Sal predicted this months ago...

Here is a more detailed analysis

washingtonpost.com

"China's recent move to limit exports of minerals critical in the manufacture of a vast array of products such as missiles, car batteries, cellphones, lasers and computers is stoking alarm that its domination of the industry could give it enhanced leverage over the United States.

On Thursday, some traders of "rare earths," 17 minerals that are used in small portions in almost every advanced industrial product, reported that China, which controls 97 percent of the industry, had halted the export of anything that contained traces of the minerals to Japan. The Chinese government denied the allegation.

The purported export ban was linked to a dispute between the two countries over an island chain called the Senakus in Japanese and Diaoyu islands in Chinese. Japan has detained the captain of a Chinese fishing vessel over a collision at sea with a Japanese coast guard ship."

All this is done just for one person! This is so unlike Chinese behaviour in the past and this certainly raises eyebrows everywhere.

"Only in the past year has the issue begun to receive significant attention in Washington. In April, the Government Accountability Office reported that it could take as long as 15 years to rebuild the U.S. rare earth industry. "

"For years, China has worked to dominate the rare earths industry. Starting in the late 1980s and early 1990s, China flooded the world with cheap rare earths."

"China's prices were so low that it led the once-biggest mine in the world - Mountain Pass in California - to shut its operations in 2002 after allegations of environmental violations at the facility."

"From mining, China moved up to refining and advanced metallurgy. They drove rare earths refiners out of the market. They obtained patents for downstream work. They bought magnet makers around the world. They offered to massively overpay for three Japanese firms that dominate the production of magnets for computer hard drives. "

Today, China dominates not just the mining but also the refining of rare earths, and the profits are enormous. Prices of several minerals have jumped 200 percent in the months since China announced it was limiting exports."

"China is already being sued at the World Trade Organization by the United States, the European Union and Mexico for export restrictions on raw materials, including some rare earth minerals. The U.S. trade representative is also considering filing a separate case purely on rare earths, U.S. officials said. And in industry, Molycorp Metals is working to reopen the California mine.

In June, the European Union issued its own report on rare earths that predicted that the minerals would become increasingly rare. While the United States has focused on China's increasing leverage over its national defense, the EU report reflected worries that China would control the core of green technology in the future. "

Wow, China being sued for not exporting enough! The truth of the matter is that now China has a stranglehold on essential materials for the high tech industry. It will take at least 15 years before the rest of the world can ramp up enough production. But China can simply flood the market again and bankrupt any private ventures. In the meantime, the easiest way to access these rare earth elements is to invest and set up your factories in China and transfer all your technology.

The latest news is that Japan has yielded to China and released the trawled captain.

BBC News - Japan to free Chinese boat captain amid row

This just demonstrates that times have changed and China is the senior partner now. It was a choice of between holding him or risking your high tech industry.

http://www.bloomberg.com/news/2010-0...ieda-says.html

This is not surprising. There is a lot anger in China over abuses committed by Japan in China. China has been biding it's time, quietly expanding its holdings, whilst snickering over the United States being its own worst enemy beating itself up in costly foreign operations (to use a euphemism). I once investigated the viability of setting up a business that involved touching up manufactured products. I dropped that idea right quick, after I phoned around and pretty soon discovered that Canadian and American manufactures were disappearing or relocating faster than fleas hopping off of a dying dog.

People were genuinely surprised at how tough the Chinese government response was. They were in doubt under intense public pressure through the Internet. There was great anger over the fact that a grandmother of the captain died of shock when she learnt of his detention. If indeed the trawler captain did ram the Japanese ships on purpose (flashback US spy plane incident 2001), he must bear some personal responsibility. In the past, Chinese trawlers were simply told to go away. This time, the Japanese arrested a crew and charged him with a non-jailible offense.

China has already cut down rare earth exports by 40% this year citing own needs and also the need to protect their environment. Mining rare earths is a very dirty and dangerous buiness and they clearly would really prefer to cut it down. I can't see how you can force a country to harm its population and environment on purpose in order to make stuff for you.

In any case, there are a lot of other commodities that China need in return and so this is unlikely to get out of hand. The next big test would be whether the US impose trade sanctions on China for currency manipulation and how China responds should that occur. Japan is particularly vulnerable because it is the biggest importer of rare earths and it does not have much natural resources. However, it does have a strategic reserve that would last a year.

It will take at least another 50 years for Japan-China relationship to become completely normal, as it would be case for relationships between Japan, Korea and other countries that Japan occupied with great brutality during and before WWII. Japanese cruelty and brutality is completely ingrained in Asian psych and will only disappear until all survivors from that period had died.

Britain, France, USA and other Western powers also had colonies in Asia during that period but unlike Japan, there is very little hard feeling lingering towards them.

I'm not surprised by China's activities these days. Maybe that's because I worked in the Mining industry (Financial/ Investment/ Trade) part of it so I am updated with these issues.

What's interesting is how China has taken advantage of the many mining opportunities, not limited to the ones within their own country. If you look at their mining activities, you'll find that they actually have more mining investment than Japan does. Their rare metals or metal investments in general are scattered globally and they've invested quite heavily around Asia in recent years. They've also done it with stealth. Sure, you'll find government backed investments but there are private corporations, too, that have made great investments in mining as well (don't be surprised if those "private" corporation are owned by a bunch of politicians).

China has vast metal resources in their own country and they are always on the look out for more in comparison to Japan. Another country that's also seen growth in the mining industry is India, particularly for Iron Ore.

I don't think I'll be any more surprised if China starts slapping embargoes on other products or raw materials. They have capitalized in many industries and they continue to do so.

WWIi has everything to do with this, this dispute is just as costly to China as Japan. The main reason why memories lasted so long in Asia is how Japan handled its past actions in comparison to Germany. Because of the atom bombs, it tend to regard itself as a victim rather than as an agressor. There is a fear, however irrational, the Japanese may do it again one day if they have the chance.

Second Sino-Japanese War - Wikipedia, the free encyclopedia

"To this day the war is a major point of contention between China and Japan. The war remains a major roadblock for Sino-Japanese relations, and many people, particularly in China, harbour grudges over the war and related issues. A small but vocal group of Japanese nationalists and/or right-wingers deny a variety of crimes attributed to Japan. The Japanese invasion of its neighbours is often glorified or whitewashed, and wartime atrocities, most notably the Nanking Massacre, comfort women and Unit 731, are frequently denied by such individuals. The Japanese government has also been accused of historical revisionism by allowing the approval of school textbooks omitting or glossing over Japan's militant past. In response to criticism of Japanese textbook revisionism, the PRC government has been accused of using the war to stir up already growing anti-Japanese sentiments to whip up nationalistic feelings and divert its citizens' minds from internal matters."

Japanese war crimes - Wikipedia, the free encyclopedia

"According to Rummel, in China alone, during 1937-45, approximately 3.9 million Chinese were killed, mostly civilians, as a direct result of the Japanese operations and 10.2 millions in the course of the war.[30] The most infamous incident during this period was the Nanking Massacre of 1937-38, when, according to the findings of the International Military Tribunal for the Far East, the Japanese Army massacred as many as 300,000 civilians and prisoners of war, although the accepted figure is somewhere in the hundreds of thousands.[31] A similar crime was the Changjiao massacre.

In Southeast Asia, the Manila massacre, resulted in the deaths of 100,000 civilians in the Philippines. It is estimated that at least one out of every 20 Filipinos died at the hand of the Japanese during the occupation.[32][33] In the Sook Ching massacre, between 50,000 and 90,000 ethnic Chinese in Singapore were taken to beaches and massacred. There were numerous other massacres of civilians e.g. the Kalagong massacre."

And some think it's closer to $3 trillion:
Afghanistan: U.S. Geologists Discover Wealth of Mineral Deposits in Afghanistan - ABC News

Ironic thing is, some say China is already mining in Afghanistan and the US is actually "accidentally" protecting Chinese interests in Afghanistan. They get to mine while we "get" to protect them.

The other problems are there's no infrastructure in Afghanistan. No railroads, roads, bridges, factories, etc so everything would need to be built from the ground up.

Which leads to the next problem of extreme corruption and the need to bribe endless tribal leaders.

It's sad really...Here's a once great country destroyed by decades of war, that's now dirt poor with few natural resources...Then when a way to really create an economy is found, there's too much BS for them to take advantage of it.

Kabul in the late 1800's was called the "Paris of the Middle East". It was a modern city full of gardens, fountains, etc. Now it's rubble. But I'm sure someone will find a way to exploit it again.

The problem with the Rare earth is not that we have shut down mines -- the problem is that it's China that has the rich concentrated deposits in a clay that is indigenous to China -- plain and simple, they HAVE the minerals. We can find some, but we probably won't find deposits to match theirs - it's unlikely that it's going to be easy to find such concentrated deposits. They are called "rare earth" for a reason.

Now we have deposits in the US - but they are not concentrated and we'll have to rip up a LOT of land to get substantial or even nearly substantial quantities with them. Sure - mine in CA, but it's not anything like the Chinese deposits. It's not like you can just pick it up or produce this stuff anywhere you want to spike an economy. They are there or they aren't and there are quantities or there isn't. China has - nobody else has found deposits to match them.

We do have the technology to find them now if they are somewhere in quantity enough to be of value.

At this point in time there are scientists working on replacement mineral possibilities that would put us back in on even ground with China, or they might be able to produce a few in the laboratory. Finding bacteria that can take specific non-gem metal forms of gold and turn it into pure metalic gem quality gold metal, they might find ways that they can feed the bacteria certain elements and they will spit out the right rare earths. It's being studied hard - trust me on that one.

Until we find deposits that are either equal to or richer than the Chinese deposits - or until science uncovers the substitute or how to create the stuff -
China has the upper hand. Point blank.

The really sad thing how one single person could have caused all this. The economic damages would be enormous on both sides. The Chinese goverment officially denies that there was a ban but there seems to have been some deliberate administrative delays. Morover, the export quota for Japan this year is nearly used up anyway.

Mine safety, health and enviromental concerns are very sensitive topics in China right now. There is genuine unease of toxic waste and other dirty work carried out for other countries, mining stuff that West do not want to do themselves for health and safety reasons. Therefore, the desire to cut down on mining and exporting rare earth is real.

Like I said, the minerals are there or they aren't. There is only so much you can "tailor" to a customer. They can get special contracts for amounts - but if the minerals dry up, those contracts are pointless. There is only so much of the stuff so individual customers are actually a secondary consideration as long as the element is a needed commodity. If you can only dig and process a pound a year - there is not much the customer can do about that now is there?

When concentrations are low - the cost of mining and processing either can't be supported or prices of these materials (and subsequent products containing them) will go sky high.

We are looking at a very tough situation all the way around.

Some rare earth mining is more environmentally damaging than others. Some are toxic themselves. Some are open pit mining - and tear up a LOT of land. The minerals are hard to extract and some take some nasty chemical usage to do so. But - China has the minerals so they either mine or they don't. The whole world is depending on them for the substances needed for some technologies -- so what happens next? Will China start wars refusing to produce or are they willing to do whatever it takes to get the goods? Will they use it as political leverage? (We've seen a taste of that one already).

The problem with rare elements is that they are not concentrated - you will find only specks so you have to tear up a lot of terrain to get them. There are a few places in the US we could completely waste to get get them, but when you saw the devastation caused for just a pound of this stuff it will make your head spin. That's another reason China's deposits are so important - they are concentrated more heavily than anywhere else on earth - there will be less territory ruined than anywhere else - and those clays can be landscaped and planted in any area that runs dry. Also - because deposits elsewhere are not concentrated, mining costs, processing costs, etc. will determine whether we do ANY mining or not. We can't run mines and processors on negative returns. Look at the silver mines that are closed down out in ID - lots of silver but the cost of mining is prohibitive. Idaho has just legislated to make a processing plant rather than to continue to outsource silver processing and have found a way to gear those mines back into production, as well as there is now technology to clean up some of the slag and extract more minerals from it. Those are all considerations when you are looking at mined minerals.


Where in the world does the labor get just benefit from a corporation? That is not the nature of the corporation to care what happens to the labor. They just try not to kill enough that others start to take notice. Corporate greed is not a Chinese phenomena. As far as mine labor - miners don't make much unless they have specialized skills and education behind them, the cost to produce and process is high even without manpower leveled into the mix.

The best thing we can do (worldwide) is find alternative elements that can be used in our technologies or learn how to construct equivalent synthetics. The people who are able to do that will become industry leaders. Wherever it is necessary to take unrenewable substances from the earth, you are going to have to look at depletion so without the new technologies into alternative elements we only have so long we can count on the REE (rare earth elements) to sustain us.

Okay - I did some digging into one of our Rare Earth mines that has been closed in Cal - perhaps further exploration would discover more in over the border in Nevada - It was much richer a resource of minerals than I realized. Anyhow -- here's the old press release - Who needs customer input when you have 29 conflicting gov agencies in your faces? Apparently - if our Gov wants to get their excrement coagulated we can handle our own on at least one rare earth element. I wonder how much political turmoil and cost we will be subjected to as well?
And keep your Eye on Afghanistan There are some very important minerals there, too - and Gary Bowsersox (The Gem Hunter) has money from a US agency to work with gem deposits, education of the people, etc on gems and mining - um....... yeah, okay.

That PR made my head spin.

We should declare the entire US a wilderness area, and everyone
has to be a waitress/waiter in a restaurant. Why not? Makes as
much sense as anything else.

I've seen a couple things about the rich mineral deposits in Afghanistan.
I think the entire war has nothing to do with the advertisement. Sort
of like deceptive advertising. Where's the FTC?

You know, Sal... there is some nefarious activity going on in either
AZ or NV re Indian rez's and mineral deposits. Same ole broken record.
I think there was something about the gbmnt seizing (breaking treaty
number whatever) lands so mining ops could happen.

Does anything change? lol No, really.

I wonder how hard it would be to recycle rare earth material from old
pc's, cell phones, Steve Seasoned's R/C toilet flusher... ? lol


Ken