This diary is in response to eKos: Greenpower, Tech & Comm Hit by China REE Export Cuts published by FishOutOfWater on December 31. Since I feel that diary did not present a complete picture I would like to broaden the discussion, so I request you first read Fish’s diary for context before proceeding here which will make both more meaningful since I avoid repetition. Think of them as companion diaries, we are not compeating.
The teaser:
Rare Earth Elements (REE), also commonly referred to as Rare Earth Metals or Rare Earth Oxides are strategic commodities used in many High Technology products as direct materials or processing agents from optics and electronic components to motors, batteries, windmill generators and missiles that shoot-down bad guys. If you are reading this you are an REE end-user and consumer.
China presently produces 97% of REE global demand. Last spring, China announced its intention to reform and strengthen regulation of its REE industry and institute controls to conserve reserves by imposing quotas, lighting a firecracker heard around the world.
More fun after the flip !
Rare Earths are not rare. In fact, some are amongst the most abundant minerals on earth. They are called that because, in natural form, they are chemically dispersed in low concentration in ores requiring a large volume of ores to be mined and refined to produce a small amount of materials.
This means it is necessary to level mountains or strip plateaus, much as is done in coal mining, to produce it in bulk. Once you obtain ore, it must be processed in acids to extract the material and then the acids and tailings or by-products must be disposed. That makes it a dirty and dangerous proposition with a high environmental impact and historically, it has resulted in pollution and environmental damage no one with half a brain would like in his back yard. Let’s call it NIMBYtastic.
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O.K.., let’s have some fun with a mind mapping game.
Suppose you are an environmentalist, an advocate of renewable energy and would like to replace some dirty, polluting coal-fired power plants that require mountain-tops to be removed to mine coal, with some bright, shiny, non-polluting windmills. Great idea, no?
So you go down to the local hardware store for a bag of REEs to make some Rare Earth Magnets for your generators, put together your windmill, install it in Farmer Brown’s pasture and give it a whirl. Problem solved.
Lovely.
Unless you live in the town where the REEs are mined and refined. Or maybe used to live there before the mountain was gone, the soil eroded and the river turned into acidic soup with radioactive residues.
Damn, someone needs to find a new town; sure glad it’s not me.
This isn’t very much fun, let’s play something else. I could use a good Fairy-Tale about now.
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Once upon a time, in a universe far-far away when life was simple, there were some hard-working and resourceful folks who built a shining city on a hill. The famers farmed, the bakers baked, the miners mined and the engineers scratched their heads and talked to themselves a lot but invented lots of insanely great stuff. After awhile, they grew prosperous and worked their way up the value chain until they were quite prosperous and soon became the envy of the world. Things were so good, Mr. Banker got a little fat, but he was an optimistic and jolly sort of chap and was always willing to make a loan to the folks in town so they could have nice houses, drink beer with their friends and send their daughters to piano lessons. Life was good for everybody. Well, not quite everybody, but most of the neighbors, at least. The others? Some folks are just lazy.
Down the hill was another town where folks weren’t so lucky. They were hard-working and honest too, but their town was kind of old and run-down and their mayor and city council had some strange ideas and didn’t seem to manage things very well, and besides, they talked funny and all dressed the same. Who can understand such crazy people? No wonder they had so many problems.
One day, the Mayor and the Chamber of Commerce were invited to a banquet down the hill, and when they returned they said “Hey, they’re not such bad folks. They are poor, but they seem to be pretty hard working and have family values just like us, and they’re damn good ping-pong players. Maybe that place has potential. It seems they’d like to do business with us, so let’s give it a try. But if you go to dinner with them, don’t drink the wine because it’s strong stuff and tastes terrible!”
In not too long, some businesses set-up shop down the hill taking the dirty, unpopular work so the other folks could have a job and it seemed to work out well because they had a real knack for making simple things, worked for a reasonable price and never seemed to complain. And up on the hill, people were happy too because after the mines and the factories moved down the hill the city was cleaner and brighter than ever, store shelves were bursting with things anyone could afford and folks didn’t have to work so hard anymore – why some had so much time on their hands they didn’t know what to do with themselves anymore. Imagine that!
Down the hill things seemed to be looking up too. The mayor had a new car, lots of the workers built new houses, and the farmers worked as hard as ever. Except ... well ... let’s just say it wasn’t a place you would want to live because compared with the city on the hill, it was kind of a dusty, dirty place and sometimes the river turned a strange color and smelled bad, and the fishermen didn’t seem to be quite happy. But that wasn’t such a bad thing because everyone had mobile phones.
Then one day, something odd happened. The weather changed. Mr. Banker ran to the Mayor’s office looking pretty worried and closed the door for a long time, and afterward Mr. Mayor made a speech to tell the people the town was in trouble. It seems the bank was empty, business wasn’t really all that great and everyone was going to have to tighten their belts and make some sacrifices, because if the bank couldn’t get a loan from the city, how could the town stay in business? That would be bad for everyone.
Meanwhile, at the bottom of the hill, the workers went on strike, the fishermen started picketing city hall, with signs that said “We want fish” and the mine foreman marched up the hill to see the Owner and said “I quit! I’m tired of all this dirty work, I want to run my own mine and that’s our land!” Imagine that; ungrateful to say the least.
What was happening? Why was everyone suddenly so unhappy? And what the heck was going on with the weather? It seemed every day was hotter and hotter. Was it because everyone was so mad? Oh, that’s impossible, humans can’t change the weather, maybe the air conditioner was broken.
What were they to do?
Gosh, I’m tired of this, what kind of Fairy-Tale is this anyway? Has Harry Potter run amuck? Get me out of here, I need a reality break. This fanasy crap is making my brain hurt. Unbelievable nonsense.
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I have a better idea, let’s act like adults and cut to the chase.
Warning : NSFW - Chinese Rant
The party is over, folks.
The days of cheap, undervalued REEs that come at the cost of environmental disaster in China are over. We have had enough of illegal wild cat mines that poison our rivers, poison villages and get us kicked in the ass for thanks while middle men and market speculators get rich off our backs. Wall Street is not in charge of this. Let them cry in their lattés and piss their Gucci underpants if that is what they want to do but it’s time for China and the World to move on.
World demand of REEs is rapidly accelerating and expected to approximately double in the next 3 years. China was never going to supply all those materials, that is fantasyland. The fact is, at present demand levels, China has about 20-30 years of reserves of the strategic REEs needed for high volume applications and it needs to manage that because we need to build windmills and high-tech batteries and electric vehicles, etc, etc, etc.
China spent twice what the US did on clean energy infrastructure in 2009. We are a developing country with a huge industrial output with just a fraction of the per capita energy use and CO2 emissions of the US but 4 times the population and our power demands are increasing and that is not going to change.
The only question is how it is generated and how efficiently it is used and our national energy plan(yes we have one and enforce it to the point of shutting down laggards) requires us to continuously reduce energy use per unit of GDP because we have already figured out China is not the US and we don’t get 3 cars per family. Ever.
Some smart aleck in RL Miller's coal diary proposed trading coal for REEs. Very clever. Do you really want that? No thanks, keep your coal and force us to build more windmills, that’s my opinion. Just thought I would share that.
I’m sorry, but this is not the 19th Century and Obama is not King Leopold and you don’t get to dictate a situation where wealthy countries take all the natural resources they want for a pittance and convert it to cash on the way to the military-industrial complex. Want some rare earth magnets? Buy them, they are a small fraction of the cost of the products they are used in and it’s not going to kill anyone.
Can’t get enough? Fine, dig your own mine, the US has larger reserves than China and it will put people to work. The price will go up, Molycorp will make a mint and you can thank us later for being such assholes. The Lord works in mysterious ways. Trust me, you're going to love it.
And let’s get the record straight. With all due respect to the Corporate MSM and all the Democrats and Republicans in Congress bashing China and whining about the WTO:
:: No country exercises more strict strategic export controls than the USA. You keep all the good stuff for yourself and your buddies and give the finger to whoever doesn’t like it. Grow up. Don't like it? Sue me.
:: When China announced it’s intention to crack-down on illegal mines and bring it’s REE mining & refining industry under strict controls, it requested you to PLEASE start developing other sources, preferably your own so the world doesn’t have to depend on one country to supply the world. Sounds sensible to me. Were you listening?
:: You complain you can’t compete because of “cheap Chinese exports”. That just got fixed, we kicked the speculators in the nuts and now they are running to you to buy into your mines (Bloodsucker H/T to Sumitomo). You’re welcome. Have fun. And BTW, when China bought the last US mine 20 years ago they were the only bidder, you could not unload that money loser and environmental blackspot fast enough.
:: Reduce, reuse, recycle, replace. Again, the price just went up and there are no more excuses not to. Japanese are already working on it. (Actual H/T to Hitachi and Sony, you are setting a good example.) That dead disk drive is a gold mine. Ditto the household appliance motors, auto parts, etc.
And:
:: Dear Greens – we don’t hate you. I’ve been an environmental activist in China for almost 20 years. Cut the CT and victimization crap and let’s work together. We should have all learned a lesson about undervalued natural resources with fossil fuels. Want to repeat that? New word: peakREE. Steal it.
:: Dear kossacks. Stop complaining about DK4, it’s a tool and I’m learning how to use it and so should you. Environmentalism begins with me. Let’s work together to get the message out and explain the ABC’s to people so they can start making better personal decisions to lower their carbon footprints and environmental impact and start supporting clean energy and mass-transit, and ... um ... creating jobs. That is the mantra, isn't it? The NIMBYs on this site make me crazy. Are they really Progressives?
:: End of Adult Section ::
Thanks for reading, kids. Thanks for thinking.
Have fun! Debate!
HFNY!
:: :: Update :: ::
Wow, Rec Listed - Thanks everyone for the great response and all of your comments, I'm back up and will try my best to reply.
Thanks for reading and debating these issues, I really didn't expect this over a holiday.
Cheers.