The Rare Earth Mining Industry
Once dominated by the United States, the rare earth element (REE) mining industry is now controlled by China, which exports 90% of the world’s trade in rare earth metals. China has a monopoly on the mining of rare earth minerals, and manipulates the rare earth element world market to their benefit.
Rare earth elements, which are actually more abundant than the name suggests, are a group of 15 elements commonly known as the lanthanide series and Scandium and Yttrium. Lighter flints, high powered magnets, fluorescent bulbs, liquid crystal displays of smart phones, wind turbines, glass, hybrid cars, and military missiles all function due to the inclusion of rare earth elements in their production. The electronics, clean ‘green’ energy, and military industries heavily rely on the use of rare earth elements in many of their products. Mining of these metals is cost extensive and often creates negative byproducts that can harm the environment, especially water sources.
The United States was the majority produced of rare earth elements until 1980. By this time, China had begun mining rare earth elements and quickly grew to overtake the United States as the largest exporter of these elements. China’s quick success stems from their comparative advantages in labor and cost of mining and separating rare earth metals. China grew to export more than 90% of the world’s demand for rare earth metals as other mines were forced to close because of China’s dominance.
Recently, China has begun to limit its exports of rare earth elements. They still have a monopoly on the industry however. Initial entry costs into the industry are quite high and require a period of 2-10 years to open, from initial land surveying to mining of the metals. Subsequent refinement of the mined earth into usable rare earth alloys proves to be another costly process. China claims to limit exports due to the increased environmental hazards associated with mining and the restrictions the government placed upon the mining companies.
However, their actions could be for other unstated reasons. (1) China’s limited exports reduce the supply of rare earth elements globally, thus increasing the world price of these minerals. (2) Harsher export restraints could be China’s plan to save their supply of the rare earth metals, so that they do not deplete their resources and have future dependence on other countries. (3) Having increased production in industries that use rare earth elements, China’s cut-back on exports can be viewed as a manner of benefitting native firms through offering REE prices lower than the exported price of REE. This strategy helps China’s economy and allows those firms to have an advantage over other foreign firms with higher costs and less access to rare earth minerals.
In response to China’s policies, many countries have begun to invest in possibly opening mines within their respective countries. The United States, Canada, India, Australia, and South America contain deposits of rare earth elements and, given sufficient funding and government aid, could possibly open mines in the near future. Some countries also levied a case with the World Trade Organization (WTO) against China, but the case appears to have little chance to significantly alter policy in China.
The United States has responded by heavily investing in research of possible new REE mining sites. A site in Wyoming called Bear Lodge appears to be the best location available within the United States to mine REE, and mining could occur in 5 years time. Although the environmental risks must be considered before mining can occur, support for the mine grows, as the global export quantities are further restricted and prices continue to rise.
China’s control on the industry will continue in the short run. Despite the reasons for export restrictions, prices continue to rise causing significant concerns to countries relying on rare earth elements in electronic, ‘green’ energy, or military industries. The United States increased interest in rare earth element mining will attempt to provide competition to the currently dominating Chinese firms and therefore lower prices of the elements. A mine within the United States would also secure that the military would never be dependent upon another country for rare earth elements to use in high-tech weaponry and that green energy companies could research and develop better products at lower costs. To conclude, China controls a monopoly on the rare earth element industry, but REE deposits eventually depleting and other countries’ firms entering the industry will eventually reduce their totalitarian control of the rare earth element mining industry.
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