Should the rise of China have us nervous about a neodymium gap?
It’s a question President Barack Obama is taking seriously, as he showed Tuesday in asking the World Trade Organization to look into China’s manipulation of the global market in so-called rare-earth elements. We wish the U.S. Defense Department would show an equal amount of concern.
Neodymium is one of 17 rare-earth metals that have become vital to industrial production and national security in our high-tech age.
One thing neodymium isn’t is rare — it is as commonplace in the earth’s crust as prosaic metals like copper, and scattered around the globe. Much the same can be said of praseodymium (used in Hollywood’s arc lights), samarium (guided missiles) and lanthanum (night-vision goggles). Yet, despite this abundance, China produces more than 90 percent of the global supply of rare earths.
The trigger points for wars often seem silly and inconsequential; and readers only need to refer to yesterday’s post to consider just how consequential the outcome of this nascent trade war might be. And the reality here is that America has ample supplies of rare earths:
That’s right: the United States was once Earth’s greatest producer of rare earth metals. But China managed to do it more cheaply, and so American interests decided they would go with the cheaper option. And so America’s national security interest was compromised as China can now set whatever quotas and prices they want. America’s huge rare earth resources remain undeveloped.
From New Scientist:
The US has 13 million tonnes of rare earth elements but it would take years to extract them, suggests the first detailed report on the country’s supply.
“Rare earth” is an alternative name for the lanthanides – elements 57 to 71 – plus yttrium and scandium. The elements are integral to modern life, and are used in everything from disc drives, hybrid cars and sunglasses to lasers and aircraft used by the military.
China controls 97 per cent of the world’s supply and has been tightening its export quotas, sparking concerns that the rare earths could live up to their name.
What the big media commentators are missing is that this problem is a microcosm of a much, much bigger problem for America down the road. Namely, that this is far from the only industry — from resources, to components, to finished goods — where China produces, and America consumes, and China can cut America off any time she likes.
“Oh, but they’ll never cut us off!” cries the deluded American wishful-thinker. “They need us to consume their produce!”
Sadly, China has 1300 million people in its own population who would be quite willing to do a little consumption to keep the Chinese economy ticking over. Consumption is easy — anyone can consume — especially an economy with a very high savings rate and a huge hoard of $ and €, like China.
This strain of American thought reminds me very much of the pre-sacking Roman elites who foolishly clung to the belief that the barbarians could never sack Rome, because Rome was Rome, and the barbarians were snivelling Dionysians lacking in culture and sensibility.
No, the barbarians can sack Rome. And they will, so long as America keeps trying so damn hard to stay resource- and energy-dependent, and to continue to accrue debt to foot the bill for her role as global policeman.
azizonomics 
With China’s $3 Trillion hoard of Treasuries I would be shocked if Obama didn’t get permission from Beijing before embarking on this “trade war” rhetoric. This strikes me as for domestic consumption, 100%. It is an election year after all.
Yeah, it’s stump rhetoric. Honestly, I don’t think China are trying to give the impression that they are in control.
The sad thing is that the American political sphere calls for Romney and Obama to out “CHINA IS A CURRENCY MANIPULATOR” each other. Some dumb shit.
Glad you know about Mr Tzu. But sadly the Presidents top advisers don’t.
There is this conspiracy theory: The master of the universe wants to use up everyone’s resources before ever to consider his own:
WWIII is the war between the aging developed world and new emerging world to fight over the remaining resources: Lands, Energy, etc etc.. The best way for the West to win is to prevent the emerging from emerging by crook (to corrupt their governments) or by hooks (suck out their wealth and intelligence meaning immigration.)
But the greedy multinational corporations will spoil that by take side with the emerging world as lone as there is lots of money to be made.
That’s not a conspiracy theory; that sounds like reality.
“One thing neodymium isn’t is rare — it is as commonplace in the earth’s crust as prosaic metals like copper, and scattered around the globe”
This might be misleading for many. Yes, they’re not rare, but you need to find minerals where those elements are found in sizable proportions for their exploitation to be economically viable at current costs. And these minerals can only be found in a few places on Earth. Two of those places being southern China and the decommissioned Mountain Pass mine in the US. This fake-abundance is a cause for concern w.r.t. many other elements (potassium from potash for agriculture etc.).
I’m not a geologist, but yes you are correct.
As a point of geostrategy the closure of Mountain Pass is a terrible embarrassment for America
Adam Smith predicted corporations would act in a way that would be counter to national interests, lobbying Governments for certain rights (Wealth of Nations 1776). Of course Corporations would source from overseas.
On another note. The end of an era
http://www.theage.com.au/business/world-business/chapter-closed-on-britannica-in-print-20120314-1uzdx.html
Lets hope that they don’t recycle books (Storage costs) and rely on digital media. I would hate for this act to be seen in the future akin to book burning. Or the loss of Knowledge after Rome collapsed. I mean if there is global war how do we keep our data safe? Machines wear out.
I sold my Britannica for a pittance years ago. I have only a small library. I regret my reliance on the internet.
An interesting take on Government Bond purchasing by the Central Bank
Click to access AEFRevisionistViewOfTheGreatDepressionPartOne.pdf
And since Australia has 99.9% Voter turnout ( you get fined if you don’t vote) I see this Party upsetting the 2 party system
http://www.ausparty.org.au/issues/free-trade.html
Reminds me of Ross Perot.
He is getting a lot of airplay and rising support. It is like he took his policy from the “letters section” of papers and blogs. It is what the people think.
In Australia we feel that big business and big unions control our Muppets sorry Politicians.
The only problem is Mr Katter is a bit of an outspoken eccentric. The Left will label him a lunatic and it will stick with the Sheeple.
We had someone espousing similar views (Pauline Hanson). She had the knowledge of Sarah Palin. She failed after the media grilled her.
Right now our richest Oligarch, Gina Rheinhart has bought a major stake and board seat on our largest media network. I think the natives are getting restless and she needs to influence.
BTW this company is bleeding money. Advertising way down due to internet competition. I am sure the Editors will write favourable reports to keep their jobs. If they make a loss, she will make an equity injection. No sweat!
If that is not a business investment I don’t know what is!
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Engrossing blog post – cheers. You constantly publish a riveting blog. I will come again very soon.
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