Crisis rare earth metals: China is losing influenceInvestors in the steel sector and some companies can breathe easy. China's control over the world's supply of rare earth metals is significantly weakened, and a threat to the world economy has become less.
In 2010, China produced 97% of rare earth metals on the planet, which are used in the production of many things, from the magnets in your headphones to wind turbines and catalysts for oil refineries.
Then China began to restrict exports in the framework of a political dispute with Japan. World prices for rare earth metals have soared, and the United States rightly feared that this position of China is threatening the economy and even national security.
But the panic was exaggerated. In a new working paper of the Council on Foreign Relations, a former Pentagon adviser Eugene Gols explains that all the fears about the crisis did not materialize.
Shortly after the export restrictions, other countries have begun to rapidly deploy its own production or looking for ways to reduce dependence on metals. As a result, China's control of the market has decreased significantly.
The Rise and Fall of the rare earth crisisPrices soared in 2010, when China has restricted the export of metals such as neodymium, dysprosium and cerium. But within two years, prices have begun to fall, and the panic subsided.
What happened? It was affected by three factors at once.
COUNTRY began to mine rare earth metalsOther countries have begun to develop their own reserves of metals. The key point is that, despite the name, rare earth metals are not so rare. In the twentieth century, the main producers of these metals were Brazil, India, the USA and South Africa.
In the 1980s, China has massively increased production, displacing competitors. This was done due to the almost complete lack of environmental oversight, as production of metals such highly polluting.
When China began to restrict exports, prices have risen and production has again become profitable.
As a result, the US company Molycorp expand and upgrade old facilities in California, the Australian mining company Lynas opened new facilities in Malaysia. As a result, the proportion of China decreased from 97% to 70% at present.
COMPANY reduce dependenceMany Japanese companies have also started to implement measures to reduce dependence on rare earth metals.
The Hitachi have found ways to use less dysprosium for magnet production in electronics.
Panasonic has developed a method of processing of neodymium from old electrical appliances.
CONTROL FOR EXPORT WAS NOT STRONGrestrictions on exports to China were not fully effective, especially for the heavy rare earths.
Some small Chinese companies have found ways to circumvent the ban, so acute shortage still was not.
However, some Chinese manufacturers have been hit hard by the collapse of prices in 2012
"rare earth panic" It was too bloatedChina to restrict exports in order to put pressure on Japan, but the country has managed to reduce its dependence, so among the victims themselves, the Chinese authorities have lost the real levers of pressure due to too aggressive policy.
The US is also quite successfully coped with the restrictions in the short term, although there have been concerns that can threaten the production of armaments.
The market will settle all the problems and did it very quickly, which is an excellent example of what politics should not succumb to the pressure and act too quickly against the background of commodity risks
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