Rare earth minerals from China are rarer

The Toyota Prius Plug-In Hybrid is displayed during the press preview for the world automotive media North American International Auto Show at the Cobo Center in Detroit, Mich.


Kai Ryssdal: Gold hit a two-month high today: $1,248 an ounce. As attractive as gold is when the economy is questionable, though, neodymium may be a more important metal today. What's that? You never heard of it? What about lananthanum? They're what're called "rare earth metals." There are about 17 of them. They're used pretty extensively in things like hybrid cars, and smartphones and a lot of other gadgets we are coming to depend on.

Thing is, China produces almost all of the world's rare earth metals. And last month Beijing cut way back on exports of them.

Our China Bureau Chief Rob Schmitz reports.

Rob Schmitz: There are more than 50 pounds of rare earth metals under the hood of a Toyota Prius. They're the magnets in the car's electric motor, and a big part of its long-lasting battery. Electric vehicles use even more.

At this year's China Rare Earth Summit in Beijing, a lot of foreign visitors were looking worried.

Dudley Kingsnorth: My plea today was "China, you are the leader, yes, but as the leader, you've got responsibilities."

Dudley Kingsnorth is an industry consultant. What's scary to him is not that China controls the world's rare earths. It's that China doesn't want to share. It's put quotas on the amount it exports. Last year, China allowed less than half of what it mined to be sold to the rest of the world.

Kingsnorth: Now, if these quotas stay in place, then what's going to happen is that less and less of the manufacturing is going to take place in the U.S., and more and more of the manufacturing is going to take place in China. And we all know once those manufacturing jobs have gone, they're gone. It's not a temporary situation.

And that could be bad news for the Obama Administration. The president wants a clean energy work force to help revive the U.S. economy. Industry insiders say China's export quotas are already causing a global shortfall of rare earths. Toyota wouldn't comment on how this is impacting production of the Prius, but the company is reportedly looking to Canada to find more of these minerals.

This seems like a logical solution -- you see, rare earths aren't that rare. North America sits on 15 percent of the world's reserves. But there's one small problem, says commodities analyst Jack Lifton.

Jack Lifton: I don't think America's going to produce any rare earths, because I believe we cannot do it economically.

But that hasn't stopped one American company, Molycorp, from trying to resurrect a mine in southern California that once coughed up more than half the world's supply. But Lifton says it's too late to compete with China.

Lifton: We've been outfoxed in capitalism by our friends, the communists!

Lifton blames decades of outsourcing by American businesses.

Lifton: They gave away the farm. They gave away the intellectual property, all of this technology given away, to get access to raw materials and cheap labor. And now all of the sudden, it's a problem. Fortunately for the Chinese, the same stupid people run the American economy that ran it into the ground.

And that's good news for Zhang Anwen. He's a government official with China's Rare Earth Association. When asked why China was cutting off the global rare earths supply, he smiled, played it safe and towed the party line, quoting China Premier Wen Jiabao.

Zhang Anwen: China will not completely stop exporting rare earth metals to other countries. The most important thing is to set a reasonable price and a reasonable volume of production. However, China will continue to put quotas on exports.

That's small assurance to companies that need rare earths to keep their products tumbling off the production line. But industry insiders say there's at least a little hope. The U.S. government is asking business groups to provide evidence that China is hoarding rare earths supplies -- a possible case for the World Trade Organization.

In Shanghai, I'm Rob Schmitz for Marketplace.

About the author

Rob Schmitz is Marketplace’s China correspondent in Shanghai.
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A very large source of Lithium has been found in Quebec, and they are trying to get a decent supply together in Nevada. Quebec looks like it will be the winner.

had developed SmCo5 & 2-17 magnets which are produced by Elctron Energy Corp in Pa

If the reason why the US can't produce it with its 15% of world reserve is that the price is too low, it's probably too low.

Thanks China instead, of providing the products for such low price for so long. What's there to whine about?

There is another under reported potential problem with with electric and hybrid cars. There are two major sources for the Lithium needed for the batteries. There are a couple of mines is South America and some in China.

This is not a problem, but an opportunity for America. America has 15% of the world's KNOWN reserves in the rare earth metals. The California mine used to produce HALF of the world's need for such metals. Beijing is doing America a big favor by raising the prices, so that it is now economical for America to extract and export these metals at a profit. Washington should form a rare earth cartel with Beijing to make sure that the prices are high enough for everyone to make money.

To demand that China has to continue to bear the burden of 97% of the world's production of rare earth metals, and all the consequent environmental degradation, when China has only about 35% of the world's reserves, would seem rather unreasonable.

Thank you for these reports as this crisis is underreported in the US. I have close friends who are in this industry and now residents of China as a result of the US no longer mining rare earth minerals but this could be China's hidden weapon economically and otherwise, so Americans need to wise-up and soon!

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