BLOG: Charn Comments on “Analysis: Rare Earth Monopoly a Boon to Chinese Clean Tech Firms

The article below by Leonora Walet explains clearly China’s increasing requirements for larger  amounts of Rare Earth Metals to  “Green” the society (electric cars, wind turbines for industry, advanced medical equipment) . At the same time the pictures by the Chinese photographer Lu Guang clearly show how bad environmental degradation is  in China caused by rapid industrialization. Mining in  China  with lax environmental laws allow for Rare Earth production costs to be low. This cannot continue in the future as the Chinese authorities are forced to change the regulatory environment.  These added cost factors can only lead to higher prices for Rare Earth’s adding more pressure to prices in addition to the demand factor.

Analysis: Rare Earth Monopoly a Boon to Chinese Clean Tech Firms

August 12, 2010 — HONG KONG  (Source: Reuters) — In the race to build hybrid cars and wind turbines to feed growing demand for green technology, China has one clear advantage, it holds the world’s largest reserves of rare earth metals and dominates global production.

Wind turbines, made by No.2 wind turbine maker Xinjiang Goldwind Science & Technology, and hybrid cars, being developed by Warren Buffet-backed Chinese automaker BYD are among the biggest guzzlers of rare earth minerals, which analysts say are facing a global supply crunch as demand swells.

This little-known class of 17 related elements is also used for a vast array of electronic devices ranging from Apple’s iPhone to flat screen TVs, all of which are competing for the 120,000 tons of annual global supply.

China controls 97 percent of rare earth production.

“Rare earth for China is like oil to the Middle East,” said Yuanta Securities analyst Min Li.
Worldwide demand for rare earth is expected to exceed supply by some 30,000 to 50,000 tons by 2012 unless major new production sources are developed, say officials at Australian rare earth mining company Arafura Resources.

China has curbed exports of the mineral since 2005 through quotas and duties, saying it needs additional supplies to develop its domestic clean energy and high-tech sectors. On Wednesday, it said it would cut export quotas in 2010 by 40 percent.

“Export restrictions may provide an advantage to Chinese turbine makers, again because of the cost advantage,” said CIMB analyst Keith Li.

He said Chinese green companies would have priority in securing supply of the metals over international peers and their proximity to sources of the minerals ensures quicker and cheaper long-term supply.

China’s domestic consumption of the metals poses the biggest threat to global supply. The country, which holds a third of the world’s reserves, eats up to 60 percent of global rare earth supply for a wide range of applications from consumer gadgets and medical equipment to defense weapons.

China’s trading partners have grown increasingly vocal about its move to cut its export quotas, but Beijing is determined to control the rare earth market.

“Foreign companies could be facing some material supply risks, unless they decide to move production to China,” warned Yuanta’s Min Li.


But while China may ensure its first-tier green companies are given access to the rare elements, analysts agree this alone is unlikely to guarantee success for the Chinese clean tech firms.

New technologies free of rare earth elements could emerge that may undermine China’s advantage, while further cuts in rare earth quotas could trigger a political backlash which could force the nation to keep supply open for its trading partners.

“Chinese technology needs to develop quickly enough to make full use of that advantage,” said CIMB’s Li.
“That window closes if its existing technologies fail to evolve.”

Still China will have the upper hand in the global rare earth market for a while yet.

There are currently many new mine projects outside of China in the pipeline but few will be able to compete with it on price unless governments offer production subsidies.

Low prices for rare earth metals from China have undermined production and led to closure of several mines overseas. Lax environmental rules and cheap labor also allow China to sell rare earth metals at low prices.

Also, the development of new rare earth mines could take as many as 10 years.
China’s leading rare earth company, Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co., is building 200,000 tonnes in rare earth oxide reserves, and state media reported that the company is joining forces with Jiangxi Copper Corp to set unified prices for rare earth metals.

If supply becomes extremely tight as experts suggest, Chinese green companies may take upon themselves to secure the mineral by getting involved in the actual process of making rare earth products, analysts said.

BYD is scouting for new sources of lithium, an important ingredient for its high-performance batteries.
Like that of rare earth metals, lithium supply is expected to be tight by 2050, according to a European Commission study on critical raw materials. That is assuming most consumers would ditch their oil-guzzling cars for new generation vehicles.

“BYD is looking for new supply of raw materials all over China, not just in Sichuan,” said company spokesman Paul Lin in response to an inquiry about rumors that the company is buying lithium assets in the Chinese province known for its rich reserves of lithium and other materials. The company declined to make further comments about the rumored deal.

A sister company of rival Toyota has secured a lithium supply deal in Argentina while Toshiba Corp also plans to set up a rare metals joint venture with Kazakhstan state-owned firm Kazatomprom.

Toyota, which makes the top-selling hybrid car Prius, and Nissan, maker of electric car Leaf, as well as, General Motors which designed plug-in hybrid Chevy Volt are most vulnerable to a rare earth supply crunch, analysts say.

A car like the Prius requires 1 kilogram (2.2 lb) of neodymium. And each Prius battery uses 10 to 15 kg (22-33 lb) of another rare earth, lanthanum, said Jack Lifton, a commodities analyst and leading authority on rare metals.

Siemens AG and General Electric, which are investing in the development of direct drive turbines for offshore wind generation, could also be facing risks in securing supply of the rare earth, they said.

To See Amazing Pictures, Pollution in China, click here

17. Longmen town in Hanchen city, Shaanxi Province (陕西省韩城市龙门镇) has large-scaled industrial development. Environment is very seriously polluted there. April 8, 2008.

How is China’s rare earth stance impacting the global market?

China’s rare earth stance is causing ripples in the global market. As the top producer, China’s rare earth stance affects supply and prices. Its restrictions on exports have led to concerns about the global supply chain for critical materials used in various industries.

How do Japan, Vietnam, and China’s rare earth industry developments relate to environmental concerns and clean tech advancements?

The rare earth industry developments in Japan, Vietnam, and China have raised environmental concerns due to the China environmental cleanup costs. The extraction and processing of rare earth minerals pose significant environmental risks, but they are also crucial for clean tech advancements, leading to a complex relationship between environmental sustainability and technological progress.

How Will China’s Restructuring of the Rare Earths Industry Impact Clean Tech Firms?

China’s rare earths industry restructure could have a significant impact on clean tech firms. With China controlling a large portion of the world’s rare earths supply, any changes to their industry could disrupt the global clean tech market. This restructuring could lead to supply chain disruptions and price fluctuations for essential materials.

What Impact Does China’s Rare Earth Monopoly Have on the Clean Tech Industry, as Discussed in Charn’s Analysis?

Charn’s analysis discusses the impact of China’s rare earth threat on the clean tech industry. As the largest producer of rare earth minerals, China’s monopoly has raised concerns about the supply chain for clean tech technologies. This dominance could pose potential challenges for the development and production of these crucial technologies.

How Does China’s Rare Earth Monopoly Impact Clean Tech Firms, as Mentioned in Charn’s Analysis?

Charn’s analysis highlights the significant China’s impact on clean tech firms due to its rare earth monopoly. This control of essential resources affects the production and cost of vital components for renewable energy technologies. Firms must navigate China’s impact on supply chains to minimize dependency and maintain competitiveness.

How Will Higher Costs Impact Neo Material’s Profits?

The rising costs of raw materials and production may negatively affect Neo Material’s profits. The company must carefully manage expenses and find ways to increase efficiency in order to maintain strong neo material profit margins in the face of higher operating costs.

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