Wednesday, November 17, 2010

Is the world's high-tech economy about to hit the proverbial wall?

I've mentioned rare earth elements before: back in January, when news of China's growing dominance in their supply began to cause market fears, and again in September, when China cut off their supply to Japan over a territorial spat. Now comes news that China's actions may have been motivated more by self-interest than by spite. The Sydney Morning Herald reports:

Global demand for the increasingly important "rare earth" minerals that power a range of digital products could outstrip supply by next year as dominant producer China slashes exports, analysts warn.

Australian experts say the world must find new technologies or prioritise use of the glowing or highly magnetic metals behind iPhones and flat-screen TVs, as well as eco-friendly hybrid cars, solar panels and wind turbines.

"We have a classic supply and demand crisis. Under normal conditions the global demand exceeds supply in about 2011," Professor Brent McInnes from Curtin University in Western Australia told an online briefing last week.

"In 2016, it's quite evident that the Chinese demand itself will exceed the global supply of rare earth elements."

Rare earth oxides. Clockwise from top center: praseodymium,
cerium, lanthanum, neodymium, samarium, and gadolinium.

Demand for rare earths has soared with the popularity of smartphones and low-power light bulbs, at the same time that China, which produces 95 percent of the world's total, is limiting exports to feed its domestic market.

Trade tensions flared in September when buyers in Japan accused China of a targeted embargo in retaliation for a territorial dispute.

China gave assurances it would be a "reliable supplier" during a visit by US Secretary of State Hillary Clinton last month. But Japan, the United States and other top consumers are scrambling to find new sources.

"There is a whole range of economies out there ... that are building high-tech industries that are dependent at the moment on a very narrow source," said John Cole, director of the Australian Centre for Sustainable Business and Development.

. . .

Rare earth prices remained static for decades due to plentiful supplies, lulling the high-tech industry into a false sense of security.

But McInnes said "it's quite evident this is no longer going to be viable", with a 300 per cent spike in prices over the past year alone.

"In normal economic circumstances, whenever the price of an element gets so high, you look to develop new technologies that don't need that element, or you find a new element that is more abundant," said McInnes.

Dwindling supply and increasing costs underscored the need to develop alternatives such as bio- or nano-technology, he added.

There's more at the link.

This has huge implications for almost all high-tech production, including consumer electronics, computers, defense, aviation . . . you name it, it's affected. Several countries are trying to start up (or re-start) production of rare earth elements, but the Chinese mines have been so low-cost for so long that the field has had minimal investment elsewhere. It'll take some time for new mines to come online, and even then there's no certainty that all of the elements will be available in the quantities required. I suspect a lot more attention will have to be paid to recycling older electronics and goods that contain rare earth elements - a great opportunity for entrepreneurs who can obtain the financial backing necessary for the large-scale plants that will be needed to extract it. Unfortunately, given the current world financial crisis, those funds may not be all that readily available.

Keep an eye on this field. It has the potential to affect the high-tech economy of the entire world. Right now, China's in the driving seat. Will it stay there? Can the rest of the developed world afford to allow it to stay there? I suspect not . . . and that's why things may be about to get very interesting.



Anonymous said...

"Approximately 13 million metric tons of rare earth elements (REE) exist within known deposits in the United States, according to the first-ever nationwide estimate of these elements by the U.S. Geological Survey."

See article here:


SiGraybeard said...

I've read one of the most recently-close mines is going to reopen after the first of the year. In California, somewhere.

Our environmental granola (nuts, fruits, and flakes) has made it an agenda item to block all mining, drilling or other resource development in the US. It's OK if a smaller, darker person gets killed or poisoned somewhere far off, as long as they don't have to see them.