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China Begins Stockpiling Rare Earths, Draws WTO Attention 227

Posted by timothy
from the stockpiling-is-the-pejorative-for-conserving dept.
eldavojohn writes "A report by China Securities Journal claims that China is now stockpiling rare earths although it has not indicated when this stockpiling started. Many WTO members have complained about China's tightening restrictions on exports of rare earths while China maintains that such restrictions are an attempt to clean up its environmental problems. A WTO special conference scheduled for July 10th will hopefully decide if China's restrictions are unfair trade practices or if the US, the EU and Japan are merely upset that they can't export their pollution and receive rare earths at low prices. Last year, China granted its mining companies the right to export 30,200 tons but in actuality only 18,600 tons were shipped out of country."
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China Begins Stockpiling Rare Earths, Draws WTO Attention

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  • Smart but not nice (Score:5, Insightful)

    by GameboyRMH (1153867) <gameboyrmh@NoSpAM.gmail.com> on Thursday July 05, 2012 @11:35AM (#40552171) Journal

    China thinks ahead, but doesn't play nice.

    They could be doing it not just for practical purposes but possibly for setting up a DeBeers of rare earth metals.

    • by dutchwhizzman (817898) on Thursday July 05, 2012 @11:38AM (#40552237)
      It's not as if there is no other source than Chinese land for those minerals. DeBeers just buys all the diamond mines to get a monopoly, China can't do that with rare earth mines, so that won't happen.
      • by benjfowler (239527) on Thursday July 05, 2012 @11:42AM (#40552289)

        They're tried.

        The Chinese (through various proxies) tried buying Australian rare earth mines in Australia. There was political dissent within Australia, so the Chinese deployed viruses on the computers of MPs and Australian miners to get an inside track of the negotiations.

        Can't remember how it ended, but I think that basically, the Chinese were caught doing the wrong thing, the negotiations ended, and the Chinese left in a huff and a blizzard of threats.

      • Re: (Score:2, Insightful)

        by Anonymous Coward

        The issue is that for suppliers in other countries to emerge, there basically needs to be some profit in it for the investor.

        With China sitting on enormous stockpiles however, they could just release a bit of that stockpile, causing the price to crash and putting any foreign company out of business.

        WTO basically needs to either tell China to allow unlimited sales abroad, or, to allow foreign nations to subsidise their rare earth metal industry to cover for any price crash caused by China.

    • by MightyYar (622222)

      It's probably a combination of factors. They really do have horrible environmental problems, and there probably are people with power in China who really do want to limit the exportation of fruits of this damage to discourage the practices. Then you probably have people with power who want to limit exports because China has the market cornered and this raises profit or strengthens their hand in trade negotiations. Those people have reason to work together and so you have the current situation.

      • They really do have horrible environmental problems

        On a per-capita basis, China produces far less pollution than either the USA or Europe. There are fewer restrictions on factory emissions. But the workers at that factory arrive on bicycles instead of commuting 30 miles in a four ton SUV. If you look at all the sources, moving production to China leads to less pollution in some cases.

        • Re: (Score:3, Insightful)

          by meddle99 (1946010)
          This is what happens when you present one fact and leave out the context. Most of the workers at the factory can't afford cars, and would probably drive them to work if they could. Are you suggesting that poverty is a good way to improve the environment?
        • by DarkOx (621550)

          Lower carbon foot print does not always equate to less pollution. Nor does tons of waste.

          Led in your drinking water is a much more immediate problem than more C02 in your atmosphere or a big landfill stuffed mostly with fairly inert plastics.

          • But lead in Chinese drinking water or plastics in Chinese landfills doesn't impact me here in America. CO2 in the atmosphere does. Which is a bigger problem depends on your perspective (and geographical location).
    • by ShanghaiBill (739463) on Thursday July 05, 2012 @12:15PM (#40552715)

      ... setting up a DeBeers of rare earth metals.

      Diamonds are valuable only because they are rare. If the DeBeers cartel fell apart, the value of diamonds could quickly collapse, because demand would likely go down with falling prices (the opposite of normal supply/demand). But rare earths are different, because they are actually useful. If they became more plentiful and the price started to decline, many alternative uses would open up, which would push demand back up, and provide price support. Rare earths are used in things like super-magnets, catalysts, specialty alloys, etc. These could be used much more widely if they were cheaper. There is very little risk of a price collapse.

       

      • by Archangel Michael (180766) on Thursday July 05, 2012 @12:28PM (#40552897) Journal

        Diamonds aren't that rare. In fact, it is less expensive to create man made diamonds than it is to mine them. Diamonds are expensive because DeBeers has convinced women that they need a big fat expensive but utterly useless gem to get married. As for the manufactured diamonds, they are indistinguishable from real diamonds except for the fact that they are typically more "pure". DeBeers is now selling a machine that can tell the composition of diamonds and thus distinguish between natural vs man made diamonds, AND also verify if the diamonds are from their "legit" sources (no blood diamonds).

        "Diamonds are a girls best friend" and "Diamonds are forever" indeed.

      • by MaWeiTao (908546) on Thursday July 05, 2012 @01:05PM (#40553475)

        Naturally occurring diamonds are rare. But the overall scarcity of diamonds is a man-made affair. It's easier, and cheaper, to produce diamonds artificially. Not only that, but lab produced diamonds can be made even more purely than what is normally found in nature. De Beers however, has managed to severely limit the production of artificial diamonds. Nearly a decade ago, De Beers even paid a paltry fine for colluding with GE to fix prices on industrial diamonds. Interestingly enough, diamonds have been discovered around the world in areas outside of De Beers control. So their decades long monopoly has eroded.

        China, however, is not even close to being in the same situation when it comes to rare earths. Rare earths is relatively plentiful. Mining has stopped in the US moreso because of environmental regulation and cost than because of scarcity. China is gambling that it will be too difficult and costly for Western nations to reopen or start up new mines and that they'll eventually cave. The logistics of overseas manufacturing are getting to complex, inflexible and expensive. Given the rise to automated manufacturing the benefits of cheap labor are dwindling. This is giving rise to one of two scenarios: in-source manufacturing or move it where it's substantially cheaper. China is already trying to hedge its bets by expanding into Africa. But at that point why not just cut out the middle man?

        The point being that China is getting too ambitious for it's own good; they're thinking too highly of their position in the world. Yes, the China owns a bit of American debt. What's the worst case scenario? The US defaults on it's debt? It's in China's best interest that the US continue to thrive. The US, on the other hand, just needs a cheap manufacturing base. That could be anywhere; Southeast Asia, India, Middle East, Africa, South America, Detroit.

        The main thing China has going for it is experience and established infrastructure. But in the scheme of things those are easy challenges to address... I don't know about you, but I've been noticing an increasing number of products made some place other than China.

        • by careysub (976506)

          Naturally occurring diamonds are rare. But the overall scarcity of diamonds is a man-made affair. It's easier, and cheaper, to produce diamonds artificially. Not only that, but lab produced diamonds can be made even more purely than what is normally found in nature. De Beers however, has managed to severely limit the production of artificial diamonds. Nearly a decade ago, De Beers even paid a paltry fine for colluding with GE to fix prices on industrial diamonds. Interestingly enough, diamonds have been discovered around the world in areas outside of De Beers control. So their decades long monopoly has eroded.

          The concept of "rarity" is a relative, not an absolute one. They are not nearly as rare as DeBeers, and the world diamond market, would believe. Since every woman who wants some can buy as many as she likes, and the price has remained stable in constant dollars for more than a century, it is clearly plenty of diamonds to meet all demand.

          You are right that enormous new deposits have opened up in recent decades (Australia, Siberia), and although the new producers are not part of the DeBeers cartel, they know

          • by careysub (976506)

            They are not nearly as rare as DeBeers, and the world diamond market, would have you believe.

    • China thinks ahead, but doesn't play nice.

      Never mind not nice, how about not legal.

    • They could be doing it not just for practical purposes but possibly for setting up a DeBeers of rare earth metals.

      Maybe they've just produced more than they can use?

      the People's Bank of China cut rates in the world's second largest economy for the second time this year. [telegraph.co.uk] This was quite unexpected and shows that Chinese policymakers have become seriously rattled by the evident slowdown in their economy.

      ...once buoyant Western export markets are in ragged retreat, and just how much more investment can the Chi

  • by Gothmolly (148874) on Thursday July 05, 2012 @11:36AM (#40552209)

    The minerals are theirs; why shouldn't they keep them?

    • Re: (Score:2, Interesting)

      by jdastrup (1075795)
      Completely agree. Back in my day, if you wanted resources that another country had, you took over that land, even if it meant war. The problem with that is, if we did that today, the earth-worshipers would abruptly put a halt to any rare-earth mining on our newly acquired land. Oh well, never mind. Back to begging the Chinese for them.
    • by cockpitcomp (1575439) on Thursday July 05, 2012 @11:46AM (#40552365)
      Because they agreed to free trade in return for open access to markets in the WTO.
    • by BMOC (2478408) on Thursday July 05, 2012 @11:48AM (#40552387)

      US: I think you should share the rare earths, China. Is that so hard?
      China: Well, no.
      China: ...and yes. Now it comes to it, I don't feel like parting with it. It's mine, I found it. It came to me!
      US: There's no need to get angry.
      China: Well, if I'm angry, it's your fault.
      China: ...it's mine... my own... my precious...
      US: Precious? It's been called that before, but not by you.
      China: Oh, what business is it of yours what I do with my own things?
      US: I think you've played god with the international economy quite long enough.
      China: You want it for yourself!
      US: China! Do not take me for some conjuror of cheap tricks! I am not trying to rob you. I'm trying to help you.

    • by tlhIngan (30335)

      The minerals are theirs; why shouldn't they keep them?

      The problem is they entered into trade agreements. Which means that they get to sell stuff without tarriffs imposed, in exchange for the other country to sell stuff to them without tariffs.

      These agreements may have included raw materials as well.

      Not to say that it doesn't happen elsewhere (the US is notorious for imposing trade restrictions when it turns out that the agreed to free trade agreements mean some lobbying group is losing out).

    • by phayes (202222)

      The minerals are theirs; why shouldn't they keep them?

      Because They agreed not to perform such shenanigans when they petitioned to become part of the WTO. The WTO is not just opening the rest of the worlds markets to the Chinese.

    • by Ixokai (443555)

      Because they voluntarily joined the WTO, because they *chose* to submit to certain trade agreements. Because they get lots of benefits by being in the WTO, and are expected to comply with their obligations.

      Among those is that if they are selling this mineral to a Chinese company for X, then an American company has to be able to buy it for X, too. The market value of the mineral is X, period. Thus, Chinese and American companies are in competition for the mineral on an even footing. That's what the WTO membe

    • by mapkinase (958129)

      Who are "they"? "They" are not "keeping" them. "They" are selling them internally only, and that is against free market.

  • by sethstorm (512897) on Thursday July 05, 2012 @11:37AM (#40552225) Homepage

    Even if it harms the businesses and the fellow travelers that aid and abet such a hostile regime, it is time that the world plays hardball on China.

    Things like this are why Faustian deals of getting a pliant slave-labor workforce are always a bad idea. Trade is no excuse for appeasement.

    • by benjfowler (239527) on Thursday July 05, 2012 @11:45AM (#40552335)

      They can't and won't. They're afraid of China.

      The world will eventually regret not opposing the rise of China, because they will be bullies 100 times worse than the Americans at their worst, with the added bonus that the Chinese are fiercely xenophobic and have a massive chip on their shoulder from their "100 years of humiliation".

      I'm looking forward to an age of oppression and tyranny under the boot of the Chinese Communist Party.

      • by timeOday (582209)
        It is simply too soon to say whether economic engagement with China just made it stronger without fundamentally changing it, or will result in major political reforms. We won't know until this "new" nation (now with a much more wealthy, worldly middle class) is put to the test of an economic shock or a period of stagnation. Citizens almost never agitate until they are hit in the pocketbook.
      • by Tom (822)

        because they will be bullies 100 times worse than the Americans at their worst

        Now I'm curious to see that happen, because I'm not sure it is even possible. And I live in Europe, not one of the 20 or so countries that american wars have left devastated for decades.

        Let's talk again when China's track record comes near, shall we?

  • Hmmmm (Score:5, Insightful)

    by Vinegar Joe (998110) on Thursday July 05, 2012 @11:38AM (#40552247)

    So why isn't the WTO complaining about OPEC?

    • by MightyYar (622222)

      Probably because the OPEC countries are not in the WTO...

    • Re:Hmmmm (Score:4, Insightful)

      by cpghost (719344) on Thursday July 05, 2012 @11:42AM (#40552299) Homepage
      Why should it? OPEC are exporting their oil while China is withholding its Rare Earths from being exported. WTO could complain about OPEC if OPEC refused to export oil (which it doesn't), and if it had a near monopoly on it (which it doesn't either).
      • Re:Hmmmm (Score:4, Interesting)

        by ColdWetDog (752185) on Thursday July 05, 2012 @11:49AM (#40552391) Homepage

        The point being is that OPEC sets a ceiling on how much oil it pumps out each month. If you are interested in $2 / gallon gasoline, you want OPEC to produce flat out and, in fact, punch wells in every square foot of space you own.

        If you're OPEC and trying to manage a non renewable resource, you don't want to do that. While OPEC isn't the only source of oil (and neither is China the only source of Rare Earths), they produce enough to partially control prices.

        Same with China.

        Buy cheap, sell dear.

    • by w_dragon (1802458)
      Maybe because there's a subtle yet important distinction between reducing production and stockpiling? Either that or, as an AC pointed out, most of the important OPEC members aren't part of the WTO.
  • Wait (Score:4, Funny)

    by SaroDarksbane (1784314) on Thursday July 05, 2012 @11:42AM (#40552295)
    Just so I have this straight, China unfairly damages the US economy when they:

    1. Trade low-cost goods with us.
    2. Don't trade low-cost goods with us.

    Those bastards! *shakes fist*
    • Re:Wait (Score:5, Insightful)

      by i kan reed (749298) on Thursday July 05, 2012 @12:01PM (#40552543) Homepage Journal

      They sell low cost consumer goods by manipulating exchange rates.
      They don't see low cost raw materials by manipulating supply.

      Both sides function as pro-Chinese manufacturing, anti-US manufacturing.

      • by ceoyoyo (59147)

        Oh please. Keeping their exchange rate low just means China is selling the US stuff cheap (and lending the US money cheap). Boo hoo. If you don't like it, don't buy it. "Manipulating supply" just means not selling you stuff. If you don't like it, go mine your own. It's a little bit nasty if China waits until US mines get up to speed, then floods the market, but if that happens slap a duty on Chinese rare earth's and be done.

        • We are mining our own. The problem is that it takes 10ish years to get rare earth processing facilities into place. In the mean time, it's a monopoly market, and China is operating as such.

          • by ceoyoyo (59147)

            Take it as a lesson in why you shouldn't rely entirely on products from other countries. Particularly not countries that you treat as potential enemies.

            The US should have identified rare earth minerals as critical resources and kept those mines running. It didn't. I suppose that would have been too close to socialism though.

      • by nedlohs (1335013)

        Stop selling them bonds and require trade be done in RMBs instead of USDs and there can be no manipulation. Oh wait, you guys like that side of the deal.

      • Defining an exchange rate makes goods not necessarily cheap. I assume if the chineese currency was traded freely the consumer goods would become even cheaper.

    • by erroneus (253617)

      Different parties complaining on each side, of course. You see it everywhere you go. This is how politics work. It doesn't matter which side of any issue you take, there's money there for you.

  • Double Standard (Score:4, Insightful)

    by Anonymous Coward on Thursday July 05, 2012 @11:45AM (#40552337)

    I thought that this is what the Free Market is all about. Why do I have to hear my country's (USA) leaders complain ONLY when it doesn't benefit us? It's not like we're an impoverished nation. China can do whatever they want, and we can pay them for the resources or not buy them. It's not like we can't survive without them providing rare earth metals. So tired of the hypocritical whining ONLY when things don't go our way.

    • by berashith (222128)

      you are thinking very wrong. Every bit of your comment becomes incorrect the moment you decided to apply your own definition of "free market".

    • by nedlohs (1335013)

      Yeah people who don't complain when something benefits them, what a bunch of idiots!

    • Re:Double Standard (Score:5, Insightful)

      by thrich81 (1357561) on Thursday July 05, 2012 @12:32PM (#40552953)

      This is where the "free market" and "free trade" as practiced in the US now (everything done by private companies with short term profits above all) fails. When some entrepreneur tries to ramp up production of rare earths in the US, the Chinese will release enough of their stockpile to put him out of business, similar (but not exactly the same) as for solar panel production lately. The US should just close its market to Chinese produced goods which incorporate Chinese produced rare earths unless US manufacturers have the same access to the Chinese rare earths.

    • Re:Double Standard (Score:5, Insightful)

      by magarity (164372) on Thursday July 05, 2012 @12:49PM (#40553241)

      I thought that this is what the Free Market is all about

      There are always comments like this whenever articles about trade problems come up and I can never tell whether they're honestly in the dark about how free trade and markets work or if they're just snarky trolls.

      The second sentence of the article clearly states that the Chinese government is buying up and stockpiling the material in question. Sometimes it's rare earths, sometimes some other material. Whatever the commodity, the definition of free market operations is that individual businesses buy and sell in competition with each other, When governments get involved then it stops being a free market to one degree or another .

      Sure, the USA hardly has a model free market system due to regulatory oversight, taxation, subsidies, etc, but it is *relatively* free in comparison. The US government doesn't stockpile much and when it does, it's a rare case that it's trying to actively influence international markets. Mainly the US government just messes around with protectionist tarriffs with the international market and various subsidies for the domestic market but outright stockpiling to influence markets almost never happens. This stockpiling operation by the Chinese government is an extremely "up yours" move and thus all the fuss.

      Meanwhile, if an individual non-governmental player decides to stockpile a resource as a competitive strategy against other players, that would be a free market action. Perhaps it's impossible to have free market operations in a country such as China where the government takes such a active role but that's a different problem. It's not a cause to make a snide remark about free markets.

    • by jon3k (691256)
      By US I assume you mean WTO?
  • Dealing with suppliers or manufacturers of anything in China presents the possibility of low costs but adds risk. The reward/risk calculus is seriously out of whack these days: for example, a tremendous amount of world HDD capacity is located in Thailand, where floods can stop everyone's production. China's industral advancement is going to be short-lived unless they start treating contracts as binding instead of a general idea.

    A responsible supply chain manager would second-source everything they bought in

  • by Animats (122034) on Thursday July 05, 2012 @12:20PM (#40552795) Homepage

    Molycorp, which owns a big rare earths mine at Mountain Pass, California, is back on line [molycorp.com]. That mine used to supply 100% of US demand, plus exports. It was shut down in 2002 due to cheaper rare earths from China. Now it's back.

    Rare earths aren't that rare. They're just present in small concentrations. So mining produces huge volumes of waste for small amounts of product. The big rare earths mine in China is an environmental disaster area. The one in California had to comply with US and California regulations. At current rare earths prices, that's not a problem. (They do, however, ship some of the sludge to Nevada through a 20 mile pipeline. Really).

    A year from now, rare earth supplies won't be a problem. Then people will be bitching about the Molycorp monopoly.

  • Create methodologies that ignroe the requirement for Rare Earths.

    A mountain of wealth is worthless, if only one group has it.
  • Pump and dump? (Score:4, Insightful)

    by erice (13380) on Thursday July 05, 2012 @12:38PM (#40553079) Homepage

    Stockpiling does two things:

    1) In the short term it limits supply, causing prices and profits to rise.
    2) In the medium term, it gives the Chinese the means to flood the market, driving out new competitors and restoring their near monopoly.

    Rinse, lather, repeat

  • There are many on this site that will disregard China's actions on all of this. Or they will claim that China is taking these actions because the west is beating up China. Regardless, Molycorp is coming. But my guess is that China will dump on the market until Molycorp is dead.
  • by StCredZero (169093) on Thursday July 05, 2012 @01:23PM (#40553799)

    Start a Thorium energy program. This makes lots of heavy rare earth deposits in the US economical to mine:

    http://www.youtube.com/watch?feature=endscreen&v=tyqYP6f66Mw&NR=1 [youtube.com]

  • by pablo_max (626328) on Thursday July 05, 2012 @01:25PM (#40553821)

    The USA and several other countries had their own mining operations inside their own borders which produced meaningful amounts of "rare earth" metals. The US companies chose to close them and purchase cheaper Chinese metals instead. Thereby handing China an effective monopoly on rare earth metals.
    Now everyone is screaming that China has a monopoly and is not playing fair. I mean really, what the fuck did everyone think would happen?
    China looks at the long game. We look towards the next quarters profits. I am sure that from China's point of view, this is all poetic payback from how the western world fucked them as hard as possible in the 18th and 19th century.
    I just do not see how China is the bad guy here for putting itself in a position of power. A position, like the US, where everyone else is afraid to piss them off. Hell, we do it every chance we get and we are somehow the moral compass of world.

    • Actually, up until mid 90's, America's molycorp accounted for 95% of all rare earth (india had the other 5%). And we were the only exporter. It was available to all. However reagan pushed Molycorp to share tech with China. Once China figured it out, and was doing it, they DUMPPED massive quantities on the open market. Rare earth prices went to 1/10 of what they were. IOW, China gutted Moly corp. Once they did that, then China put up SMALL export quota WHICH IS ILLEGAL per the WTO agreement that they signed
      • by pablo_max (626328)

        and yet the US companies will continue to buy the Chinese metals. If the US feels they are not playing my the WTO rules, then why is does the US no impose a massive tariff on Chinese RE Metals?

  • by Tom (822)

    Wait, the WTO essentially wants to force them to exporting their raw materials? That's a very strange definition of "free market". Last I checked, coercion was one of the things that a free market does not allow for.

    • A free market does not allow a gov. to dump to destroy all competitors, and then restrict exports.
      And there is no free market where China is concerned.
    • by Sentrion (964745)

      Last I checked the "free market" slowly ended between the passage of the Sherman Antitrust Act of 1890 and the Fair Labor Standards Act in 1938, and that's just fine with me. As far as letting the Chinese government hoard or restrict the sale of rare earths, that is clearly a government restriction of free trade, as there are no private companies independently choosing to do so. And in China, the notion of an independent company becomes muddied by the fact that the Chinese government is the principal shar

  • I don't know how many decibels the dollar rings in at, exactly, but this article adds to the growing pile of evidence that insists that Corporate America's money is louder than anything else in America. America's politicians, certainly, are unable to hear anything else over it...to include warnings from America's economic and defense experts.

    Oh, well...Wal*Mart's share prices are doing well, and that's what counts...right? [wsj.com]

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