Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

China's Rare Earths Monopoly: Peril or Opportunity?


With two-thirds of the world's supply outside of China, its stranglehold on rare-earth elements production can't last forever. Western firms like Molycorp are worth a look.

The prosperity of China's "authoritarian capitalism" is increasingly rewriting the ground rules worldwide on the capitalist principles that have dominated the West's economy for nearly two centuries.

Nowhere is this shadow war between the two systems more pronounced than in the global arena of production of rare earths elements (or REEs), where China currently holds a de facto monopoly, raising concerns from Washington through London to Tokyo about what China might do with its hand across the throat of high-end Western technology.

In the capitalist West, as so convincingly dissected by Karl Marx, such a commanding position is a supreme and unique opportunity to squeeze the markets to maximize profits.

Except China apparently has a different agenda, poking yet another hole in Marx's ironclad dictums about capitalism and monopolies, further refined by Lenin's screeds after his Bolsheviks inadvertently acceded to power in 1917 in the debacle of Russia's disastrous involvement in World War I. Far from squeezing its degenerate capitalist customers for maximum profit (and it's relevant here to recall Lenin's dictum that if you want to hang a capitalist, he'll sell you the rope to do it), Beijing has apparently adopted a "soft landing" approach on rare earths production, gradually constricting supplies whilst inveigling Western (and particularly Japanese) high tech companies to relocate production lines to China to ensure continued access to the essential commodities.

REEs are found in everyday products, from laptops to iPods to flat screen televisions and hybrid cars, which use more than 20 pounds of REEs per car. Other REE uses include phosphors in television displays, PDAs, lasers, green engine technology, fiber optics, magnets, catalytic converters, fluorescent lamps, rechargeable batteries, magnetic refrigeration, wind turbines, and, of most interest to the Pentagon, strategic military weaponry, including cruise missiles.

Technology transfer is the essential overlooked component in China's economic rise, and Beijing played Western greed on the subject like a Stradivarius, promising future access to China's massive market in return, an opium dream that rarely occurred for most companies. You want unimpeded access to Chinese REEs? Fine -- relocate a portion on your production lines here.

Which brings us back to today's topic.

Rare earths and investment -- where to go?

China is riding a profitable wave, which, depending on what figures you read, produces 95-97% of current global supply. Unprocessed raw earth ores are currently going for more than $100,000 a ton, or $50 a pound, with some of the exotica fetching far more (niobium prices has increase an astounding 1,000 percent over the last year). Rare earth elements like dysprosium, terbium, and europium come mainly from southern China.

According to a United States Energy Department report, dysprosium, crucial for clean energy products, rose to $132 a pound in 2010 from $6.50 a pound in 2003.
< Previous
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos