Until recently it hasn’t been economic to mine them, and with China flooding the market the last two decades nor has it been necessary. However, Beijing’s imposition of export quotas, which it claims are necessary to protect a finite supply and curb the environmental impact of the open cast mining needed to get at them, has changed the game.
As you might expect, some western analysts are skeptical about China’s explanation for the quotas.
“It’s remarkable how when they need additional supply, they suddenly find reserves, but when they don’t want there to be supply around and it supports their argument, then suddenly the reserves are shrinking,” Jon Hykawy, an analyst with Byron Capital Markets in Toronto told Reuters recently.
The uncertainty over long term supply of the metals has led to attempts to seek alternative solutions.
Last year, for example, Molycorp invested in Boulder Wind, a maker of turbines that use no dysprosium, though they use other, less-scarce rare earths.
Car makers, meanwhile, have been looking to wean themselves off their dependence on rare earths entirely.
General Motors is reportedly developing a replacement technology for permanent magnet motors, as are Toyota and Renault. Hitachi has already produced an electric motor that does not use rare earths, but the motor will not go into commercial production for two years.
Honda has gone another route. The car maker announced recently that it has begun extracting rare earths from its old car batteries. Honda said it planned to reuse the extracted metal in new batteries and for the construction of other car parts.
All these efforts may in the end prove unnecessary, however.
According to the advisory firm Technology Metals Research, there are currently 35 rare earth projects at various stages in development outside of China.
The U.S. Defense Department, meanwhile, published a study in March which claimed that the opening of new production facilities in North America, including the Molycorp facility in California, should mean the current reliance on Chinese exports is brought to an end.
The Defense Department report asserted that by 2013 the U.S. military, which is almost completely dependent on China for its rare earths right now, will be able to meet a majority of its demand from North American sources.
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