Rare Earths, your phone and the Environment

Ever heard of Neodymium or Dysprosium? Probably not. Very few have heard of rare earth elements and fewer know what they’re used for. Yet Rare Earth elements are the reason your phone is smaller and your TV thinner. In the 70s China realized the value of these materials and today they have a complete monopoly over the industry.

In 1992 Deng Xiaoping said: “The Middle-East has oil, China has rare earths”. Mines were discovered in Mongolia and over the next decades, production was developed inside of China and mines were acquired all over the world by the Chinese. Little by little, the Chinese came to monopolize one of the most important industries.

Some Rare Earth uses:

– To make powerful magnets used in loudspeakers and computer hard drives to enable them to be smaller and more efficient
– Used in camera and telescope lenses
– Catalytic converters in cars, enabling them to run at high temperatures
– To create strong metals for use in aircraft engines
– Used in X-ray and MRI scanning systems, and in television screens

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It goes without saying that without these minerals, many of the technologies that we have today could not exist.

Yet, it took the world 20 years to realize that the Chinese were monopolizing the rare earth industry. Today they control 95% of the industry. With such dominance in such an important market, they can force other countries to manufacture their products inside China/Mongolia. China’s vision is to increase industrial utilization of rare earth elements in order to lure more companies to set up their manufacturing operations in China/Mongolia. Mongolia on the other side has a vision of becoming a major industrial base.

The Chinese/Mongolians don’t want to be perceived as just miners anymore, they want to become Germany/Japan. They want companies to created top-notch products on their land. They implemented a cap on exports and forced companies to manufacture in China if they wanted access to rare earths.

Surely, this is an ideal scenario for them as they will be able to create jobs, grow their GDP and become more industrialized. However on the other side, the west is now forced to move whole production units to China/Mongolia to have access to these materials. Tech firms can be spied on more easily and their copyrights can be compromised.
The winner in all of this? When there is a clash of Titans it is the lawyers that win.

With few regulations from the Chinese government and a goal to dominate the industry by producing at a lower price than other nations, China was able to squeeze American mines out of business. They were able to achieve this by lowering their prices. And they were able to lower their prices because they did not treat radioactive waste.
Lately, the Chinese government has been securing its industry by restricting export quotas on rare earth elements, increasing taxes, closing smaller illegal mines and consolidating larger ones to manage them more effectively.

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The US, Europe and Japan are fighting against China’s dominance of Rare Earth.
New mines have started to open all around the world. However China could squeeze them out of business by lowering rare earth prices. According to Xu Guangxian, China’s father of rare earths, Japan and Korea have built up reserves for 20 years of consumption by taking advantage of low market prices before 2008 when china began to restrict production. China hasn’t set up a stockpiling yet and if what they are saying about their resources starting to deplete is true, they might even continue to increase their control by increasing regulation and stockpiling.

Managing a rare earth mine is different from a coal or Gold mine. Rare Earths produce toxic waste that needs to be processed and cleaned up. They can be as hazardous as nuclear plants.

Whole villages in Inner Mongolia have been evacuated after reports of high cancer rates associated with numerous rare earth refineries there. Even worse, the Yellow river, nourishing more than 150 Million people, could be contaminated if no control is employed.

Like anything that is abundant, it gets taken for granted and efficiency decreases.
Indeed, the abundance of rare earths in China/Mongolia led to ignore efficient production and safety regulation. People started showing up and opening new mines. Cartels formed and efficiency decreased. The miners operated with little concern for the environment and today whole communities are feeling the consequences. It is only in the past few years that stronger environmental controls have been set.

Human beings are like that. They wake up only when they are at the edge of the pit.
A Native American proverb popularized by Greenpeace, is a good reflection of what is happening in the rare earth industry.

“Only after the last tree has been cut down.
Only after the last river has been poisoned.
Only after the last fish has been caught.
Only then we will realize that money cannot be eaten.”

…In this case phones cannot be eaten.

Georges Boustany

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  1. Recapping 2013 | Buzzonomics - January 11, 2014

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