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Washington Times - LUFT & VORONA: China's rare-earth monopoly

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U.S. should restart mining to end vulnerability

By Gal Luft and Yaron Vorona - The Washington Times

Wednesday, October 20, 2010

Original article here:

http://www.washingtontimes.com/news/2010/oct/20/chinas-rare-earth-monopoly/

Earlier this year, China announced a 72 percent reduction in the export quotas for rare-earth metals for the second half of 2010, sending tremors across America's industrial complex. Rare earths are a group of 17 metals vital to the production of precision-guided munitions, cruise missiles, radar and other defense systems as well as consumer electronics and renewable-energy technologies such as wind turbines, solar panels and hybrid vehicles. Such metals are often compared to the yeast in bread - small in proportion but huge in contribution.

The rationale behind Beijing's decision to cut exports: China produces 97 percent of the world's rare earths, and its fast economic growth requires that more of its metals production remain at home for domestic use. But last month's unofficial embargo on shipment of rare-earth elements to Japan in response to the detention of a Chinese fishing-boat captain whose boat collided with a Japanese patrol boat shows that for China, rare-earth metals are not only iPod ingredients but also tools of economic warfare. As Chinese leader Deng Xiaoping noted in 1992: "The Middle East has oil, China has rare earths."

It is not the first time China has signaled its readiness to use its rare-earth monopoly in such a way. Last summer, when the Obama administration imposed import tariffs on Chinese tires, the Chinese Ministry of Industry and Information Technology floated a proposal suggesting that the export of the rarest of the rare earths be terminated immediately.

China's domination over a global supply of raw materials key to America's military-industrial complex and its demonstrated readiness to use this domination as a weapon are undeniably a national-security vulnerability. Because of rare earths' unique role in maintaining America's technology work force, qualitative military edge and energy future, Washington should work to diversify America's technology metals supply chain and remove obstacles to building a competitive domestic rare-earth mining, processing and refining industry.

This should not be a tall order. After all, one-fifth of the world's known commercially available non-Chinese rare-earth reserves are concentrated in the United States. In fact, until the 1970s, the California-based Mountain Pass Mine (then owned by Chevron) was the world's largest supplier of rare earths. But in the decades since, China's lower production cost because of weak environmental enforcement and significant wage differentials has brought the U.S. rare-earth industry to extinction.

To restore America's industrial sovereignty, the U.S. should emulate China's success in taking over the rare-earths market. China has always ensured that its defense and energy policies are harmonized with supplementary resource policies that provide abundant raw materials of all sorts. The U.S. government, on the other hand, has no such policy synchronization. An April 2010 report by the Government Accountability Office stated that despite the metals' importance to national security, "the Department of Defense has not yet taken department-wide action to address rare earth material dependency."

Another reason for China's domination is research. China has two national laboratories devoted entirely to rare earths, and the Chinese Society of Rare Earths has 100,000 registered researchers. About 50 foreign companies are operating in the 3,850-acre Baotou Rare Earth Hi-Tech Zone in China's Inner Mongolia. Like China, the United States should support basic research and development and invest in academic activities that advance the domestic supply chain, primarily developing industrial processes that are less rare-earth intensive. The United States also should create geographic centers of excellence to improve methods for the extraction, processing, use and recycling of rare-earth materials.

Like China, the U.S. government also could support domestic rare-earth projects by streamlining the regulatory process associated with reviewing and approving permits for specific rare-earth mines located within the country, as well as through loan guarantees for domestic and international non-Chinese developments. The Japan Oil, Gas and Metals National Corp. (JOGMEC) and the Korean Resources Corp. (KORES), state-owned entities that provide assistance to Japanese and Korean companies in securing supplies of mineral resources, are one model to consider. With JOGMEC's support, Japanese companies struck a deal to set up a rare-earth mine in Vietnam and are working on a similar effort in Australia. KORES, for its part, this summer bought a 60 percent stake in a Chinese rare-earth company. These operations will ensure metals supply for Japan's and Korea's auto industries.

Ultimately, the responsibility for ensuring a supply chain of raw materials falls on the defense, automotive, electronics and energy industries. They need to recognize the risks of having a single source for their raw materials and invest in mitigating those risks. But industry cannot address this vulnerability alone. It is up to Washington to break China's rare-earth monopoly and ensure that American technology manufacturers never find themselves in the same situation their Japanese colleagues just faced.

Gal Luft is executive director of the Institute for the Analysis of Global Security (IAGS), and Yaron Vorona is director of the Center for Technology and Rare Earth Metals (TREM).

 

Congressional Research Service on the Rare Earth Supply Chain

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September 30, 2010

The Congressional Researh Service has published their analysis of the global rare earth supply chain. Mark Humphries, the Analyst in Energy Policy authored the concise report posted below.

 

China's Rare Earth Trade Weapon Aimed at America

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October 20, 2010

The Japanese arrest of a Chinese fishing crew was met with (unconvincingly denied) restrictions on exports of rare earth metals. Keith Bradsher at the New York Times reports that now China is halting shipments to the United States as well. Aside from direct shipments from China, US firms also receive rare earth containing components from Japanese manufacturers.

China's action against the US may be in response to America's announcement on Friday that an investigation into illegal trade practices would be launched. Bradsher reports that soon after, Zhang Guobao, Director of the National Energy Administration and Vice Chairman of the National Development and Reform Commission, said, “I have been thinking: What do the Americans want? Do they want fair trade? Or an earnest dialogue? Or transparent information? I don’t think they want any of this. I think more likely, the Americans just want votes.”

Perhaps the Chinese officials will deny this story as they did with the Japanese one. Regardless, the dangers of reliance on a single source for any critical resource is become more starkly clear as events unfold.

Read the full story here

http://www.nytimes.com/2010/10/20/business/global/20rare.html?hp

Krugman on Rare Earth Dependence

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October 17, 2010

New York Time Columnist Paul Krugman wrote an opinion editorial on America's dependence on Chinese rare earth metals.

He concisely says, "I don’t know about you, but I find this story deeply disturbing, both for what it says about China and what it says about us. On one side, the affair highlights the fecklessness of U.S. policy makers, who did nothing while an unreliable regime acquired a stranglehold on key materials. On the other side, the incident shows a Chinese government that is dangerously trigger-happy, willing to wage economic warfare on the slightest provocation."

The lessons, as he points out, are:

  1. We need to develop non-Chinese sources of rare earths
  2. China has the tendency to act irresponsibly, and are not hesitant to wage economic warfare to achieve its goals.
In the opinion of the TREM Center, one solution is for all branches of government to join with members of the mining industry and the defense and cleantech industry to ensure that national defense, energy, international trade and resource policies are approached holistically.
Read his commentary here:

Japan and Mongolia Cooperate

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October 11, 2010

In the year 1271, the Mongolian Kublai Khan became the emperor of China. 3 years later, he launched an armada of between 500-900 ships to attack Japan. 736 years later, facing another Chinese threat relating to access to raw materials, Japan is joining forces with the Mongolians.

According to the Wall Street Journal, in the beginning of October, Japanese Prime Minister Naoto Kan and Mongolian Prime Minister Sukhbaatar Batbold agreed to cooperate to develop rare earth resources in Mongolia during a meeting in Tokyo.

 

Development of mine resources in resource-rich Mongolia will benefit both countries. Our country's research team will launch exploration of rare metals this month," Mr. Kan said.

 

Senate Bill to Study Raw Materials of Alternative Transport

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October 7, 2010

The Promoting Natural Gas and Electric Vehicles Act of 2010 (S.3815) has been placed on the Senate calendar. The bill, introduced by Senator Harry Reid (D-NV), Senator Orrin Hatch (R-UT) and Senator Bob Menendez (D-NJ), will amend the Internal Revenue Code of 1986 to reduce oil consumption and improve energy security.

Section 2023 of the Act calls on the Secretary of the Interior should conduct a study that:

  • (1) identifies the raw materials needed for the manufacture of plug-in electric drive vehicles, batteries, and other components for plug-in electric drive vehicles, and for the infrastructure needed to support plug-in electric drive vehicles;
  • (2) describes the primary or original sources and known reserves and resources of those raw materials;
  • (3) assesses, in consultation with the National Academy of Sciences, the degree of risk to the manufacture, maintenance, deployment, and use of plug-in electric drive vehicles associated with the supply of those raw materials; and
  • (4) identifies pathways to securing reliable and resilient supplies of those raw materials.

Senate Committee on Energy and Natural Resrouces Hears Testimony on Rare Earths

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September 30, 2010

Senate Energy and Natural Resources Committee held a hearing to examine the role of strategic minerals in clean energy technologies and other applications as well as legislation to address the issue, including S. 3521 the “Rare Earths Supply Technology and Resources Transformation Act of 2010”.

The witnesses were:

 

Panel 1:

The Honorable David Sandalow, Assistant Secretary for Policy and International Affairs, Office of Policy and International Affairs, U.S. Department of Energy and TREM10 Keynote Speaker

Panel 2:

 

  • Dr. Roderick Eggert, Professor and Division Director, Division of Economics and Business, Colorado School of Mines
  • Mr. Preston Rufe, Environmental Manager, Formation Capital Corporation
  • Mr. Peter Brehm, Vice President, Business Development and Government Relations, Infinia Corporation

 

Video of the hearing can be seen here:

http://energy.senate.gov/public/index.cfm?Fuseaction=Hearings.LiveStream&Hearing_id=192e1208-95df-db80-4f96-b6318e73a56d

Fleet Magazine Focus on EVs with TREM Center

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October 7, 2010

The October issue of Fleet Magazine, which focuses on maintenance issues for the maintenance of America's vehicle fleets, features an article on Electric Vehicles. In his blog, Editor David Kolman states, "TREM (Technology & Rare Earth Metals) and IAGS are essential parts of the clean technology and defense industries."

An excerpt from the interview is available on Kolmans blog:

http://www.fleetmag.com/interactive/2010/10/01/electric-vehicle-technologies/

New House Bill to Support Rare Earth Metals Center

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September 26, 2010

In the wake of the China/Japan territorial dispute which brought rare earth and technology metal control into the spotlight, a new bipartisan bill has been introduced into Congress. On September 22, 2010, Representative Kathy Dahlkemper (D-PA) introduced the Rare Earths and Critical Materials Revitalization Act of 2010 into the House of Representatives along with TREM10 keynote speaker Representative Mike Coffman (R-CO), Representative Jerry Lewis (R-CA), Representative Bart Gordon (D-TN) and Representative Russ Carnahan (D-MO).

The bill requires that the Department of Energy establish a program of research, development, demonstration, and commercial application to assure the long-term, secure, and sustainable supply of rare earth materials sufficient to satisfy the national security, economic well-being, and industrial production needs of the United States.

The bill further requires the creation of a Research and Development Information Center. This Center will serve as the repository for scientific and technical data generated by the research and development activities funded under this section. It will also assist scientists and engineers in making the fullest possible use of the Center's data holdings and seek and incorporate other information on rare earth materials to enhance the Center's utility for program participants and other users. Furthermore, the Center will provide advice to the Secretary concerning the research and development program under subsection and finally, it will host conferences, at least annually, for participants in the rare earth materials program and other interested parties to promote information sharing and encourage new collaborative activities.

The Technology and Rare Earth Metals Center, currently a division of the Insititute for the Analysis of Global Security, is proud to hold our annual conference this year on March 22-23, 2010 in Washington DC for members of the US Government, metals companies and technology OEMs, as well as members of academia.

 

[Ed: Thanks to Megan Moore for her assistance. yv]

 

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