Peter Lee recently penned an interesting article in the Asia Times. There has been a lot of posturing and false reports about China’s use of rare earth ban as political leverage against Japan – and maybe even against the U.S. and the E.U. Despite the hot air, none of these reports have been substantiated and most are probably media reports (i.e. propaganda) planted by politically savvy parties.
Japan in particular appears to be deliberately distorting China’s legitimate export control of rare earth starting some 5 years ago to be some sort of new global economic weapon. The truth, as Peter details, is that China is not a cartel on rare earth. Due to market failures of one sort of another, China’s rare earth industry was fragmented into defenseless small operations a decade ago. The structural weakness of the industry has allowed the International Community to exploit China’s rare earth resources over the last decade. Japan may have hoarded 20 years so of supply on the cheap. At the rate the world is pillaging China’s rare earth resources, China may not have any left in a decade. In light of the exploitation, and to conserve China’s rare earth resources, the Chinese government has been steadily (and legally and legitimately) limiting, since at least 2006, the amount of materials that can be exported.
I hear a lot about how the U.S. and others are now going to search around the world for alternative sources of rare earth materials. In my opinion, that cannot come too early! The sooner the International Community weans itself from leaching off China’s rare earth, the sooner we can have better balance in our consumption of rare earth materials.