Can we now please end the rare earths fear-fest?
Saturday, May 21, 2011 at 10:20AM 
The hand-wringing on this one has been so boring. The world allows China to become the near monopolistic supplier of rare earths because nobody apparently wants to spend the money and suffer the environmental hassles of keeping their own mines open. Then China, as it moves into higher-end production modes, starts, with its usual backward attitude, to obsess over the security of supplies. Export controls are discussed and then implemented. Then the West is shocked - shocked! - to discover this huge vulnerability only a couple of decades in the slo-mo making, and op-eds are cranked ad nauseum about this significant national security threat.
Predictably, Congress blows hard on the subject, and voila! The owner of the once-booming US mine is now seeking investments for "secure" supplies. Rest assured this is happening pretty much anywhere else in the world where not-so rare earths are actually found. Crisis averted! Whew!
Now, pontificating types are opining that rare earths symbolize America finally waking up to being "disemboweled" by China and India all these years and finally starting to take back those jobs!
It is all good theater, and Molycorp Minerals should clean up on their US mine, but historic turning point it is not. It's just another example of rising demand creating temporary scarcity and clever people cleaning up on that basis, with their local congressman as front-man. God bless them. But spare me the larger meaning.
Reader Comments (3)
Very good. A short, but effective article against this China threat-hysteria about rare earths.
This shows me two things: That China has a very intelligent resource management. And that the globalized world with its market forces is not controlled by China to the point that it cannot counterbalance short- and medium term imbalances. Tom Barnett reminds me sometiomes of the French postmodernist philosophers who deconstruct the grand narratives--in this case the China Threat.
The Chinese Threat--last news: they are controlling the rare earths. New version: China was the transitstation for rocketdelivieries from North Korea to Iran.That´s what a UNreport says. Reuters and AFP published these news, but it is interesting that they don´t tell you WHEN this happended. Northkorea and Iran had extensive cooperation in the field of rockettechnology-knowhow transfer till 2001, at latest 2003. But then it stopped.The new Iranian missiles are not in anyway comparable to or are based on Northkorean technology. Iran managed it to bring ist first sateliite Orbit into space, while the Northkoreans never did or were able to do.This means the UN report is about old times, the result was that there was no real technology transfer between Northkorea and Iran. At a time when US special envoy Bosworth is going to Southkorea, Jimmy Crater and some European politicians are going to Northkorea and Kim Jung-Un is going with his uncle Jang Song Taek to Peking--means: preparetions for new dialogues--this breaking news of a new Axis of Evil: China- Northkorea-Iran --tries to distrurb the reapproachment between all sides. Like the rare earth-China threat, this seems to be another China- Threat story which wants to construct a new Axis of Evil.Maybe >Tom Barnett should analyze this grand narrative and deconstruct it.
You're pretty much correct, but I'm not sure when or if Molycorp will ever again turn a profit on mining rare earths; it last did that in the 90s. The Molycorp business model concept of mine to magnet is something that no one has ever done in one company before. Its a great story and it has resulted in a large market cap for a speculative venture. This however is not uncommon. Look at First Solar or Tesla.
Mining the street as they call this type of venture is a lot easier than doing each and every step of a supply chain for a high tech product. If Molycorp can pull that off it deserves every cent of its share price.
Note well that if Molycorp actually achieves its goal of producing 40,000 metric tons of rare earths by 2013 then it will also be turning the 8,500 tons of neodymium so produced into 27,000 tons of rare earth permanent magnets and will thus produce nearly 1/3 of the world's rare earth permanent magnets projected for that year. It will simultaneously have constructed the largest in the world and the largest ever built rare earth separation and refining facilities.
I want to go on record as asking how Molycorp will be able to sell all of those magnets into a market now dominated by Chinese manufacturers for volume and Japanese manufacturers for quality and price. If as I am told Hitachi will be Molycorp's "partner" in the magnet making then what percentage of the profits will Molycorp retain. Hitachi needs nothing but raw material from a company such as Molycorp while Molycorp would need all of the magnet making technology. Why would Hitachi give up such patents and proprietary knowledge just for raw material supplies? The Chinese have offered them the same deal for years, and Hitachi never took up that offer.
Time will tell.