Why is China restricting rare earth metals?

"Rare Earth in BlackBerry to Prius Underscores Alarm Over Supply

Rare-earth elements help give BlackBerrys their buzz, Toyota Priuses their battery power, and computer hard drives their spin.

The rare earths, a group of 17 metals including neodymium, lanthanum, cerium and europium, also have industrial and national-security uses, such as in petroleum refining, fiber- optics transmission, and military radar and missile-guidance systems.

The range of uses explains why U.S. lawmakers, officials in Japan and Germany and manufacturers of components that need these materials say they are alarmed by steps taken by China, which provides 97 percent of the world’s supply, to reduce exports by about three-quarters.

Components made with rare earths are so ubiquitous that they aren’t easily replaced, according to Jack Lifton, founder of Technology Metals Research LLC in Detroit, which advises investors in specialty metals. “Without anyone noticing, the rare-earth magnets have become overwhelmingly essential,” he said yesterday.

Rare-earth magnets account for 80 percent of the market for “permanent” magnets that retain their charge, up from zero in 1980, he said. They are in electric motors, small earphones and mobile phones. When a BlackBerry vibrates, a high-powered magnet made with neodymium is at work converting electrical power into mechanical energy.

“They are pervasive in our technology, especially in miniaturization of electronics,” Lifton said.

Automakers relying on neodymium-iron-boron magnets, used in power-steering equipment, “are concerned about long-term access to under-the-hood magnets because they import them from China and Japan,” Lifton said in a phone interview.

...While the elements aren’t as rare in nature as the name implies, they are difficult to find in profitable concentrations, expensive for Western producers to extract and often laced with radioactive elements. China has come to dominate the market because it has been able to produce the elements more cheaply and with fewer environmental restrictions than its competitors.

Japan, the largest importer of Chinese rare-earth materials, has said China halted shipments to Japanese users last month after a collision in disputed waters between a Chinese trawler and the Japanese Coast Guard led to the fishing- boat captain’s detention. Chief Cabinet Secretary Yoshito Sengoku said Oct. 20 that the import situation “hadn’t changed” weeks after the captain’s release.

Chinese Delays

China said this week that it hasn’t suspended shipments to the U.S. and Europe, as reported on Oct. 20 by the New York Times. Chinese customs officials are delaying shipments by various means, such as imposing extra inspections, according to industry participants who spoke on condition of anonymity because of concern about Chinese reaction.

China’s 72 percent reduction in export quotas for the second half of this year, which it announced in July, and the customs delays since then are driving up prices.

...Prices have climbed sevenfold in the last six months for cerium oxide, which is used for polishing semiconductors, and other elements have more than doubled...

China accounts for about 36 percent of global rare-earth reserves, the largest share, and the U.S. is second, with 13 percent, according to the U.S. Geological Survey.

...Makers of catalysts for the oil-refining industry are among the major users of rare earths in the U.S....lanthanum, used to break down heavy crude into light crude...

Lanthanum also is used for nickel-metal hydride batteries that power hybrid cars...

...Commercial and military airplanes also use samarium-cobalt magnets for power generation...

...Neodymium-based magnets also are used in wind turbines..."

Gopal Ratnam