thing except make a few people feel better about themselves as being some form of superior or another.

Stupid should hurt. That is how some people learn (and often the ONLY way they learn)