“Middle East countries have oil, and China has rare earths. Let us export rare earths to increase our foreign exchange reserves.”
Yttrium, lanthanum, neodymium, promethium…. While not part of your daily vocabulary you will certainly find these rare earth elements (REE) in your close environment: wind turbines, iPods, hybrid vehicles, the list of high-tech applications using REE seems without an end.
The bad news? Since the turn of the century, China controls close to 95% of the world’s REE production and possesses 50% of the world’s reserves. There is even a Rare Earth Industry Development Plan. The Chinese government has imposed increasing export duties and quotas on the rare earths industry. There are even some rumours that the most valuable of these elements will be prohibited from leaving China or restricted to companies located on its soil.
The good news? Europe, Japan and the United States seem to have suddenly woken up to the strategic nature of REE and, akin to oil, are considering setting up strategic reserves. In addition, rare earths are not as rare as their name suggests. Alternative supply sources exist (e.g. in Vietnam or Australia) so in the end it may just be a question of pricing.