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Chinese Rare Earths Producer Suspends Output

timothy posted about 2 years ago | from the free-market-except-oh-not-really dept.

Businesses 265

concealment writes "State-owned Baotou Steel Rare Earth (Group) Hi-tech Co. said in a statement released through the Shanghai Stock Exchange that it suspended production Tuesday to promote 'healthy development' of rare earths prices. It gave no indication when production would resume and phone calls to the company on Thursday were not answered. Beijing is tightening control over rare earths mining and exports to capture more of the profits that flow to Western makers of lightweight batteries and other products made of rare earths. China has about 30 percent of rare earths deposits but accounts for more than 90 percent of production. Beijing alarmed global manufacturers by imposing export quotas in 2009. It also is trying to force Chinese rare earths miners and processors to consolidate into a handful of government-controlled groups."

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not with a bang, but a little heard whimper. (4, Interesting)

Roskolnikov (68772) | about 2 years ago | (#41766795)

China is finally flexing its grip on the tech industry, more to come certainly.

Re:not with a bang, but a little heard whimper. (5, Interesting)

MightyYar (622222) | about 2 years ago | (#41766885)

Sounds short-sighted. Since rare-earths are a commodity, this will just drive prices up and thus other people will mine them. Businesses may even prefer these new sources for stability. Then prices will crash as a glut of supply hits the market, and the unreliable producer will command an even lower price.

Or the market could do something totally unpredictable :)

Re:not with a bang, but a little heard whimper. (5, Interesting)

mmontalvo (831939) | about 2 years ago | (#41766937)

It is not about mining. That is not their monopoly, their monopoly is on the production of the minerals to usable components. This unfortunately is not easily solved. A full scale production facility takes about a decade to build and about 1 Billion dollars. There was a private investor who was discussing this issue about 5 years ago and was trying to get investors to go in on building a new facility but was unable to get the needed amount of capital.

Re:not with a bang, but a little heard whimper. (4, Interesting)

MightyYar (622222) | about 2 years ago | (#41767579)

If the price goes up, the private investor will have no problem raising the money. That's exactly what happened 2 years ago. [smartplanet.com]

Re:not with a bang, but a little heard whimper. (5, Informative)

Anonymous Coward | about 2 years ago | (#41767933)

Exactly right. There were something like three rare earth mines idled by China's effort to flood and capture the market. One of those started back up after China's last screw job to the world. If prices continue to rise, more will simply re-open with a relatively modest investment and in relatively small time frames.

Having a US supply is a good thing. It mean stability in the market, shorter delivery schedules, cheaper storage for manufacturers, and US jobs. Likely the those outside the US will see the advantage too.

Re:not with a bang, but a little heard whimper. (2, Informative)

Anonymous Coward | about 2 years ago | (#41768033)

> If the price goes up, the private investor will have no problem raising the money.

They will have a problem, because they will know that the Chinese can drop the price at their leisure, undercutting them and bankrupting their investment.

Re:not with a bang, but a little heard whimper. (5, Interesting)

Jane Q. Public (1010737) | about 2 years ago | (#41767539)

It is about mining, too. It takes time to develop mines.

A huge, truly massive deposit of a large variety of rare earths was found here in the United States a year or two ago. Prices are already at the point that it is very likely this will be put to use. But it's a large enough quantity to call into question the long-held idea that China "has 30%" of the rare earths.

Re:not with a bang, but a little heard whimper. (4, Insightful)

afidel (530433) | about 2 years ago | (#41767819)

It depends on what you consider China "has", if it's just the minerals in the sovereign territory of China then 30% is probably a bit inflated, if you consider it explored proven reserves owned/controlled by China or Chinese companies it's probably understated.

Re:not with a bang, but a little heard whimper. (1)

Zorpheus (857617) | about 2 years ago | (#41768045)

But mining all their rare earths and continuing to sell them at low prices would be even more short-sighted.
They will run out of rare earths at some point. Then the prices on the world market will go up, and they have to buy them from other countries for higher prices.
I don't think that this is about China trying to make money with a monopoly. It is just common sense, and the fight against the poisoning of their environment due to illegal mining.

Re:not with a bang, but a little heard whimper. (-1, Troll)

alen (225700) | about 2 years ago | (#41766887)

Afghanistan has something like $4 TRILLION of minerals with lots of those rare earths. the russians discovered them first but we are going to get them.

its not an accident we got out of Iraq and are still in Afghanistan

Re:not with a bang, but a little heard whimper. (3, Interesting)

MightyYar (622222) | about 2 years ago | (#41766933)

Actually, if you've been paying attention, they are mostly giving these sort of contracts to Chinese companies. They don't exactly love Americans.

Back to Beckistan with you! (2, Insightful)

Anonymous Coward | about 2 years ago | (#41767161)

Um, no. We are not in Afganistan for the minerals. Sending valuable peolpe and equipment into a mine in a country where explosives-enthusiastic people want you dead is just insane.

Seriously, if you get a bonus check at your job, for $10k and you go to invest it are you going to be remotely tempted to chip in on a "New Long Term Afgani Business Venture?"

Because if that appeals I can connect you to a very well known Nigean Prince with even better offers.

Re:Back to Beckistan with you! (2)

hawguy (1600213) | about 2 years ago | (#41767951)

Um, no. We are not in Afganistan for the minerals. Sending valuable peolpe and equipment into a mine in a country where explosives-enthusiastic people want you dead is just insane.

Seriously, if you get a bonus check at your job, for $10k and you go to invest it are you going to be remotely tempted to chip in on a "New Long Term Afgani Business Venture?"

Because if that appeals I can connect you to a very well known Nigean Prince with even better offers.

That depends on what backroom deals I get from the US Government - if they say "Hey, we want you to build a mine in Afghanistan, we can't pay you to do it, but here's a $100M contract to purchase output from this mine. Don't worry about security, we'll make sure that anything you dig up can be safely delivered. Feel free to open it under the banner of your Kenyan subsidiary."

Re:Back to Beckistan with you! (1, Offtopic)

dkleinsc (563838) | about 2 years ago | (#41767981)

You're right: We weren't after the minerals. We were after the right to build an oil pipeline that former Unocal executive Hamid Karzai agreed to shortly after he was installed as president of Afghanistan with the help of former oil executives Richard Cheney and George W Bush.

Re:not with a bang, but a little heard whimper. (1)

Jonah Hex (651948) | about 2 years ago | (#41766923)

I don't think this will be a little heard whimper, instead it should get fairly big press coverage. The Chinese government starts playing games with rare earth prices putting almost all modern electronics prices at risk, we'll probably see huge graphs depicting possible iPad price increases, or even better pictures showing the size one would be if it used non-rare earth components. It will probably show up in the Presidential Race before elections as a talking point. - HEX

Re:not with a bang, but a little heard whimper. (0)

Anonymous Coward | about 2 years ago | (#41767165)

Apple products have huge profit margins (~30%). Even if all the components and Chinese labor cost (~5% of retail price) were to go up, Apple would still making a (smaller) profit without a price increase.

Re:not with a bang, but a little heard whimper. (1)

K. S. Kyosuke (729550) | about 2 years ago | (#41767339)

Apple products have huge profit margins (~30%). Even if all the components and Chinese labor cost (~5% of retail price) were to go up, Apple would still making a (smaller) profit without a price increase.

*Or*, others would have to drive their prices up and Apple's products would look more competitive compared to them than before the (others') price increase, so they would get more sales and the profit would be more or less the same or even better.

Re:not with a bang, but a little heard whimper. (0)

Anonymous Coward | about 2 years ago | (#41767021)

They're a little slow. Could have done it earlier for better results.

The corpses will buy with the higher prices, the governments will protest and nothing will change. Short term.

Long term, there will be other companies that will be ready to fill in the gaps.

They're idiots anyway you put it, communists suck at economics.

Re:not with a bang, but a little heard whimper. (1)

Synerg1y (2169962) | about 2 years ago | (#41767457)

I'd have to agree, somebody else will step in to fill the void, but as somebody else in this discussion mentioned, that's not going to happen overnight, but rather over a period of years. The problem... the runner up is Russia and they don't have much love for the states either: http://www.mining.com/russian-getting-back-into-rare-earth-game/ [mining.com]

Re:not with a bang, but a little heard whimper. (1)

fustakrakich (1673220) | about 2 years ago | (#41767301)

It could be the tech industry itself encouraging this to keep prices up. They may want to keep hard drive prices from falling back to pre-flood levels.

Trade war (4, Insightful)

Anonymous Coward | about 2 years ago | (#41766797)

Start putting tariffs on anything made with Chinese rare earths. Since China is a net exporter, they have the most to lose playing these games.

Re:Trade war (1)

DamageLabs (980310) | about 2 years ago | (#41767219)

Which means most electronic devices of today. Including the iPhone.

Re:Trade war (5, Insightful)

Dan East (318230) | about 2 years ago | (#41767277)

No, don't put tariffs on them. Why would the US want to sell or produce rare earths? They are a finite resource. If China wants to burn through their supplies so the rest of the world can enjoy cheaper technology, then that is their prerogative. Once it's out of the ground and used to manufacture products shipped to the US then it can be recycled for reuse in new products. Either way the material is no longer in China. This is a gamble China has made to try and prop up their massive industry and population, is to not only undercut worldwide labor with a very cheap workforce, but also burn through their physical resources as well.

Nothing about China is sustainable, and there will be great sorrow and suffering in that country when the bottom drops out of various markets over the next decades.

The USA's production at various rare earth mines simply idled or completely stopped as prices dropped and it was not longer profitable to mine them. The rare earths are still sitting there waiting for us when we need them. No hurry to get to those resources at all.

Re:Trade war (4, Informative)

TubeSteak (669689) | about 2 years ago | (#41767401)

I feel like you're missing a key issue in the discussion.
China controls ~90% of the rare earth refining capacity.
That's what's being reduced.

Why would the US want to sell or produce rare earths?

So that the USA isn't beholden to China's monopoly on refined rare earths.
Was that a trick question

Re:Trade war (1)

MeNeXT (200840) | about 2 years ago | (#41767997)

you missed his point. The only reason everyone else stopped refining rare earth was because China dropped the price by flooding the market with cheap rare earths. Once China is no longer able(unwilling) to produce cheap rare earths then the rest of the world will get back into production.

Re:Trade war (0)

Anonymous Coward | about 2 years ago | (#41767409)

I don't think you understand what "rare earth" means. The most common rare earth is no more rare than copper. In fact, the only rare earth that is scarce is promethium.

Re:Trade war (4, Insightful)

Sydin (2598829) | about 2 years ago | (#41767481)

Nothing about China is sustainable, and there will be great sorrow and suffering in that country when the bottom drops out of various markets over the next decades.

There will be a great sorrow in every country, especially the US. We are all deeply tied into China's market, and whatever affects them, affects us. The next great depression will not also be a result of domestic economic negligence. It will be the result of China sinking, and dragging the world's economy down with it.

Re:Trade war (1)

Anonymous Coward | about 2 years ago | (#41767519)

Rare earth metal, despite it's name, is actually much more common then the name leads you to believe. The problem is extracting it, however, since deposits might be spread thin or in difficult to reach places (too deep). China has the advantage of cheap labor in dealing with these issues simply by throwing more people at it.

But because of this advantage, it makes it almost impossible for any other place to compete, at least in a fair market. It can take many years to startup rare earth mining, and even more to break even and start making a profit. With China being the sole supplier of rare earth at so cheap prices, they can easily control market prices enough to prevent any company from competing. This wouldn't be a problem but China has a heavy hand in the market making it bad for everyone else. You can only fight a heavy hand, with another heavy hand (general international agreement for traffics for boycott of China to force China to play nice OR paying a company to survive at a lost via government subsidies).

Re:Trade war (2)

hawguy (1600213) | about 2 years ago | (#41768093)

Rare earth metal, despite it's name, is actually much more common then the name leads you to believe. The problem is extracting it, however, since deposits might be spread thin or in difficult to reach places (too deep). China has the advantage of cheap labor in dealing with these issues simply by throwing more people at it.

Is mining really that labor intensive? Especially for something that involves digging up mass quantities of earth and refining out the trace metals?

I thought something like rare earth mining would just employ huge earth moving equipment with comparatively few people to run it.

How much of a mine's costs go to labor?

I would think that China's bigger advantage is in less strict environmental standards.

Re:Trade war (1)

Anonymous Coward | about 2 years ago | (#41767777)

The same can be said of the United States. Our current track is un-sustainable.

An average of $500,000 for a house in California. Your household (husband+wife) needs to make a minimum of $120,000 to afford a house in California.

A lack of high-income jobs to pay for a basic cost of living here.

$16 trillion in federal debt. I can't even begin to imagine that amount of money.

Skyrocketing health care costs, that will doom the entire system.

A university education that is quickly becoming beyond the reach of ordinary citizens.

The thing is rare earths aren't (1)

Sycraft-fu (314770) | about 2 years ago | (#41768111)

Go look it up. Their name is not very good. No they aren't abundant like silicon, aluminium, or iron, but they are not these extremely rare elements that you can't find many of. They are fairly plentiful.

So if China wants to price things up too much there really isn't a good reason not to go after them in other locations.

Re:Trade war (2)

zerotorr (729953) | about 2 years ago | (#41767319)

Start putting tariffs on anything made with Chinese rare earths. Since China is a net exporter, they have the most to lose playing these games.

That's ridiculous. The largest purchaser of rare earth minerals are US companies. Tariffs are meant to encourage people to buy products from other countries, mainly the host country. There really are no other producers of rare earth minerals to choose from, not in quantities large enough to satisfy demand. That would be like increasing taxes on oil to encourage people to not buy from the middle east. There's just not enough being produced outside there to satisfy demand. The economy would crumble. What the US needs to do is encourage production elsewhere of these minerals, so we're not tied to China so much.

Re:Trade war (0)

Anonymous Coward | about 2 years ago | (#41768001)

Rare earths aren't rare. China produces the most because they have the cheapest labor. With tariffs domestic rare earth production would be competitive and the recycling of electronic goods to reclaim the rare earths would be profitable.

Re:Trade war (1)

Ichijo (607641) | about 2 years ago | (#41767353)

Reducing production to increase prices is "playing games"? Don't you know how to read a demand curve [wikipedia.org] ?

Buy Molycorp (MCP) (0, Offtopic)

i_want_you_to_throw_ (559379) | about 2 years ago | (#41766853)

Time to consider buying Molycorp. (ticker: MCP). They are, I think, the sole US company involved in the space. Apparently the news hasn't caught onto this story yet but I made a bunch of $$$$ last year with this one. Just something to keep an eye on.

Re:Buy Molycorp (MCP) (2)

TheRealMindChild (743925) | about 2 years ago | (#41766983)

Are you actually trying to use Slashdot to manipulate stock prices for you? *ugh*

Re: Winning! (5, Funny)

hoboroadie (1726896) | about 2 years ago | (#41767061)

He's promoting healthy development of his stock's price.

Re:Buy Molycorp (MCP) (1)

MightyYar (622222) | about 2 years ago | (#41766987)

but I made a bunch of $$$$ last year with this one

It's down 74% off it's 52-week... are you shorting it???

Re:Buy Molycorp (MCP) (1)

Sarten-X (1102295) | about 2 years ago | (#41767035)

I made a bunch of $$$$ last year with this one.

By any chance, was that money made by buying the stock, then posting messages online about it to generate interest and raise prices [wikipedia.org] , then selling the stock at the new higher price?

Re:Buy Molycorp (MCP) (1)

JazzHarper (745403) | about 2 years ago | (#41767955)

I made a bunch of $$$$ last year with this one.

By any chance, was that money made by buying the stock, then posting messages online about it to generate interest and raise prices [wikipedia.org] , then selling the stock at the new higher price?

That's extremely unlikely. There haven't been any new higher prices for MCP in a long time. It peaked at $77 a year an a half ago and has been crushed, ever since. It's down around $11, now. The only people who made money were the ones who were short.

Besides, message board pumping only works for thinly-traded stocks. With 6 million shares of MCP changing hands every day, a random dude on some board isn't going to move the needle.

Re:Buy Molycorp (MCP) (2)

jgtg32a (1173373) | about 2 years ago | (#41767297)

Yeah I made a lot of money with them as well, but then I bought them again right before the crash and then I doubled down at around $30. Good news is I don't have to pay capital gains tax for quite a while.

Re:Buy Molycorp (MCP) (1)

zeroryoko1974 (2634611) | about 2 years ago | (#41767387)

I think members of the FTC would be very interested in hearing about your investment. Give them a call

Communists my ass... (3, Insightful)

bjdevil66 (583941) | about 2 years ago | (#41766863)

They're capitalists, with all the dirty trappings and failings of western businessmen, only without the whole problem of human rights.

Someone probably needs to remind these people that artificially manipulating prices like this can get burned badly in the end.

Re:Communists my ass... (5, Insightful)

Kenja (541830) | about 2 years ago | (#41766985)

Try starting a Chinese company that competes with one of the party backed ones and you'll see how capitalist they are not.

Re:Communists my ass... (1)

jovius (974690) | about 2 years ago | (#41767491)

Free market != Capitalism. Isn't it the ultimate capitalism when the state and the business go hand in hand reaping profits for as few as possible? Sure there might be competition, but it's fierce and probably bloody too.

Re:Communists my ass... (1)

Anonymous Coward | about 2 years ago | (#41767517)

OK, Fascist then.

Re:Communists my ass... (1)

jellomizer (103300) | about 2 years ago | (#41767059)

Are you saying that the Chinese don't have Human Rights issues?

What news outlet have you been watching? The chinese news?

Re:Communists my ass... (1)

Drathos (1092) | about 2 years ago | (#41767223)

I think it's not that they don't have human rights issues, more that they don't consider them issues and just ignore them.

Re:Communists my ass... (0)

Anonymous Coward | about 2 years ago | (#41767091)

Communist leaders are only publicly communist. If there wasn't a huge pot of gold waiting for them at the end of the communist rainbow, they would never have invented communism in the first place.

Re:Communists my ass... (1)

mfwitten (1906728) | about 2 years ago | (#41767093)

They're capitalists, with all the dirty trappings and failings of western businessmen

No, they're central planners,with all the dirty trappings of a centralized power structure.

manipulating prices like this can get burned badly in the end.

That's because it makes no sense; what they call a "healthy price" is actually an artificially inflated price, which causes strife and can therefore lead to violence.

Thank you! Someone who actually had economics! (0)

Anonymous Coward | about 2 years ago | (#41767271)

No, they're central planners,with all the dirty trappings of a centralized power structure.

Thank you! Thank you for NOT saying they're "Communists"! For the rest of you:

Capitalism is an economic system.

Communism is a political system; NOT an economic system.

Re:Thank you! Someone who actually had economics! (2, Insightful)

Anonymous Coward | about 2 years ago | (#41767413)

How can it possibly NOT be "economic" when the entire economy is forced (at gunpoint if necessary, like any instance of government) to "contribute" to the political system?

Let's call a spade a spade here. If a government takes your money by force -- which all of them do -- then the political system effectively *is* the economy.

Re:Thank you! Someone who actually had economics! (2, Informative)

Anonymous Coward | about 2 years ago | (#41767527)

That's funny, because all of my economics books and professors always taught us it was an economic system, not a political one.

Re:Thank you! Someone who actually had economics! (1)

space fountain (1897346) | about 2 years ago | (#41767535)

I guess in a way, if you squint at it right. Sure the government is forcing communism on everyone, but at least under the dictionary definition, a country could be communist and have a democracy. Don't tell me a country can be communist and capitalist.

Re:Thank you! Someone who actually had economics! (0)

Anonymous Coward | about 2 years ago | (#41767937)

I think that just illustrates my point. A country cannot be both communist and capitalist because they are different economic systems. In fact, communism seeks to overthrow capitalism. Communism can coexist with democracy or totalitarianism, because they aren't competing economic systems. I think the driving purpose of communism is that means of production are owned by the people. In other words, it's about ownership.

The point about the dictionary definition is well taken, though. I took a look at a few on the web and they're simply wrong. They often mention totalitarian governments as part of the definition, but that need not be the case.

Re:Thank you! Someone who actually had economics! (0)

Anonymous Coward | about 2 years ago | (#41767947)

... , but at least under the dictionary definition, a country could be communist and have a democracy.

Absolutely not.

Don't tell me a country can be communist and capitalist.

I will and for proof I give you China: they are a Communist state with a (mostly) capitalist economy. Although, many firms are still state controlled and owned - hence the qualifier "mostly" for the pedants.

Of course in today's World, you'd be hard pressed to find a truly Democratic/Capitalist country or a truly Communist/Socialist one. The World is moving more and more to hybrids. democratic states/ socialist economies (Scandinavia/India) or Communist states and Capitalist economies (China).

I'd cite Wikipedia but they got too much wrong and I'm not part of the "in crowd" to edit the articles.

Re:Thank you! Someone who actually had economics! (0)

Anonymous Coward | about 2 years ago | (#41768055)

I would submit to you that, these days, China is communist in name only.

Re:Communists my ass... (1)

alexgieg (948359) | about 2 years ago | (#41767695)

No, they're central planners,with all the dirty trappings of a centralized power structure.

Internally, yes, but looking from the outside and taking China as a single ultra-huge corporation, then what they're doing is typical monopolistic capitalist entity.

One should always remember that liberalism and libertarianism are almost never what a mega-corp CEO believes in, they're middle class ideologies. The very poor want someone to pay their bills for them, hence they lean left. The middle class want to be left alone, so they lean libertarian. And the very rich and powerful want to stay rich and powerful no matter what, not wanting that silly free market to put them at risk, so they lean "power", whatever the label. Thus, being a capitalist-like entity isn't opposite to leaning left on other things, all the while is most certainly is leaning anti-libertarian.

Re:Communists my ass... (1)

Ichijo (607641) | about 2 years ago | (#41767379)

Reducing production when profits don't justify the current level of production is "manipulating prices"? Don't you know how to read a demand curve [wikipedia.org] ?

Back to the stoneage (1)

Anarchy24 (964386) | about 2 years ago | (#41766865)

Two solutions exist for America - first, repeal all free-trade agreements. Second, the perennial favorite: bomb em!

Re:Back to the stoneage (5, Informative)

cavreader (1903280) | about 2 years ago | (#41767129)

Or just re-open the closed rare earth mines in the US. Rare Earths are really not that "rare". The US closed it's most productive mines for environmental reasons and because it was cheaper to purchase from abroad. Same reason domestic oil production was reduced. Of course the US is now pumping approximately 10 million BPD and is expected to surpass Saudi Arabia in as little as 4 years using newer extraction methods is also something to look forward. China's economic forecasts have always been predicated on best case scenarios as well as their government making the optimum decisions every time but their government is no more immune to stupid decisions than any other government in the world.

Re:Back to the stoneage (0)

Anonymous Coward | about 2 years ago | (#41767333)

The bombing only works if the US is the only one that have the bombs. U.S. has not used its nukes so far (at least not in the news) against anyone else since WWII. Not even against terrorists that launched their attack in a U.S. city. What make you think that the U.S. would do that without an actual physical attack? Would the U.S. be able to get away without the rest of the world turning against it?

Assuming the U.S. has first launch of its nukes pointing at China.

At some point before the nukes go to orbit, the Chinese, Russian would see the launch.
Since Russia is sort of in the general direction, Russia will assume that it is the target.
China fires their nukes, Russia fires its nukes, hell even North Korea fire their failed fireworks.
U.S. will be gone a few minutes afterward.

Re:Back to the stoneage (1)

KingMotley (944240) | about 2 years ago | (#41767471)

It has been a long time since Russia and the US were in any sort of tense conflict that would lead them to believe the US would launch a nuke at them.

I suspect if Russia saw a US nuke launch they would (like most rational people) be calling North Korea to say good bye.

Re:Back to the stoneage (1)

afidel (530433) | about 2 years ago | (#41767961)

Iran is a LOT more likely than North Korea, if we attack NK Soul gets leveled, we have no such qualms with Iran (until they get a warhead small enough to fit on one of their missiles that can reach Israel).

70% (3, Insightful)

Githaron (2462596) | about 2 years ago | (#41766905)

China has about 30 percent of rare earths deposits but accounts for more than 90 percent of production.

It sounds like we should consider mining from the other 70 percent.

Re:70% (2)

hoboroadie (1726896) | about 2 years ago | (#41767123)

It sounds more like we should consider developing production facilities beyond that 10% to me.

Re:70% (0)

Anonymous Coward | about 2 years ago | (#41767235)

If Only there was a country friendly to western powers with lots of rare earths!

What? Wait! Afghanistan???

Re:70% (0)

Anonymous Coward | about 2 years ago | (#41767849)

no really: http://www.scientificamerican.com/article.cfm?id=afghanistan-holds-enormous-bounty-of-rare-earths

Re:70% (0)

Anonymous Coward | about 2 years ago | (#41767473)

It is just like oil. As prices rise, an alternative source or method begins to look cost effective. A price drop in oil wipes out all investor money in that alternative. Alternatives that have not reached a critical mass can not survive unless they can compete with the minimum surviving level of the incumbant source. Every time this happens less and less investors are interested in starting up the alternative because they know the cycle and the risks.

Outsourcing (2)

Zontar The Mindless (9002) | about 2 years ago | (#41767107)

This is what happens when you outsource production of a key component of a critical technology. Quoth the fine article,

The United States, Canada, Australia and other countries also have rare earths but most mining stopped in the 1990s as lower-cost Chinese ores came on the market.

In other words, it sounds like we set ourselves up for this by going for the quick buck.

Re:Outsourcing (0)

Anonymous Coward | about 2 years ago | (#41767403)

Two key facts:

1) "Rare earth" is a misnomer, as these elements aren't incredibly rare.
2) The US has plenty of reserves we no longer exploit due onerous new environmental regulations.

Effectively, we bought cheaper neodymium, et al, from China by outsourcing our pollution. Seems like a fair trade to me.

If they don't want to sell to us anymore the market will rectify the situation; it will once again become viable to use US reserves (albeit at the higher cost of environmental policing).

Re:Outsourcing (2)

space fountain (1897346) | about 2 years ago | (#41767437)

Yes, but maybe not in the way you mean. My understanding is it's not the labor costs that are the main concern, but the fact that these ores contain other toxic materials. Disposal of these material is most of the expense. And, of course, the that's no problem for the Chines

Re:Outsourcing (3, Insightful)

Dan East (318230) | about 2 years ago | (#41767483)

This is simply inevitable. China has been producing rare earths at unsustainable and artificially low prices, which is why the rest of the world no longer needed to bother with mining and consuming their own finite resources.

Everyone needs to grasp that this is an inevitability - the prices of various products (mainly higher technology) will have to go up, and thus the global markets and product will rebalance themselves. The manipulation was already done in keeping the prices too low, not in making them go up. Your complaints are coming way too late in this game - you should have been complaining at least a decade ago when they flooded the market with cheap resources, not now that the bubble has burst.

Say a new hot dog stand opens up in town, and for the first month they sell hotdogs for 25 cents at a massive and unsustainable loss. Maybe that's long enough to run the other hot dog stands out of business, or at least make them realize it's just not worth bothering with. Then after the introductory price they go up to where the market belongs. Now at that point the other hot dog stands can re-open, with new owners or with their old owners - doesn't really matter. At the end of the day it's all the same end result - hotdogs cost what they're worth.

My question is this - was it wrong for the rest of us to enjoy hotdogs for only a quarter apiece while we were able to? My opinion is no, that's not wrong of us, nor is it wrong that the world enjoyed lower priced rare earths (and thus technology) because of China's willing sacrifice of their finite resources.

Re:Outsourcing (1)

e065c8515d206cb0e190 (1785896) | about 2 years ago | (#41767559)

Whose fault? Who's "we"?

Subsidising unprofitable US producers would be extremely costly. It's extremely hard to fight market forces in a globalized environment (if it was just Montana vs Nevada, one could just pass a law). It's also most of the time counterproductive.

Now this is beyonf "free markets", this is clearly price manipulation. And price manipulation is "legal" only when there's no law. OPEC has been manipulating oil for years. Why do they get away with it? Because they don't belong to the WTO and hence don't fall under its "laws". China is a WTO member, so it's not that legal for them to act like that, and there is precedent action against such manipulation: http://www.google.com/search?q=wto+china+rare+earth [google.com]

Re:Outsourcing (1)

ShanghaiBill (739463) | about 2 years ago | (#41768039)

Whose fault? Who's "we"?

Since these elements are strategically necessary, I would say that "we" means the US Government. They are elected to look out for our interests.

Subsidising unprofitable US producers would be extremely costly.

That was not the only alternative. Another good solution would have been stockpiling. If it would take, say, three years to restart our own mines after a supply disruption, then the prudent thing (both economically and militarily) would have been to build up a strategic stockpile to cover three years of consumption before these mines were closed, to allow time for them to reopen. We could have built the stockpile by buying either from our own mines or from the Chinese.

Re:Outsourcing (1)

RGladiator (454257) | about 2 years ago | (#41767571)

The problem with this is we don't have government controlled mines. When a private U.S. company cannot sell it's rare earth elements cheap enough to compete with China, they cut their losses and shut down. Only if the government gave them money to keep running or was willing to buy U.S. rare earth's at U.S. prices could we not "set ourselves up". It's not the quick buck, it's the global economy.

Re:Outsourcing (1)

GoodNewsJimDotCom (2244874) | about 2 years ago | (#41767613)

I always felt that if you were once a world leader in an industry, yet some other country is just doing it cheaper than you, the government should subsidize your final competing industry and possibly put tariffs on incoming goods to protect your last 10-5% industry. The US government should have thought about this around the 70s when Pittsburgh was struggling losing their steel. I'm not so sure the politicians are interested in this though as they're not always for serving the people, but more the people giving them campaign contributions.

Re:Outsourcing (1)

Bob the Super Hamste (1152367) | about 2 years ago | (#41768057)

From my understanding the old US steel mills that closed were mostly pre WWII and other countries had a competitive advantage because we bombed their old ones off the face of the planet or they never had them to begin with so they built new modern mills. The US steel industry should have spent some of the money from the good years modernizing but instead they remained complacent and advanced.

Re:Outsourcing (1)

Type44Q (1233630) | about 2 years ago | (#41767747)

In other words, it sounds like we set ourselves up for this by going for the quick buck.

Alternately... we were set up by the Chinese dumping cheap product (product subsidized by prison/slave labor and complete disregard for any/all environmental consequences).

That's quite funny (1)

7-Vodka (195504) | about 2 years ago | (#41767133)

... And this strategy never works. Even in a cartel it rarely works because to make money output has to resume and to make maximum profit, the price has to be at the level that clears the market.

Good luck to you china, I wonder how long before they can no longer stand their fast.

OPEC (1)

e065c8515d206cb0e190 (1785896) | about 2 years ago | (#41767687)

I beg to differ, OPEC has run successfully as a cartel for quite some time.

Yes, they all more or less cheat, but not too much. In the end, they still drive the prices.

so what? (4, Insightful)

nimbius (983462) | about 2 years ago | (#41767163)

America exports the worlds supply of helium, hasnt produced a millilitre more for over 2 decades, and keeps the price artificially low.

OPEC sets quotas and prices for global oil supplies, and can suspend or restrict production whenever they feel the need.

American agricultural conglomerates like ADM and General Mills collude to set the price at which they will accept corn from farmers. too much corn does not drive the price of it down, instead its maintained by dumping cheap corn as an export, or siloing it for next year.

how has china in any way changed how capitalism has worked for the past 270 years? The only thing thats generated outrage is chinas willingness to take an aggressively competitive position in the global economy, instead of a subservient one. If you dont like it, consider pushing for more organized labor.

Re:so what? (1)

ericloewe (2129490) | about 2 years ago | (#41767495)

Unions, while fine in principle, will soon become a bureaucratic organization whose only goal is to screw the administration (country, company, whatever) over, not look after workers.

A neutral party should look after everyone's best interests. Goverments could take on that role, but tight and inflexible controls or excessive interference in what should be strictly business are the sad reality.

Re:so what? (0)

eyegor (148503) | about 2 years ago | (#41767669)

Speaking from an economic standpoint, a union is a monopoly on the supply of their 'product' (labor) and can dictate the terms the cost of their product to the consumers of that product (industry). That monopoly position has done great harm to many of the industries that are forced to pay higher than market costs for labor than they would in right-to-work states.

Re:so what? (1)

Rob Riggs (6418) | about 2 years ago | (#41767813)

Unions, while fine in principle, will soon become a bureaucratic organization whose only goal is to screw the administration (country, company, whatever) over, not look after workers.

A neutral party should look after everyone's best interests. Goverments could take on that role, but tight and inflexible controls or excessive interference in what should be strictly business are the sad reality.

Unions and representative governments reflect the character and will of their constituents.

u s a (0)

Anonymous Coward | about 2 years ago | (#41767221)

nebraska has this starting soon http://www.quantumrareearth.com/ bought from molycorp which never developed it

This is a good thing. (0)

Anonymous Coward | about 2 years ago | (#41767225)

This is the free market at its best. This company doesn't owe anyone anything and by driving up prices they are simply doing what is best for their own rational self interest.

And here's the squeeze. (0)

Anonymous Coward | about 2 years ago | (#41767243)

This is the part where I laugh and do the I-told-you-so dance.

This is why you don't let china become the only producer in any industry.
This is really why solar companies in the US are dropping like flies. China is /huge/ in to solar and they want to squeeze out the competition.

Afgan Mineral Rights are purchased in 10 , 9 , 8 (1)

RobertLTux (260313) | about 2 years ago | (#41767381)

isn't one of the reasons we are still in Afghanistan that they have an imperial C4ton of rare earth minerals in the mountains??

Re:Afgan Mineral Rights are purchased in 10 , 9 , (0)

Anonymous Coward | about 2 years ago | (#41767913)

Possibly, but I think the Chinese already bought the rights to those deposits.

Re:Afgan Mineral Rights are purchased in 10 , 9 , (0)

Anonymous Coward | about 2 years ago | (#41767953)

http://www.examiner.com/article/we-re-fighting-to-protect-china-s-economic-interests-afghanistan

Re:Afgan Mineral Rights are purchased in 10 , 9 , (1)

oodaloop (1229816) | about 2 years ago | (#41768027)

No. Or rather, they do have minerals, but that's not why we're there and we're not getting the minerals. We're leaving by 2014 without the contracts.

It's a good thing (1)

K. S. Kyosuke (729550) | about 2 years ago | (#41767505)

We should prepare ourselves for the future in which everything will have to be recycled.

Four steps to bankruptcy (3, Interesting)

gurps_npc (621217) | about 2 years ago | (#41767551)

Step 1. Develop a business model founded on being the cheapest.

Step 2. Watch as almost everyone else gets out of the business because they can't profit at your price, leaving you with 90% of the market.

Step 3. Now try to increase profits. When you realize you can't raise prices because the other 10% undercut you and make most of the profit, cut off production entirely.

Step 4. Watch as the other 10% raise prices (to the level you wished you got) and make a profit at your expense. Then watch as they expand, cutting your original market share from 90% to 70%.

How do you know the rare earths are secure? (0)

Anonymous Coward | about 2 years ago | (#41767615)

China could have written a BACKDOOR into the rare earth elements they export and will ROOT YOUR PHONE!!!!

Really.

Why the fuck should china care about a "trade war" when the USA and Australia have both decided already to impose sanctions in a trade war? What is supposed to happen here? China says "Oh no, if we stop exporting rare earths, the USA and Australia may block purchases of our network kit. Even more, we mean!".

War! (0)

Anonymous Coward | about 2 years ago | (#41767629)

Looks like it's time for a nice little invasion...

Great! (1)

ZenDragon (1205104) | about 2 years ago | (#41767655)

Now maybe my Molycorp stock will go back up! :D

Market manipulation (1)

phorm (591458) | about 2 years ago | (#41768019)

it suspended production Tuesday to promote 'healthy development' of rare earths prices

If you want to promote "healthy development" of prices, raise the prices. If you go too high, you'll know when people stop buying from you or start developing relationships with a third-party.
Perhaps this will promote some laws/rules around this sort of behavior. It's similar to cartel or price-fixing behavior when you've got a cornered market like this.

However, it's not like this is the only market where this happens. While the petroleum market is a bit more diverse, supplies are still choked in order to drive up prices etc.

well that works (1)

slashmydots (2189826) | about 2 years ago | (#41768065)

I guess by "promote healthy pricing" they mean guarantee that every other major country will start their own mining operation and eventually all but put them out of business. I think they really meant they're greedy assholes driving the price up but my proposed end result is more realistic.

Go Go MolyCorp (0)

Anonymous Coward | about 2 years ago | (#41768085)

Looks like Silicon Valley could have a new gold rush on its hands, "Thars Neodynium in those hills.."

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