CORRECTION: The original version of this story misidentified the chief executive of Molycorp, a mining company. He is Mark Smith. The story has been corrected.
Kai Ryssdal: If you want to make a cell phone or an electric car or wind turbines or guided missiles -- all of which are in varying demand in the wider world -- you've got be able to get your hands on something called rare earth metals. China has the lion's share of them -- about a third of global supply or so. In a complaint to the World Trade Organization today, President Obama said the limits Beijing has put on rare earth exports "break the rules." From the Marketplace Sustainability Desk, Scott Tong has more on how China got the rare earth upper hand.
Scott Tong: You may have heard it here before, but rare earths actually aren’t rare. They’re beneath the ground everywhere, not just China. Yaron Varona is with the Institute for the Analysis of Global Security, which is hosting an industry conference today.
Yaron Vorona: China only has I’d say only about a third of the world’s rare earths. However, they are by far the leading producer of rare earths.
Just 25 years ago, American companies were mining the stuff and processing it. But then, U.S. firms shut down, and the business went to China.
Vorona: Deng Xiaoping was famously quoted as saying the Middle East has oil and China has rare earths. And so they really put a strategic emphasis on developing that.
China threw subsidies at the sector, built it up. And they’re widely believed to have cut environmental corners. Gareth Hatch at Technology Metals Research explains to process the minerals, you dump chemicals on top.
Gareth Hatch: It’s called leeching. And if you’re not careful with the runoff or the residue from those processes, those reagants can end up in the water table, they can end up in the soils.
We’re talking dangerous byproducts like uranium and thorium. So the industry moved to China -- and it keeps going. Just days ago, the mining firm Molycorp bought a Canadian processing firm based in China. Here’s Molycorp CEO Mark Smith.
Mark Smith: We would all like it more if end product manufacturers that use rare earth materials were in the U.S. or other countries. But after decades of attrition, it just isn’t the case any more. It’s not reality.
But here’s the thing: China capped exports, prices went up, and markets reacted. Companies again started mining rare earths outside China -- in places like Australia and California -- and more supply will come. So why pick a trade fight now? Industry lobbyist Jeff Green says it could backfire. If the Chinese...
Jeff Green: Refuse to allow additional exports of that material, we have now fed the very system we had concerns about in the first place.
There’s a fear here that a trade spat on behalf of U.S. industry could hurt U.S. industry.
In Washington, I’m Scott Tong for Marketplace.