Tuesday, June 26, 2012

Rising Tensions Over China's Monopoly on Rare Earths?

Rising Tensions Over China's Monopoly on Rare Earths?, by June Nakano
East-West Center Asia Pacific Bulletin, no. 163
Washington, DC, May 2, 2012

Jane Nakano, Fellow with the Energy and National Security Program at the Center for Strategic and International Studies, explains that "the current rare earth contention should serve as a reminder of the fundamental importance of supply diversification, and the enduring value that research and development plays in meeting many of the energy and resource related challenges society faces today."


The recent Chinese industry consolidation may not be a welcome development as it will most likely increase the price of many rare earth materials. However, it is probably too short-sighted to view this move as a simple measure to side-step international complaints about China’s restrictive export policies on rare earth materials. In reality, the consolidation likely has multiple objectives, such as to demonstrate to the Chinese public an effort to both curb pollution and eradicate illegal mining, to ensure an adequate level of supply to domestic consumers, and to encourage higher value exports—if the consolidation leads to an in-flow of foreign rare earth processors to China. It would be neither easy nor particularly meaningful to determine which factor is most dominant.