By Rawle Lucas
Swing
The market for commodities is a well-known one, figuring into global politics every day. Some, like oil and coal, are vital if imperfect power sources. Others, like copper, are valuable for their everyday applications in common infrastructure. Still others, like gold, are a good way to store wealth, since it is rare, pretty, and highly desired. Every minute of every day, investors watch the prices of these goods swing up and down, hoping to derive maximum returns from the companies that exploit these resources. All it takes to cause a major shock is the mere perception of trouble on the horizon.
But are you familiar with lanthanum? Neodymium? Yttrium? Probably not; they sound like something a science fiction author would make up. However, these metals are quite real, and they — along with thirteen others like them — are far more important than is commonly known. The oddly-named elements are often referred to as “rare-earth elements” (REEs) because they are not found in heavily concentrated deposits the way gold, for example, is found; their importance to the world economy cannot be overstated. Countries that have these elements rarely boast about them like those with oil and other highly-prized commodities.
Shrink in Size
REEs are used to build a wide range of computerized products, from cellphones to guided weaponry to green technologies such as windmills and hybrid cars. Many of these elements act as catalysts in oil refineries while others enable the formation of very strong and powerful permanent magnets, much stronger than can be formed with iron. Some of these elements are able to emit red photons that are important to achieving colour images in display screens or monitors. REEs are primarily responsible for the miniaturization of computers, as it has allowed transistors to shrink in size to the point where human hands can no longer handle them. Furthermore, the modern world relies on computerized systems to get its most essential business done, whether it involves financial transactions or power generation or waste disposal, among other things.
Protectionism
Looking down the road, the attractiveness of these rare elements could result in the eruption of global trade disputes. China, where about 95 percent of all REEs are currently mined, has proposed a move to restrict mining to a select group of state-run mining companies by 2014, citing environmental concerns and seeking to protect those supplies for use in China itself. Such protectionism does not sit well with countries that prefer the unrestricted flow of goods across borders. If the initiative by China moves forward as planned, it is likely that major global consumers of the “rare-earth elements” would activate the appeal process of the World Trade Organization (WTO) to get China to back off of its protectionist inclination. If trade in these products is restricted, there is the possibility of retaliation and the danger that an already compromised world economy could very well find itself slipping into crisis again.
Outcompete
The control in production and global trade did not always rest with China as it appears now. From the 1950s to the 1980s, the US produced most of the world’s REEs through mines in California. For a significant part of that time, there weren’t very many applications for these metals. Two important events changed this, however: trade liberalization in China and the accelerating pace and application of technology. By the 1980s, several mines in China had been opened, and these mines, owing to China’s relative lack of environmental regulations, became inexpensive enough to outcompete American mines. Increasing demand for REEs from producers of computerized technologies made the Chinese mines even more profitable. However, China is not the only country with REEs; as pointed out earlier, there are reserves in the United States with some estimates putting them at 13 million metric tons. Australia and Greenland are also known to have sizable reserves.
Harvestable Quantities
Therefore, the current situation is hardly like that of the petroleum market where access to harvestable quantities of the REEs is dictated by countries whose interests are dissimilar to those of the consuming countries. There will come a time when the profitable mines in China would no longer provide needed REEs and this could lead to higher prices for these commodities. Hoping to take advantage of the impending supply problems, two US corporations — Molycorp and U.S. Rare Earths — hope to open mines in California and Idaho respectively, ensuring that the world’s supply of REEs does not grind to a halt. Unless there is a breakthrough in production technology, it is likely to take these companies at least 15 years to develop the capacity to harvest REEs properly, according to an April 14, 2010 Government Accountability Office (GAO) report. In the interim, REE prices will increase, with the risk of hampering high-tech manufacturing around the world.
Future
One should not discount the contribution that Greenland could make to the global supply. It is known to have substantial reserves in Ilimaussaq. Greenland recently regained sovereignty over its natural resources. The country also boasts a productive uranium mine, and profits from that mine make funding a rare-earth operation easier. With such a game-changer in play, it would be very difficult to predict the way the market would trend in the near future. At least one thing is true, though: the world needs to pay more attention to these metals, for they will only become more crucial as technology advances and leaves a heavy carbon footprint in the process.
