Element-ary Economics

Economics - the Chinese will use the rare earths to attempt to monopolize the technologies that require these elements. That is their expressed intent.

Mineralogy – most rare earths are recovered not from stand alone mines but in concert with other minerals. I am aware of a gypsum mine that has rare earths in the gypsum and they are recoverable. The gypsum board company chooses not to deal with them since it is not there core business. They have invited other to take the minerals out the gypsum they mine and leave just the gypsum. The problem is that gypsum is mined only when there is demand and the rare earths are not profitable without the gypsum being mined for wallboard. It is like this in many places in the world with trace elements.

Helium used to be recovered from stand alone wells. But much more of it occurred with natural gas. Once the US government mandated the recovery of Helium from all natural gas the Helium wells were no longer of any use since it was now a plentiful gas recovered and sold by a government monopoly.
Something will have to change before we get the quantity of rare earths we will need for the future and I am guessing it will require some sort of “gulp” government incentive or intervention to get things past the tipping point.

It is one of my firm convictions that it is a fatal mistake to assume that the attitudes, ideas, and opinions of your circle of friends and acquaintances are shared by all of America, or the world.

I think, Don, you're making that mistake in assuming that the profit motive is now, and will be tomorrow, what drives the Chinese leadership. Bear in mind that though China is exhibiting movement towards more of a market economy, it is still controlled at the top by firm believers in complete control and central planning, while still powerful enough to crush the people if that becomes necessary.

In other words Tiananmen Square could happen again today, and though there would be real unrest in China, and hue and cry in the rest of the world, not one single nation could do a damn thing about it, nor would they do anything but talk. The Chinese leadership have never shown the slightest interest in talk, oh they give it lip service but proceed to do what they were going to do in the first place.

I have been reading that worship and/or respect for Mao is rearing its ugly head in China. Have the Chinese people and the Chinese leadership got beyond the thinking and acceptance of what produced the "Great leap forward" disasters of the 50s and 60s? I think it would foolish to bet either way.

So, ultimately making predictions on what China is doing or may do with their ownership of rare earth metals is at best extremely risky. Worse would be to anticipate the Chinese doing what you want.

You are correct Mao idolization is wide spread. AND the government does not tell it people about the government disasters. Tienaman Square and those events that surrounded it are not known by most younger Chinese. Very similar to the lack of awareness of Japanese of the events at NanKing. You are also correct the Chinese fear revolution beyond the 1000 plus demonstration that go on each week. The way discontent is being held in check is promising and delivering more prosperity. Look to filling that promise and the fear of loosing grip on power as why the Chinese Government do what they do – it will all make more sense.

This is why I fear Chinese stocks – they have many “promising” and “hopeful” assets. Yikes…

Rare earth elements have been seen as a boon by entrepreneurs in all developed nations, where they are often seen as a waste product by other entrepreneurs -- much as silver was seen as a waste product of gold mining in the Comstock.

I would be more interested in the opportunities there are in rare earth elements when you enter socialist economies. I suspect they don't understand the waste market as well -- because that's where most rare earth elements originate from.

Does he offer some advice for addressing this concern, or is this concern promoted as a prelude to "strategic initiatives"?

If china stops exporting them because it is more profitable to use them in China, then, barring successful exploitation of alternate sources, the prices will rise to make it more profitable to export them or find new sources.

That we may perceive some imported element as "crucial" is no reason to become "offensive".

Why is China's destiny to export these metals? If they can find it more profitable to use it home then that everyone's else tough luck. Maybe everyone else who look if they can have their own mines.

I don't know what China's destiny is. They can export or not for all I care. As with anyone with their own resources, their choice, not mine.

I understand that China has done much of the R&D on the rare earths and the associated IP may be more important that the actual mines. The rare earths aren't so rare, so new mines could be developed -- if you could get permits, which you can't in the US in any reasonable amount of time. Along with just getting the permits, you would need the IP. With the paucity of Science and Engineering majors being produced in the US, compared to China, and too many of our "best and brightest" going into law, and finance, we may not be able to develop the required technology.

Probably right, but it does assume that profits motivate Chinese planners. I think it's a decent assumption, but probably doesn't universally apply.

If one entity, be it a corporation, cartel or a country, has something that is vital to our existence and available nowhere else, then we are indebted to that supplier, at least in the short run. And in the short run we may all be seriously debilitated if we don't get that critical item. Wars have been fought over the control of resources, or even over the perception of their necessity, because the sole owner has become our master and we, his slave. This deplorable situation is the antithesis of liberty, so watch out those of you that cherish and protect our freedoms. Get ready to rumble!

China could stop exporting rare earth elements in their raw form and instead use them to produce higher value added goods that could then be consumed internally or indeed exported. They would get the same, if not higher, economic value for the rare earth elements but with the added benefit of being able to earns profits on the items into which they have been incorporated.

The economic gain of exporting high value added goods containing rare earth elements is greater than the economic gain of just exporting the rare earth elements alone. As such it makes sense that China, that has its own unemployment issues, will encourage the former.

Non Chinese manufacturers who rely on rare earth elements, who are presumably already subject to monopolistic pricing, should be concerned that China decides to move along the value chain and consume all available material.

People should always be concerned about critical supplies.

And speaking of China....nice job refuting the protectionist on the latest episode of Stossel.

And I am going to stop exporting my labor to the local university that pays me over 90K/year and focus my rare talents working my my yard. The university should be worried 'cause I'm going to retain all the wealth for me.

Ya can't make this stuff up, folks.