
China no longer has a stranglehold on the world's supply of rare earth metals - nkurz
http://www.vox.com/2014/10/22/7031243/china-grip-rare-earth-metals-supply-weakening
======
ars
"But the panic turned out to be overblown"

No it wasn't. The panic caused changes that fixed the problem.

A self fulfilling prophecy in reverse if you will. Y2K was the same way -
because of the panic people fixed things and there was no problem.

~~~
bryanlarsen
The high prices fixed the problem. The high prices caused profit seekers to
reopen old mines and users to search for alternatives.

~~~
TheSoftwareGuy
TL;DR It turns out that the principles of supply & demand worked. hooray for
the free market.

------
madaxe_again
Forget about the more exotic rare earths for a minute.

Tantalum. Tungsten.

We use these in all consumer electronics - Tantalum is a major component of
capacitors and resistors.

Here are a pair of _amazingly_ short lists, which show all of the known, non-
war-fuelled, smelters in the world:

[http://www.conflictfreesourcing.org/tungsten-conflict-
free-s...](http://www.conflictfreesourcing.org/tungsten-conflict-free-
smelters/)

[http://www.conflictfreesourcing.org/tantalum-conflict-
free-s...](http://www.conflictfreesourcing.org/tantalum-conflict-free-
smelters/)?

Yes, there's no national stranglehold, but it's an area of risk that nobody
really seems to be aware of - it wouldn't take much to completely disrupt the
global materials supply chain for the electronics industry.

~~~
badsock
Tantalum capacitors are increasingly rare, and are trivial to substitute.
Tantalum resistors I would say are downright exotic.

And other than lightbulbs, I've never heard of tungsten used in electronics.

~~~
nickff
Tantalum capacitors are only "trivial to substitute" in some applications; as
someone who works in electronic hardware, I can assure you that it is often
impossible to use any other part, and achieve the same performance.

~~~
badsock
Sorry, you're right - tant caps are irreplacable in some applications. I
overcorrected on madaxe_again's assertation that tantalum used universally in
electronics, when really the number of places that it's used, and couldn't be
replaced if supply was cut off, isn't huge. That number certainly isn't zero
though.

------
davidw
For some things, markets work pretty well. Prices go up, people have a big
incentive to supply the good.

~~~
vince_refiti
Imagine if the Chinese were able to patent the process of mining and
processing the rare metals. And bombarded everyone with frivolous lawsuits.
Good thing these crazy scenarios don't happen.

~~~
davidw
> patent the process of mining and processing the rare metals

If they were to make big and non-obvious improvements that allow everyone to
mine and/or process more efficiently, then that's exactly what patents are
supposed to do: they get a temporary monopoly on those improvements in return
for sharing them with the world.

But I have the feeling you're just spouting off a bit :-)

~~~
briantakita
I suppose you don't agree with the phrase "standing on the shoulder of
giants".

The fact that, through history, people create novelty & discovery without the
"incentive" of ownership, invalidates the "need" for patents to provide an
"incentive" of exclusivity.

Re: patents, those who own the capital also own the patents. It's simply a
mechanism to control others by restricting who can use an idea originally
developed by "standing on the shoulder of giants". So if you own lots of
capital, patents allow you to control others. If you don't own lots of
capital, patents are oppressive.

~~~
davidw
> The fact that, through history, people create novelty & discovery without
> the "incentive" of ownership, invalidates the "need" for patents to provide
> an "incentive" of exclusivity.

But are they creating at an optimal rate? Without patents, would they still
create nearly as much stuff? It's a fascinating question. My view is that it's
all a bit of a messy compromise, and neat, clean answers like "abolish
patents" are probably a bad idea. I'd be in favor of some major reforms, and
severely limit them in some fields.

~~~
briantakita
We made lots of progress without the systems of capitalism and patents. I dare
say that the progress before the systems of capitalism & patents was more
sustainable (environmentally & humanely).

Much of the paradigm of economic scarcity is a false. Economic scarcity is a
tool to enforce social order so those on top can control all of the resources.
Capitalism needs scarcity for the profit motive. Farmers can't make as much
profit if everybody has enough to eat and can receive food in a decentralized
manner.

We can have abundance. Hunger does not need to exist. We already produce
enough food. We already produce enough ideas & innovation. Humans naturally
create. No coercive incentive is needed.

> clean answers like "abolish patents" are probably a bad idea

It's probably a good idea to decentralize power & control. Power corrupts
after all.

------
higherpurpose
> Not long after China restricted exports, other countries quickly began
> producing their own rare earths — or finding ways to reduce their reliance
> on the metals. As a result, China's control of the market is much diminished
> today.

This reminds me of how Google Reader had near ubiquity in the RSS reader
market, and as soon as they announced the shutdown 20 new RSS readers popped
up.

------
kelvin0
I am not that familiar with the CFR. But it seems the article has been written
by someone who is a member (or at leasy associated with it). Is anyone
familiar with the CFR from an insider`s perspective? What biases should I
expect when reading content from their web site?

[http://www.cfr.org/energy-and-environment/rare-earth-
element...](http://www.cfr.org/energy-and-environment/rare-earth-elements-
national-security/p33632?cid=nlc-press_release-press_note--
link3-20141021&sp_mid=47239399&sp_rid=ZHJvYmVydHNAZ3Jpc3Qub3JnS0)

~~~
arca_vorago
Regarding the author:

"

Eugene Gholz is an Associate Professor who works primarily at the intersection
of national security and economic policy. From 2010-2012, he served in the
Pentagon as Senior Advisor to the Deputy Assistant Secretary of Defense for
Manufacturing and Industrial Base Policy, where he led initiatives to better
understand the complex defense supply chain and to apply that understanding in
the budget process. He also focused on policy regarding reimbursement of
industry's Independent Research and Development (IR&D) expenditures. Before
working in the Pentagon, he directed the LBJ School's master’s program in
global policy studies from 2007–10.

Dr. Gholz works on innovation, defense management, and U.S. foreign policy. He
is the coauthor of two books: Buying Military Transformation: Technological
Innovation and the Defense Industry, and U.S. Defense Politics: The Origins of
Security Policy. His recent scholarship focuses on energy security. He
previously taught at the University of Kentucky's Patterson School of
Diplomacy and International Commerce. He is also a research affiliate of MIT's
Security Studies Program, a member of the Council on Foreign Relations, and
associate editor of the journal Security Studies. His PhD is from MIT."

So he seems to be the pretty standard international power academic.

As for the Council, what you can always expect is a globalized view biased
towards big business interests. That's who started it, and that's who have run
it ever since. It's essentially the non K-Street American government "mind
lobbying" program for the international elite.

If you are still curious I would highly recommend research along the following
lines. Paris Peace Conference, Woodrow Wilson and Edward House, and the Reece
Committee.

~~~
kelvin0
Thanks, but I did read that bit from his paper (at the end of it). What
troubles me is that it seems that the CFR is referred to a lot by some
alternative news outlets (in not so glowing terms). Also it seems to try hard
to portray itself to be a non-partisan think tank. I will look at the
references you gave me, much appreciated ...

------
ck2
"Rare earth" metals aren't rare.

The USA has plenty, we just don't have the underpaid labor to mine it and
actual regulations that make it more expensive to mine.

Ironically some of the best land for it in the USA is owned by Canadian
corporations. Why are we selling something considered a national resource to
foreign owners?

~~~
lotsofmangos
You seem to be saying here that the USA isn't economically able to use certain
natural resources but that these unprofitable resources should not be open to
purchase on a free market by Canadian companies. That sounds a lot like a
soviet style planned economy.

~~~
_delirium
You don't have to be the USSR to manage at least substantial portions of a
country's infrastructure and natural resources in a rational way, designed to
maximize national welfare. It's a reasonably common way to operate in
prosperous western democracies: Statoil (Norway), Hydro-Québec (Canada), DONG
Energy (Denmark), Vattenfall (Sweden), Électricité de France (France), LKAB
(Sweden), Deutsche Bahn (Germany), are all well-run state-owned companies,
with no gulags in sight.

~~~
lotsofmangos
None of those countries ban companies from other countries they are at peace
with from ownership of land containing mineral reserves, which is the policy
that was suggested.

edit - one of the consequences of which would be foreign investors hiding the
existence of useful minerals on any land they own and are using for something
else, so it doesn't get taken away from them.

~~~
_delirium
For minerals and energy, it's usually not done by restricting ownership of the
land itself, but by retaining at least some mineral rights in state hands (or
at least managed under a different legal regime). For example, the Norwegian
state owns Norway's oil and gas reserves (originally outright, now via the
partially privatized company Statoil). Anyone can buy land in Norway, but it
doesn't come with ownership of oil/gas reserves.

Separating ownership of surface rights and mineral rights is fairly common in
the U.S. as well, it's just that it's usually another private company that
retains the mineral rights, not a publicly owned company. For example, the
house I grew up in in Indiana did not come with ownership of mineral rights.
The company that developed the subdivision sold us surface rights to the
1/4-acre lot our house was on, but retained the mineral rights underlying the
entire subdivision (presumably just in case there turned out to be something
there).

~~~
lotsofmangos
There is a massive difference between stopping all companies trading by
enforcing national ownership of a resource and stopping foreigners trading
resources that are legally on the market.

The question posed was not:

 _" Why are we selling something considered a national resource?"_

It was:

 _" Why are we selling something considered a national resource to foreign
owners?"_

edit - also, I fully support mixed market economies with nationalised
infrastructure, I think they seem to get more benevolent outcomes, but not
with protectionist markets on the bits that are privately owned.

~~~
_delirium
I agree with that, yeah (especially the last edit). I think the "national
capitalism" approach, where things are privately owned but preferential access
is given to important domestic corporations, often ends up mixing together the
bad parts of public/private ownership rather than each of their good parts.

------
ytturbed
Rocks are passing by us all the time at distances comparable to the moon's
orbit. Some of them are rich in rare metals. Some of them threaten the Earth
itself. So let's deflect them onto the moon, noting the crash sites. This will
(a) teach us how to defend the Earth, (b) create an incentive for mining
companies to build a moon base, (c) increase the supply of rare metals.

~~~
andrewflnr
Since you talk about deflecting asteroids, you may find this perspective
interesting. [http://qntm.org/asteroids](http://qntm.org/asteroids)

~~~
ytturbed
The perspective is that humans can't be trusted with asteroid deflecting
technology in case they use it to attack Earth.

But this ignores the fact that nature has _already_ placed an asteroid out
there with our name on it. Which will kill us if we don't do our duty and
prevent it!

------
ChuckMcM
I was not surprised at the rise in production, I spent my college years
driving by the old rare earth mine at Mountain Pass[1] but what really
surprised me was that China totally blew it on this. They had a near monopoly
on the production of rare earths, and if they had just moved the prices up
slowly, I believe they would have captured far more value before it triggered
a ramp up of external suppliers.

[1] Las Vegas to LA and back. Got out to look around once when the workings
were basically abandoned but decided against it after seeing all the radiation
warning signs :-)

~~~
stcredzero
_China totally blew it on this. They had a near monopoly on the production of
rare earths, and if they had just moved the prices up slowly, I believe they
would have captured far more value before it triggered a ramp up of external
suppliers._

I think this is a valuable observation with respect to how well the Chinese
government works with regards to _long term_ decisions.

------
briantakita
> in the 1980s, China ramped up production massively, driving out competitors
> and cornering the market. (China could do this, in part, by going easy on
> environmental oversight of mining, which can be a horrifically dirty
> process.)

> When China decided to restrict exports in 2010, that drove prices up and
> suddenly made it profitable for other countries to start boosting their own
> production again.

This in an example where "free markets" cause major environmental issues.

------
wnevets
Until china decides to sell those metals at a lose again driving these other
companies out of business.

Power of the free market

~~~
seanflyon
If China wants to give us some free money for a while, I'm not too concerned.
We can start these companies back up faster next time and anyone concerned
with a temporary future price increase can either pay a premium to keep some
of these companies going, or stockpile the metals.

~~~
wnevets
The US steel industry certainly has had no problem recovering

~~~
seanflyon
The US steel industry would be fine if all the foreign steel producers raised
their prices to try to screw us. The problem with US steel is that foreign
steel is cheaper.

------
lnanek2
Much like how high enough oil prices mean processing oil shale and digging
deeper/sideways start to make economic sense, which then prevents further
price rise.

------
oftenwrong
I guess I shouldn't be surprised that the mostly-American HN will upvote an
article with such a blatant anti-Chinese bias. From the first sentence this
article paints China as the "bad guy". China is not the only country that has
used economic pressure to protect its interests.

~~~
hyperpape
Maybe some people feel this way, but you're assuming far too much. I don't
want any country (including mine) to have a monopoly on any resource. At best,
it enriches that country to no one else's benefit. At worst, it leaves room
for threats to the world economy.

Sure, I trust China less than I trust Denmark (but I also trust Denmark more
than the US), but that's not even the point.

~~~
jp555
Capitalism is the pursuit of monopolies.

Does it matter if there's cheap minerals when a patent, exclusive licence
agreement, or lack of adequate engineers blocks any possibility of making a
competing product?

Raw materials are not the only resources that can be subject to monopolies.
There is only one Gordon Ramsey, and he uses this monopoly to get asymmetric
profit out of the horribly competitive restaurant market.

~~~
Symmetry
No, capitalism is a system wherein the means of production are privately owned
and can be bought and sold. Capitalists can pursue anything they wish and
still be capitalists, including monopolies, but usually they try to maximize
their profits rather than their market share.

~~~
jp555
Maximizing profit is the pursuit of monopolies. In a market with perfect
competition there are no profits.

~~~
Symmetry
_In a market with perfect competition there are no profits._

I hope you can see that that claim doesn't fit the observed evidence. Gas
stations somehow generate enough profits to stay in business despite the fact
that they're competing to sell something that's an indistinguishable
commodity.

Now, in the special case where the marginal cost of production is very low and
you're selling a commodity it is true that competition destroys profits. Like
if there are two people selling txt files of The Prince neither is going to
make much money (that's why we have copyright). But we're talking about rare
earth minerals here and those have a substantial cost of production with a
corresponding upward slowing supply curve and I assure you that the people
mining minerals are making a profit without having a monopoly.

~~~
jp555
"a substantial cost of production" is often a barrier of entry exploited via a
monopoly, whether in the form of superior patetended technology, exclusive
production agreements, government subsidy, a distribution cartel, etc, etc.

Are gas stations making profit off the gas or is that often a lost leader for
high margin snack sales? I've heard that stations make nothing off gas sales.

Copyright is a government supported distribution monopoly.

