Global Economy
August 29, 2013

China’s share of rare-earth production: 97% in 2010, 85% in 2012.

By Edward Gresser

THE NUMBERS: China’s share of world ‘rare earth’ production –

2010 97%
2012 85%
2013? 80%
2015? 73%

WHAT THEY MEAN:

How well do natural-resource sanctions work? Chinese economic diplomacy provides a case study, in the form of a 2010 threat to cut off sales of rare earths to Japan.

In September 2010, a Chinese fishing-boat in the Senkaku or Diaoyutai island chain collided with a Japanese naval vessel. The Chinese skipper, Zhan Qixiong, went briefly into jail; China then threatened to cut off (or, depending on what account you believe, actually did cut off, or off-handedly discussed the possibility of reducing) sales of rare earths to Japan.

“Rare earths” are in fact not very rare, nor are they ‘earths.’ The U.S. Geological Survey describes them as “iron gray to silvery lustrous metals that are typically soft, malleable, ductile, and usually reactive.” As a scientific matter, they include 16 of the 114 named chemical elements, beginning with yttrium at atomic number 39, continuing on through the lanthanides at numbers 59 through 71 for lanthanum to ytterbium and lutetium. Yttrium costs about $190 a kilo; lutetium is priciest at $10,000 per kilo. (For context, lead is $2.40 per kilo, copper $7.30, silver $735, and gold $44,000.) Rare earths are important in the sanctions context because of their use, in small but very important quantities, in information-technology, medical-device, automotive, defense and other high-tech industries. USGS’s Mineral Yearbook 2013’s list of uses for yttrium include:

“phosphors for color televisions and computer monitors, temperature sensors, trichromatic fluorescent lights, and x-ray-intensifying screens. Yttria-stabilized zirconia was used in alumina-zirconia abrasives, bearings and seals, high-temperature refractories for continuous-casting nozzles, jet-engine coatings, oxygen sensors in automobile engines, simulant gemstones, and wear-resistant and corrosion-resistant cutting tools. In electronics, yttrium-iron garnets were components in microwave radar to control high-frequency signals. Yttrium was an important component in yttrium-aluminum-garnet laser crystals used in dental and medical surgical procedures, digital communications, distance and temperature sensing, industrial cutting and welding, nonlinear optics, photochemistry, and photoluminescence. Yttrium also was used in heating-element alloys, high-temperature superconductors, and superalloys.”

China in 2010 produced almost all the world’s rare earths – of the 124,000 tons of rare-earth ore dug up worldwide, 120,000 tons came from mines in Sichuan and Mongolia. No rare earths for Japan, a sanctioners’ thesis would go, would mean no jet-engine coatings, no yttrium-aluminum-garnet crystals, no superalloys, and so on. Thus a threat to cut off sales might be a powerful political lever.

How did it work out? Captain Zhan did get home by the end of September. On the other hand, Japanese views of the essential question of island ownership remain unchanged. And the sanction’s long-term effect has been to erode the Chinese hold on the rare-earth market. Since 2010, Japan has bulked up scrap collection and recycling capacity, and the American rare-earth mine at Mountain Pass in California is back in business, digging up 7,000 tons of ore last year and operating experimental runs to explore mining at full 15,000-ton capacity this year. China’s share of rare-earth production, at 97 percent in 2010, was 85 percent in 2012, and may drop to 80 percent this year; in an August China Daily article, Chinese analysts guess at a 73-percent share by 2015. So a partial success for the sanction, but at a relatively high cost; and perhaps a lesson that a lever of this sort is hard to use more than once.

FURTHER READING:

On sanctions –

Resource-based sanctions are old policy tools, with a generally uninspiring history. The first U.S. effort in the field was Thomas Jefferson’s 1808 closure of American ports, to halt exports of supposedly essential wood, flax, and iron ore to warring Britain and France. This did stop “impressments” of sailors on American merchant ships, if only because it took all the American boats off the water, but also created a depression and the collapse of the American merchant marine. The U.S. swore off trade sanctions for a century afterward. The irreplaceable work on sanctions policy is Economic Sanctions Reconsidered, by Peterson Institute for International Economics scholars Gary Hufbauer, Jeff Schott, Kim Elliott, & Barbara Oegg. This reviews 170 uses of sanctions from 1914 to 2000, and derives some rules about types of sanctions and the goals that are most likely to succeed. (Most successful sanctions have relatively modest goals; long-imposed sanctions rarely succeed, etc.) Economic Sanctions Reconsidered: http://bookstore.piie.com/book-store//4082.html

Rare earth industrial background –

The U.S. Geological Survey on rare earths, including a two-page snapshot with production and reserve figures through 2012. The Survey places American reserves at about 13 million tons. This is about 100 years’ worth of world rare earth needs at current consumption levels. China’s reserves are 36 million tons and Russia’s 19 million tons: http://minerals.usgs.gov/minerals/pubs/commodity/rare_earths/

California rare-earth mining company Molycorp reports on output as of mid-2013: http://www.molycorp.com/molycorp-reports-second-quarter-2013-results

The WTO reports on the progress of cases against Chinese rare-earth export restrictions, filed by the U.S., Canada, European Union, and Japan: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds431_e.htm

And the China Daily on the Chinese rare-earth industry outlook: http://www.chinadaily.com.cn/china/2013-08/09/content_16881394.htm

Analysts –

Chicago-based rare earth analyst Clint Cox looks at Canadian extraction: http://www.theanchorsite.com/category/general-ree/

The (conservative) American Enterprise Institute look at Japanese rare-earth policy: http://www.aei.org/papers/foreign-and-defense-policy/regional/asia/ensuring-japans-critical-resource-security-case-studies-in-rare-earth-element-and-natural-gas-supplies/

The Center for American Progress (liberal) on American policy: http://thinkprogress.org/climate/2012/10/16/1014461/upstarts-can-rare-earth-replacements-spur-a-supply-chain-revolution/

Yufan Hao of the University of Macao and Jane Nakano of CSIS, interviewed by the National Bureau of Asian Research, speculate on rare earth sales, Chinese policymaking, and China-Japan relations: http://www.nbr.org/research/activity.aspx?id=137#.Uh4NJz-T5bE

And the chemistry —

Four rare earths (yttrium, ytterbium, erbium and terbium) are named for a single small Swedish town, Ytterby, where the rare earths were first dug up and isolated between 1828 and 1878. Los Alamos National Labs has an authoritative version of the period table with quick references for each element, with rare earths under Column IIIB at 39 for yttrium, and beneath the main table at atomic numbers 59-71 for the lanthanides: http://periodic.lanl.gov/default.htm

The Periodic Kingdom, an entertaining layperson’s guide to the elements from British chemist and religion-controversialist P.W. Atkins, reviews the elements and the periodic table’s basic concepts, and says oddly disparaging things about rare earths (“nature has seemingly no use for the lanthanides” … “not yet great contributors to the global economy”): http://www.amazon.com/Periodic-Kingdom-Journey-Chemical-Elements/dp/0465072666