Recent news of German rare earths agreements with Kazakhstan and Mongolia, as well as slow progress on an Australian rare earths refinery in Malaysia, indicate that the West may finally be starting to break China’s hold on the industry.
Since the early 1990s, China has been the world leader in rare earth metals mining. With 57 percent of the world’s supply, it expanded massively in the industry due to its vast resources, increasing technological development since the 1980s, and lessening interest in the United States and elsewhere. Today, China controls 97 percent of the industry.
This gives China a powerful strategic advantage when it comes to the clean-energy, high-tech economy. Rare earth metals, a set of 17 elements composed of scandium, yttrium, and the lanthanides, are essential to a variety of “green” products, including hybrid electric cars, wind turbines, and energy efficient light bulbs, as well as standard high-tech products such as cell phones and laptops.
In recent years, China has imposed strict limits on its rare earths exports, leading to growing concern over higher global prices, more expensive supply chains, and growing international dependency on China for both raw materials and finished goods.
Intending to challenge China’s rare earths dominance, Germany recently signed agreements with Kazakhstan and Mongolia that will allow German companies to mine rare earths, and gain access to other resources, in the central Asian countries in exchange for technological investment.
Rare earths are not actually rare. In fact, they exist all over the world. The challenge with mining rare earths is that they exist in low concentrations and are generally found together with radioactive elements, such as thorium or uranium, making extracting and refining them a difficult, time-consuming and expensive process.
In addition to being expensive, both the mining and refining of rare earths can lead to radioactive pollution without the proper disposal of tailings that contain thorium.
In the United States, strict controls govern tailings disposal. In China, no controls for rare earths exist (and pollution standards are difficult to enforce even where they do). Decades of massive scale and unregulated rare earths mining have caused widespread environmental damage, with some areas, such as the city of Baotou in Inner Mongolia, becoming toxic wastelands.
Malaysia is also familiar with the effects of radiation from the refining of rare earths. It was once home to a Japanese refinery, but the plant closed in 1992 and is now one of Asia’s largest radioactive waste clean-up sites.
Today, Australian mining company Lynas Corp. is set to build a $230 million rare earths refinery plant, the world’s largest and the first rare earths plant outside China in almost 30 years.
Lynas received permission to build the plant several years ago from the Malaysian government, which is eager for the investment. Economic output from the refinery is estimated at almost one percent of Malaysia’s total.
The eruption of angry public protests last year has not to date halted the project, but it has caused delays and increased scrutiny for Lynas Corp. The Malaysia’s Atomic Energy Licensing Board is now telling Lynas it must meet certain key conditions before it can begin the refining process – most notably, a plan for permanent waste disposal.
Permanent waste disposal poses a significant but necessary challenge for rare earths mining. There is little other way to square the problematic tradeoffs between radioactive pollution and development of products for a healthier environment.
As for China’s dominance, it is likely to continue for some time, even with the new Malaysian plant and German agreements. A recent World Trade Organization (WTO) ruling decided that China has violated international trade law by restricting exports on nine industrial metals. Some experts believe that although rare earths were not included in this ruling, the precedent can form the basis of a new case to compel China to lift export limits on rare earths. Other experts, however, point out that even if China were to end export limits, it would not lift limits on domestic production that are designed to prevent further environmental damage – and keep profits high.
Of particular concern to the international community is China’s use of its competitive advantage as a lever in unrelated disputes. In 2010, for example, China restricted exports to Japan following a dispute over Japan’s arrest of a Chinese fishing captain in the East China Sea.
There is, however, some potentially good news. As China’s central government gains more control over domestic production, it likely will result in stricter environmental regulations, and perhaps increased enforcement. It is also likely to become the leader in safer rare earths mining, given the considerable funding they have put into rare earths research since the 1980s and the vested interest they have in reducing toxic waste.
As for Japan, it is seeking ways to make hybrid and electric cars with either recycled rare earths, or none at all.