On Tuesday, President Barack Obama announced that the United States, joined by the European Union and Japan, is filing a challenge with the World Trade Organization over China's export restrictions on what are known as rare earth minerals.
Which, for many people, raised a number of questions, not least: What are rare earths? Why are they important? And what is this dispute all about?
What Are Rare Earths?
Rare earths are a group of 17 chemical elements, largely grouped together in the periodic table. The first was discovered in a quarry in the Swedish village of Ytterby in 1787.
Despite their name, they are, with one or two exceptions, not actually especially rare: one of them, cerium, is considered roughly as abundant as copper. However, it is difficult to find them in sufficient quantities in any one location to mine them. After discovering a potential site, it can take up to 10 years before a company is even able to begin rare earth mining, and the process of extracting and processing these elements is laborious and capital intensive: there are between 100 and 1,000 steps involved in separating rare earth elements from ores extracted from the ground.
Why Are They Important?
Because of their magnetic and conductive properties, rare earths are important, if sometimes minor, components in a wide variety of electrical and related applications. The military is a significant consumer, using them in everything from Predator unmanned aerial vehicles and Tomahawk cruise missiles to night vision goggles and smart bombs. Commercially, they are found in, among many other products, stadium lights, lasers, color televisions, air bags, anti-lock brakes, compact fluorescent bulbs, and laptop batteries. In an increasingly high-tech economy, their usefulness and value is only increasing, as Bryan Walsh detailed in Time magazine last year:
What's the Dispute About?
Until 1948, many rare earths were sourced from mines in India and Brazil. South African mines took the lead in the 1950s, but thereafter the United States – which hosts an estimated 13 percent of global rare earth reserves – became the dominant supplier, largely through the Mountain Pass mine just west of the southern California-Nevada border. In 1984, Mountain Pass accounted for 100 percent of U.S. domestic demand and one-third of global exports of rare earths.
However, some 35 percent of global deposits lie underneath Chinese soil, and from 1978 to 1989, Chinese production of rare earths increased by an average of 40 percent annually. Few of these Chinese ventures were profitable, but because of massive financial support from the government, they were able to produce rare earths at disproportionately low prices, increasing exports and effectively driving other sources out of business. The Mountain Pass mine shut down in 2002, leaving the U.S. entirely dependent on Chinese sources. Today, China exports 97 percent of the world's rare earth supply.
But now China has suspended issuing new licenses for rare earth prospecting and mining and has tightened up export quotas; as a consequence, export prices have soared relative to their price inside China, prompting the challenge by the US, the EU and Japan. "American manufacturers need to have access to rare earth materials which China supplies," said President Obama. "Now, if China would simply let the market work on its own, we'd have no objections."
China protests that its actions are being taken on environmental grounds. China Daily protested that:
It is undeniably the case that rare earth mining and production can come at a terrible environmental cost. The complicated process of extracting the minerals produces millions of tons of wastewater, harmful chemical run-off, and radioactive byproducts that can contaminate surrounding waters and farmlands. It is true also that in the past Chinese environmental regulations were virtually non-existent, a factor in the country's industry being able to so easily undercut the rest of the world financially.
The U.S. and others, however, suspect that there are other issues at play and that China is primarily seeking economic and geopolitical advantage.
But in the seeds of the dispute may lie something of a corrective. As supplies diminish, prices rise and profit margins increase once more. And so, for the first time in a decade, the Mountain Pass mine has reopened for business.
Hexagonal crystal of well-trained rare Earth Minerals bastnaesite-(Ce) of gorgeous chestnut brown color, grown on an alkaline granite gneiss; origin: Zagi Mountain, Hameed Abad Kafoor Dheri, Peshawar, Provinz Khyber Pakhtunkhwa, Pakistan, 2011; size: 4 cm. (Walter Geiersperger, Corbis)