When those of a certain age hear the term "rare earth," what immediately springs to mind is a 1970s band of the same name, whose biggest hit was a song called "Get Ready." The song was catchy, but the lyrics ("Well tweedley-dee and tweedley-dum/Look out baby, 'cause here I come") weren't exactly profound. The chorus repeated the "Get ready, 'cause here I come" phrase quite a few times. But it had a solid beat, and you could dance to it... as they said back then.
An entirely different kind of rare earth is in the news these days: the kind that actually comes out of the ground. A whole group of elements (which aren't actually all that rare) are classified as "rare earth" minerals. Their importance in the modern world is growing by leaps and bounds, because they are a key component of most high-tech devices (such as cell phones, computers, and electric car batteries). Even more critically, they are a key component of high-tech military hardware such as night-vision goggles, guided missiles, and Aegis warships.
Last week President Obama mentioned the subject in a briefing:
This morning, we're taking an additional step forward. We're bringing a new trade case against China -- and we're being joined by Japan and some of our European allies. This case involves something called rare earth materials, which are used by American manufacturers to make high-tech products like advanced batteries that power everything from hybrid cars to cell phones.
We want our companies building those products right here in America. But to do that, American manufacturers need to have access to rare earth materials -- which China supplies. Now, if China would simply let the market work on its own, we'd have no objections. But their policies currently are preventing that from happening. And they go against the very rules that China agreed to follow.
Being able to manufacture advanced batteries and hybrid cars in America is too important for us to stand by and do nothing. We've got to take control of our energy future, and we can't let that energy industry take root in some other country because they were allowed to break the rules. So our administration will bring this case against China today, and we will keep working every single day to give American workers and American businesses a fair shot in the global economy.
We're going to make sure that this isn't a country that's just known for what we consume. America needs to get back to doing what it's always done best -- a country that builds and sells products all over the world that are stamped with the proud words: "Made in America." That's how we create good, middle-class jobs at home, and that's how we're going to create an economy that's built to last.
This isn't your usual trade complaint to the W.T.O., because at the moment China produces over 95 percent of the world's rare earth minerals. And they're showing more and more reluctance to sell any of it on the world market. Their reason is they want to use the rare earths "internally," by which they mean grabbing more market share for the refined products rather than the raw ore. The U.S. and Europe want a free-market approach. But it's tough to argue with a monopoly. When you control all but 3 or 4 percent of a worldwide commodity, the market pretty much has to dance to your tune.
But most of the news reports on this growing trade war (as well as President Obama, the other day) don't mention a crucial fact: this monopoly may not be around for very much longer.
I first wrote about this, optimistically, about a year and a half ago. Back then, a mining company was making plans to reopen a mine in Mountain Pass, Calif. One mine may not sound like such a big deal, but it is. Back then, I pointed out:
And although it's hard to believe when you see the place today, the Mountain Pass rare earth mine was the world's largest supplier of rare earth elements, from the 1960s to the 1980s. You can see, by looking at a chart of worldwide rare earth production, that they even named the "era" for the Mountain Pass mine. At one point, Mountain Pass was producing 70 percent of the world's supply of rare earths.
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I don't want to sound too alarmist over the situation, though. China didn't rise to worldwide dominance in rare earths by nefarious design, but rather because they got lucky, in a way. They were already mining iron ore at a mine called Bayan Obo, and discovered that the byproducts of this mining were rich in rare earths. This made it a lot cheaper for them to produce the elements than anyone else in the world.
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But China's not blameless in this situation, either. They have shown not only a willingness to cut back dramatically on the rare earth ore they supply to the world, but also a recent willingness to cut it off entirely, when they feel like it. Japan just found this out. Japan and China were in an international disagreement about an incident which happened out at sea, and the Japanese government was holding a Chinese fishing ship captain in custody as a result. And -- completely coincidentally, as China tells it -- all shipments of rare earths to Japan from China ceased. Japan buckled, and sent the captain home to China. During this period (this all happened in the past three months), rare earth shipments to America were also briefly interrupted.
Unless this whole incident was complete coincidence (as the Chinese government insists), it shows China's willingness to use the supply of a valuable commodity on the world market for its own diplomatic and geopolitical goals.
The reason I wrote the article in November 2010 (when I should have been talking about Veterans' Day) was that the mining company Molycorp had announced they were going to reopen the mine, use much "greener" processing (to avoid problems like radioactive mine tailings), and provide rare earths, they claimed, "at half the cost of the Chinese in 2012."
Since the subject is in the news again, and since it is now 2012, let's see what progress they've made. Coincidentally, three weeks ago the company issued a press release, which (in part) says:
Molycorp, Inc. today announced that the sequential start-up of the new Project Phoenix rare earth manufacturing facility at its flagship Mountain Pass, California operation will begin this week and includes the following operations and plants:
Active mining at a full mine production rate of approximately 2,800 short tons of fresh rare earth ore per day has been underway for several weeks.
Mechanical completion of the new Crushing Facility has been achieved and fresh ore is now being fed into the system.
Mechanical completion of the initial Cracking Facility has been achieved, steam testing has been completed, and feedstock from stockpiled material has been fed into the system.
Other operations in the Project Phoenix facility that will be brought online over the coming months include the following: milling and mineral extraction; expanded cracking; impurities removal; rare earth oxide separations; product finishing; and paste tailings processing and storage.
"The launch of Project Phoenix's sequential start-up is occurring well ahead of our April 1 deadline, and represents the accomplishment of a critical milestone in our project," said Mark A. Smith, Molycorp President and Chief Executive Officer. "When this new manufacturing facility is complete and running at full capacity, it will be the most technologically advanced, energy efficient, and environmentally superior rare earth facility in the world."
That's the good news. Even better is the news that they're ahead of their own schedule and now claim they'll put out close to 2,000 metric tons of rare earth oxide not by the end of this year but by the end of the third quarter.
That isn't all that far away. So the trade war on rare earth minerals with China may never become the threat that it previously could have presented to America's economic and military security.
Someone should tell the White House. That's the sort of thing that would sound good in a presidential briefing. We're not there yet, in terms of supplying our own production of the rare earths we need, but we're getting closer. Get ready, get ready.
Chris Weigant blogs at: Follow Chris on Twitter: @ChrisWeigant 
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Rare Earth did indeed cover 'Get Ready' by the Temptations. Rare Earth's cover was very white.
I'd give good money to be under 40 again. All I know is, in the 70s, the Rare Earth version was what got overplayed on the radio (at least the radio in my town).
-CW
"Bounty of Rare Earths Discovered in Afghanistan"
http://www.livescience.com/16315-rare-earth-elements-afghanistan.html
Like oil, Rare earths have a finite limit. By buying domestic produced Rare Earths and putting them in Reserve we protect ourselves and vital industry. We maintain a certain knowledge base for these industries. It's much easier to go from meeting 10% of your needs for any industry to 100% of your needs than starting from 0%. Because at 0% you don't maintain your knowledge base.
Maybe we need to think strategically in other areas?
"As a result of the increased demand and tightening restrictions on exports of the metals from China, some countries are stockpiling rare earth resources."
http://en.wikipedia.org/wiki/Rare_earth_element#Global_rare_earth_production
"A whole group of elements (which aren't actually all that rare)."
Rare earths aren't really strategic commodities in the sense of say tungsten or chromium. In an agile world wide market place, extraction just shifted to where it could be done most cheaply. My guess American business and banks were eager to facilitate the whole process and made hefty profits in the whole enterprise.
Chinese business extracts rare earths to earn money, US business skips the dirty work and just extracts money. This pretty much the story of the US manufacturing over the past few decades. Managing one quarterly report at a time tends to paint our economy into corners.
It was not a banking decision that shut it down.
In general, it's not a good practice to be utterly dependent upon one independent supplier. It's even worth paying a bit more to have a second and third source. Think of it as a form of famine insurance.
In contrast, digging dirt and exporting (it is the processed tailings that are radioactive, with mostly thorium) can be done TODAY. The preferential agreement (basically a "lai liao jia gong" (bring materials to process) deal in China trade parlance) could make processed rare earth products IMMEDIATELY AVAILABLE - you ship 100 tons of ores, you get back the equivalent amt. (0.5 ton?) of the refined metals at preferential prices, and that can be done TODAY.
This whole rare earth thing smirks of being 100% politics, and zero common sense.
If access to rare earths (not so rare) is truly the goal, it would be a wonderful opportunity for America to gain a leg up on the other industrial players (such as Germany, Japan, and S. Korea) that are true peer competitors with America. China is still so very much lower on that tech step ladder, its industries are more complementary (rather than competitive) with American manufacture.
China + America can easily control the pricing of Rare Earths. Do a cartel with China - if processing the ores is too environmentally unfriendly, subcontract that to China, with agreement to bring back the refined products (i.e., have the likes of Molycorp export the ores to be processed in China, with agreements to bring back the refined products). Japan and German and S. Korea do not have the ores, and would thus be disadvantaged.
Mining and exporting of the ores provide good jobs (see Australia). The refined rare earth materials (pure metals, instead of radioactive ores), imported at substantially lower prices (vis-a-vis the true peer industrial competitors), to be processed further into high tech products by American companies in America - now that's a viable industrial policy that takes advantage of the high end expertise of America.
If their stock has dropped by 50%, it might be a good time to buy it.
http://us1.campaign-archive2.com/?u=a9e8676e87fad805702b98564&id=aaec2518fe&e=[UNIQID]
China with its communistic version of capitalism controls these key resources for it's own industry. These not so rare earth mineral could be sold at a higher prices on the global market and industries inside China may be experiencing shortages while Japan is well supplied.
Look at the solar panel market, China is dumping these low cost panels on the market. One reason they are low cost, access to cheap raw materials. China needs to offer these material for export with the same price China industry pays.
I know, wishful thinking...
If an i-phone cost $40,000.00 from China, Apple will make them somewhere else. And they will have the rare earths needed! Maybe it will be produced here in the U.S.
Is it free trade when another nation has forced a monopoly?
Tariffs are paid by AMERICANS, not by the Chicoms.
Apple is worth $600 a share, with a market cap of $560 Billion. That is because it has net income of about $33 Billion, based on the annual sale of over 40 million iPhones, and many millions of iPads.
So, our genius would instead be selling $40,000 iPhones. HOW MANY do you figure would sell? 3? How many manufacturing will that bring back to America? How many service jobs will be lost from the reduced sale? How much of that market cap (wealth) will be destroyed by that tariff?
Ironic, isn't it?