Rare earths and not-so-rare tensions

The US government’s threat to take China to court for hoarding precious elements is more than just a trade dispute.

On 13 March, US president Barack Obama announced that his government would bring a case to the World Trade Organisation (WTO) over the quotas China runs on the export of rare earths – the name given to 17 naturally occurring elements. Underpinning this trade dispute, however, is a mixture of pessimism about resources and fear of China’s growing industrial power.

Rare earths, Obama observed, are used by American manufacturers to make high-tech products like the batteries in hybrid (petrol/electric) cars and mobile phones. He went on: ‘Being able to manufacture advanced batteries and hybrid cars in America is too important for us to stand by and do nothing. We’ve got to take control of our energy future, and we can’t let that energy industry take root in some other country because they were allowed to break the rules. So our administration will bring this case against China today.’

Is this a new phase of tit-for-tat in an ever more protectionist world economy? Certainly. Is it a cheap piece of Sinophobia, all too familiar in today’s Democratic Party, and all too obviously an election stunt? No doubt about it. Yet there is more to the contention over rare earths than you might think.

Running out of rare earths?

What are these ‘rare earths’ and why do they seem to matter so much? Scandium, yttrium and the 15 lanthanide elements running from lanthanum to lutetium in the periodic table are key to in-demand technologies of both a commercial and a military kind. When samarium is mixed with cobalt and neodymium is mixed with iron and boron, they can make permanent magnets that don’t require electricity to generate a magnetic field. As noted by the Institute for the Analysis of Global Security (IAGS), a Washington thinktank that researches energy security, that can help make computers smaller and, in the case of the heat-resistant samarium-cobalt magnet, makes samarium a key component in military aircraft, missiles and smart bombs.

As researchers at the Massachusetts Institute of Technology (MIT) add in a paper just published in Environmental Science and Technology that has already been widely quoted, rare earths are also important to the permanent magnets used in the synchronous motors on wind turbines and to the kind of batteries that will power both the low-CO2 hybrid (petrol/electric) road vehicles of the present and the all-electric vehicles of the future. Indeed, the MIT researchers have determined that demand for these green-energy technologies ‘may lead to an increase [in demand] of more than 700 per cent and 2600 per cent for Nd [neodymium] and Dy [dysprosium], respectively, over the next 25 years’.

But hang on a moment. That’s the first of a number of a very big ‘ifs’.

When MIT modelled the future of demand for rare earths, there were two out of its five ‘scenarios’ that turned out most dangerous. Scenario C was based on two expert reports, published in London and the Hague, on the future of rare earths; but as the MIT team observes, industry ‘insiders’ may be guilty of ‘systematic biases’. Scenario D was similarly based on an International Energy Agency (IEA) scenario, Blue Map, and the assumption that electric vehicles and wind turbines will be adopted at a rate consistent with stabilisation of world CO2 emissions at 450 parts per million (ppm). But when the same IEA launched its World Energy Outlook 2011 on 9 November 2011, it insisted that the target of 450ppm, which in international negotiations on climate change is held consistent with a rise in global temperatures of two degrees Celsius above pre-industrial levels, will prove very hard to achieve. Moreover, wind turbines are unlikely to make up a major proportion of electricity generation in the next few years. Coal- and gas-fired power stations will be much more important, particularly as the March 2011 explosions at Fukushima in Japan have put a dampener on nuclear power.

A parallel story emerges with hybrid vehicles and certainly with all-electric vehicles. At the London press conference held to launch World Energy Outlook 2011, I heard IEA chief economist Fatih Birol quite properly say that electric means of propulsion will not seriously begin to make inroads on the internal-combustion engine ‘for a long, long time’. And this is important, for the MIT projections of a rapid take-up of rare earths assign much more demand to electric vehicles than to wind turbines.

To top it all, the MIT projections assume no technological improvements that would lower demand for rare earths, and no recycling or reuse of these materials, either. Far from being a realistic assessment of the availability and consumption of rare earths, pessimism is baked into the MIT models from the start.

Turning China into a villain

What we have here, as so often with the computer models so beloved by environmentalists, is a very putative apocalypse forecast for a fairly distant future (2035). So President Obama is being less than candid when he suggests that a rule-breaking, Chinese-imposed scarcity of rare earths has put America’s energy industry at risk. America, which has been known to break one or two rules itself in the past, is transparently manipulating the possibility of an issue with rare earths in decades to come to cast China as an international villain in the here and now.

According to the sober prose of the New York Times, China’s Ministry of Industry and Information Technology began as early as the mid 2000s to ‘tighten its hammerlock on the market for some of the world’s most obscure but valuable minerals’. In the NYT account, China is home to 93 per cent of the world’s current production of rare earths and more than 99 per cent of the output for dysprosium and terbium, which are vital in missiles. In 2005, according to an article in the Wall Street Journal, China limited annual exports of rare earths to 65,000 tonnes; today, its export quota stands at about 30,000 tonnes a year, and prices are at historical highs.

So, the line is that America can’t allow those kinds of export controls. They are an infringement of agreed principles of free trade. In the words of top US liberal economist Paul Krugman, China’s grip on rare earths gives it a monopoly position ‘exceeding the wildest dreams of Middle Eastern oil-fueled tyrants’.

What a charming piece of diplomacy! But the indictment of China continues. According to the US Army analyst Cindy Hurst, China mines and processes these rare earths under dodgy environmental and social conditions – indeed, the Chinese Society of Rare Earths itself has said that a tonne of rare earths generates prodigious quantities of fluorine, hydrofluoric acid, sulphur dioxide, sulphuric acid and waste residue that’s radioactive. Around Baotou in Inner Mongolia, which is China’s centre for rare-earth production, enormous amounts of wastewater are created but not treated. Also, hard ‘tails’ of waste that derive from the processing of rare earths contain thorium, which is radioactive.

It’s not just America that dislikes Chinese conduct with rare earths. On 7 September 2010, a collision in the South China Sea between a Chinese fishing boat and two Japanese coastguard vessels highlighted a longstanding territorial dispute between China and Japan over the Senkaku/Diaoyou islands. After the Japanese detained the Chinese trawler’s captain, China cut off exports of rare earths to Japan, forcing Tokyo to set aside a budget of $650million to ensure continued supply. On top of this, Germany, which has always shared with Japan a weak resource base, has also adopted a strong posture on rare earths. In October 2010, the German government approved a new strategy designed to secure the supply of rare earths and other key commodities; and this year, German industrialists have formed an alliance to get hold of rare earths and German chancellor Angela Merkel has signed a deal with Kazakhstan to obtain supply.

That points to the second major deception going on in the ‘China takes all’ dystopias that surround rare earths. The West only relies on China for current production. As the MIT team notes, despite their name, rare earths are not that rare. Though toward half of the world’s reserves are in China, significant quantities also exist in the US and the former Soviet Union. Used up at the current rate, the world’s reserves should last about 870 years – against a figure for, say, copper of 34 years. As the authors of the MIT paper note, known reserves for rare earths are ‘not expected to be constraining in the next 25 years’.

Even the US military isn’t much bothered by rare earths. A new report by the Department of Defense, Rare Earth Materials in Defense Applications, says that by 2013, among the seven rare earths that it wants to use in military applications, the US will be able to produce sufficient quantities of six. Only ultra-scarce yttrium, which is used in precision lasers and to stabilise rockets, may present a problem.

The real story with rare earths is that, through its Mountain Pass mine in California, the US used to be big in them, but decided to discontinue production in the early 2000s – in part, for environmental reasons. Now the US complains of a shortage, and adds that China has only assumed its commanding position by lowering costs in line with low levels of environmental and social protection.

It’s particularly egregious that the West vilifies China for weak environmental and social controls on the mining and processing of rare earths. Why? Because China has established quotas on the production and export of rare earths, in part, because it wants to clean up its act.

If any country is going to take the lead in wind turbines and electric vehicles, it’s more likely to be China than America. So, as Cindy Hunt observes, to protect its resources, ‘the Chinese government has been clamping down on its domestic industry in several ways, including: restricting export quotas on rare-earth elements; closing down smaller and illegal rare-earth operations and consolidating larger ones in an effort to gain more control; trying to put into place increased environmental laws regulating rare-earth mining; and stockpiling. Much of the developed world regards these measures as threatening.’

Thus, China’s behaviour in this area seems entirely sensible. The Chinese government wants to allow for growth for years to come, while being aware of the safety and environmental downsides of getting and handling rare earths. What else should it do in the circumstances? Of course, as the Hunt points out, whether or not Ministry of Environmental Protection standards on the discharge of pollutants around rare earths are ever successfully fully implemented ‘remains to be seen’. But no environmentalist can fairly criticise China for trying to impose limits on rare-earth production.

Most importantly, China’s limits on the export of rare earths are far from being reached. In the first 11 months of 2011, actual exports of rare earths were less than half the export quota.

So let’s get this straight: the case against China is made because of its supposed monopoly on metals that are held key to military, civilian and green technologies. But not only is that monopoly likely to be transient, as new sources of production open up, but it is not being exercised to any appreciable effect on the developed world, except in the case of a retaliation against Japan – which in fact began to reduce its imports from China five years ago, in early 2007. And when China claims to want to suppress the production of rare earths because of the side effects it has in terms of environmental damage, that policy is deemed to be unacceptable. The West needs rare earths for its weapons, its IT and the distant possibility that it will convert millions of vehicles to green, electric propulsion. By contrast, China’s military, commercial and environmental plans are simply regarded as illegitimate.

Rare earths as a natural barrier to development

The final installment of received doctrine on rare earths seeks to situate them within a broader context of naturalistic fear. Michael Klare, a professor at Hampshire College, a private liberal-arts college in Amherst, western Massachusetts, has been making the intellectual running on this issue. For Klare, rare earths are part of a wider crisis of resource depletion, leading to wars over resources. As my co-author and I note in our book, Energise: A Future for Energy Innovation, Klare has pursued this dogma since 2001.

In an interview last autumn, Klare’s awareness of the new mines for rare earths that are being developed around the world forced him to admit that what he called America’s ‘dependence’ on Chinese rare earths is ‘not, by itself, a cause for alarm’. That, however, did not prevent him from being pessimistic. He said: ‘What is far more worrisome is China’s determination to take the lead in all facets of green-energy technology, including wind, solar, and all-electric vehicles. Unless the United States recognises the vital importance of retaining leadership in this field and allocates the funds needed to pursue cutting-edge technologies, we are destined to become a second-class industrial power while China will zoom ahead of us.’

From the point of view of simple American patriotism, perhaps that is true. Here, Klare simply anticipated the arguments made by Obama. But in a very recent Rolling Stone interview on ‘peak everything’, titled ‘The Deadly Scramble for the World’s Last Resources’, Klare warned of ‘more conflict, more crisis, more poisonous relations with countries like China because of the competition between us’ in resources.

Going further, Klare observed that hybrid cars ‘are full of rare earths. That suggests we may have to be thinking even more radically in the search for solutions… We humans have always behaved as if new sources of energy will come along to replace the ones we use up, so we don’t have to think about conservation or efficiency or alternatives, but we are at the end of that process, we can’t think that way anymore, because there aren’t new abundant pools of energy that are affordable… the innovative research and technologies of the future will really be about efficiency.’

There we have it: the best way to avoid reliance on environmentally tricky rare earths is not to want them in the first place. As Klare adds, ‘we’re going to have more bad environmental crises occurring… if we don’t begin to change our behaviour today’.

What Klare appears to imagine is that wherever rare earths are to be found in its military hardware, mobile phones, electric vehicles, wind turbines and solar panels, America should abandon these goods until such time as it can either reduce usage of rare earths and/or find substitutes for them.

This is a mind-boggling programme for a very distorted kind of technological advance. It shows that environmentalist hatred for ‘dirty’ materials is not confined to coal, oil and radioactive waste, but extends beyond carbon to another 17 naturally occurring elements. In the green framework, then, it is not just China’s conduct with rare earths that is reprehensible, but the whole of humanity’s. It’s beyond the wit of man to extract, process or recycle rare earths in a non-polluting manner, and we would do best to stay away from them altogether.

Conclusion

The market for rare earths is worth just a few billion dollars. For them to be the subject of a presidential address is not something, then, that can be explained for commercial reasons. Nor, as we have seen, does America’s giant defence sector feel it is going to be neutered by China’s supposedly overweening control over militarily critical rare earths. And though China – as Klare and others note – is more dedicated to green-energy technologies than most, the size of America’s future green claim on rare earths is highly debatable.

Clearly there is potential for international conflict around rare earths, just as there is around oil. But to cast rare earths as the new and driving source of tomorrow’s wars is as silly as saying that Britain is busy in the Falklands because of oil there, or that Obama has troops in Uganda because of oil there. This is a vulgar, one-dimensional kind of materialism. It sees no misguided, humanitarian impulse and no irrationality behind the West’s wars around Libya or Afghanistan, but can find only cold Western calculations of what lies beneath the soil in these kinds of places.

In diplomatic circles, and at dinner parties in the West, the future will see a lot more talk about China’s strong-arm tactics with rare earths. But though China has undoubtedly taken forthright positions with these materials, the West’s anger about them has little to do the 17 elements themselves. They are just a pretext for Western exasperation not just with China’s mineral endowments, but also – and mainly – with China’s industrial growth.

Fear, envy, jealousy and impotence, not physics or chemistry, are what make the West affect to be concerned about rare earths.