Foreign Policy writes about China’s strategy to develop its capacity to mine rare earth minerals, and the trade issues that have developed as a result:
Although rare earth metals can be found in many countries, few governments or corporations had the foresight to invest and develop lanthanide mines. The United States, for example, has some reserves, but the U.S. government and private corporations depend heavily on existing stockpiles and on imports. Mining of rare earth metals in the United States is rare. Reviving defunct mines and developing sites for new ones will take considerable time — up to a decade — and even more money. Currently, the United States imports 87 percent of its lanthanide from China. The rest comes mostly from France, Japan, and Russia.
China’s approach to lanthanide couldn’t be more different. Fifteen years ago, it set out on a deliberate plan to capture the rare-earth-metals market. Beijing offered cheap loans to Chinese state-owned enterprises to develop lanthanide-rich sites and mine these metals. Thanks to cheap labor costs, poor environmental obligations, and shoddy cleanup standards, Chinese mines have been able to produce rare earth metals at much cheaper prices than foreign competitors — in the process forcing many of these competitors out of the market. Yet even while squeezing its competitors’ margins, Beijing has gradually cut export quotas of lanthanide to regional “strategic competitors” (such as Japan) by 6 percent each year over the past decade. In 2009, China will only sell 38,000 metric tons to Japan — the same amount that Japanese giants Toyota and Honda consumed in all of 2008.
The stakes have been raised even higher recently.
