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Chinese Rare Earths Producer Suspends Output 265

Posted by timothy
from the free-market-except-oh-not-really dept.
concealment writes "State-owned Baotou Steel Rare Earth (Group) Hi-tech Co. said in a statement released through the Shanghai Stock Exchange that it suspended production Tuesday to promote 'healthy development' of rare earths prices. It gave no indication when production would resume and phone calls to the company on Thursday were not answered. Beijing is tightening control over rare earths mining and exports to capture more of the profits that flow to Western makers of lightweight batteries and other products made of rare earths. China has about 30 percent of rare earths deposits but accounts for more than 90 percent of production. Beijing alarmed global manufacturers by imposing export quotas in 2009. It also is trying to force Chinese rare earths miners and processors to consolidate into a handful of government-controlled groups."
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Chinese Rare Earths Producer Suspends Output

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  • by Roskolnikov (68772) on Thursday October 25, 2012 @12:48PM (#41766795)

    China is finally flexing its grip on the tech industry, more to come certainly.

    • by MightyYar (622222) on Thursday October 25, 2012 @12:54PM (#41766885)

      Sounds short-sighted. Since rare-earths are a commodity, this will just drive prices up and thus other people will mine them. Businesses may even prefer these new sources for stability. Then prices will crash as a glut of supply hits the market, and the unreliable producer will command an even lower price.

      Or the market could do something totally unpredictable :)

      • by mmontalvo (831939) on Thursday October 25, 2012 @12:56PM (#41766937)
        It is not about mining. That is not their monopoly, their monopoly is on the production of the minerals to usable components. This unfortunately is not easily solved. A full scale production facility takes about a decade to build and about 1 Billion dollars. There was a private investor who was discussing this issue about 5 years ago and was trying to get investors to go in on building a new facility but was unable to get the needed amount of capital.
        • by MightyYar (622222) on Thursday October 25, 2012 @01:30PM (#41767579)

          If the price goes up, the private investor will have no problem raising the money. That's exactly what happened 2 years ago. [smartplanet.com]

          • by Anonymous Coward on Thursday October 25, 2012 @01:51PM (#41767933)

            Exactly right. There were something like three rare earth mines idled by China's effort to flood and capture the market. One of those started back up after China's last screw job to the world. If prices continue to rise, more will simply re-open with a relatively modest investment and in relatively small time frames.

            Having a US supply is a good thing. It mean stability in the market, shorter delivery schedules, cheaper storage for manufacturers, and US jobs. Likely the those outside the US will see the advantage too.

          • Re: (Score:2, Informative)

            by Anonymous Coward

            > If the price goes up, the private investor will have no problem raising the money.

            They will have a problem, because they will know that the Chinese can drop the price at their leisure, undercutting them and bankrupting their investment.

            • by sumdumass (711423)

              Not if Romney has his way (even if Obama adopts his policies on this).

              If the US labels China a currency manipulator, we can place tariffs on imports that degrade locally derived businesses without violation Trade Agreements. The further sets the stage for international authority to do the same if they try to dump products onto the market with the intent of damaging domestic business.

              domestic businesses are pretty much guaranteed they won't be bankrupt because of dumping if the US government stands up.

      • by Jane Q. Public (1010737) on Thursday October 25, 2012 @01:29PM (#41767539)
        It is about mining, too. It takes time to develop mines.

        A huge, truly massive deposit of a large variety of rare earths was found here in the United States a year or two ago. Prices are already at the point that it is very likely this will be put to use. But it's a large enough quantity to call into question the long-held idea that China "has 30%" of the rare earths.
        • by afidel (530433) on Thursday October 25, 2012 @01:43PM (#41767819)

          It depends on what you consider China "has", if it's just the minerals in the sovereign territory of China then 30% is probably a bit inflated, if you consider it explored proven reserves owned/controlled by China or Chinese companies it's probably understated.

          • Re: (Score:3, Interesting)

            by BoRegardless (721219)

            For accuracy, no single supplier produces all "rare earths". The largest and least expensive lithium supplies come from dry lake beds in Bolivia-Columbia as I recall.

            The former rare earth mine at Mountain Pass, CA (near Nevada) was shut down over a decade back but is being reactivated by Molycorp in a multi-year process & should start producing this year. It too only has certain rare earths in its "mine". It produced most commonly used rare earths and will the mine will likely be a large profit maker

            • by fnj (64210)

              For accuracy, no single supplier produces all "rare earths". The largest and least expensive lithium supplies come from dry lake beds in Bolivia-Columbia as I recall.

              Since when is lithium a rare earth [wikipedia.org]?

        • According to Wired [wired.com], that mine dates back to the 1980s.

      • by Zorpheus (857617)
        But mining all their rare earths and continuing to sell them at low prices would be even more short-sighted.
        They will run out of rare earths at some point. Then the prices on the world market will go up, and they have to buy them from other countries for higher prices.
        I don't think that this is about China trying to make money with a monopoly. It is just common sense, and the fight against the poisoning of their environment due to illegal mining.
        • by torkus (1133985) on Thursday October 25, 2012 @03:48PM (#41769775)

          Driving up supply chain costs in a cornerstone of a shakey global economy is a good idea? China is nowhere near mining out all their rare earths. If they were, other countries would have set up mines and production facilities in preparation for that because they'd have guaranteed profit. What exactly indicates other countries would have higher prices though? Plus we won't "run out" of rare earths. Unlike oil most can be recycled and reused more or less indefinitely.

          This is 100% about China trying to streghten their powerbase in the global economy. It's blatant price manipulation in what's supposed to be open markets. China is taking their ball and going home till all the other kids come begging. Unfortunately someone else is going to buy their own ball eventually.

          As for environmental concerns - sorry but that's just laughable. If they cared, they would close the mine or update to more modern and clean processes (which are still quite dirty.) Also they'd so something about the myriad of severe pollution problems they have. The main reason China has a monopoly right now is because they were content to pollute their country and (more or less) everyone else was (more or less) happy to let them. That balance is shifting now.

          • by MightyYar (622222)

            As for environmental concerns - sorry but that's just laughable.

            Yes, if the US mine can operate in - of all places - California, then obviously there is some way to do this without nuking the environment.

      • by hairyfeet (841228)

        Too late, that is already what is happening. They are trying to cash in while they can, because after their first stunt with clamping down the mine in the western USA (AZ or UT, can't remember which) is being opened back up and the Japanese have found a large cache on the ocean floor they intend to mine so they have only a limited time before they have competition again.

        So no need to panic,this is one of those areas where supply and demand will sort things out.

      • by Dahamma (304068) on Thursday October 25, 2012 @03:08PM (#41769137)

        The problem is China can turn on production whenever they want and undercut any competition, driving those other producers out of business again and again so that no one wants to invest in such a risky industry.

        I'm not a big fan of excessive tariffs, but the only way to prevent China from manipulating the market like that is for other governments to step in with their own manipulation, putting enough tariffs on Chinese exports that domestic mining of rare earths can survive (and also showing China if they pull this shit, there will be consequences).

        The problem is businesses and consumers are so into short term savings they are more than happy to screw over their long term viability - when that happens it may be up to regulatory bodies/governments to look at the long term.

      • by Amouth (879122)

        while the higher price for this commodity can and should spur investment in other sources, the requirements to be productive in mining Rare Earths are steep and you can't just put up a plant and have it producing quickly. China already has the mines and plants, they are just idle now. If they want to ramp production they can. This is threat to anyone who wants to start producing this commodity. China could easily just sit back and wait till people start investing then start production again and crash t

    • by Jonah Hex (651948)
      I don't think this will be a little heard whimper, instead it should get fairly big press coverage. The Chinese government starts playing games with rare earth prices putting almost all modern electronics prices at risk, we'll probably see huge graphs depicting possible iPad price increases, or even better pictures showing the size one would be if it used non-rare earth components. It will probably show up in the Presidential Race before elections as a talking point. - HEX
  • Trade war (Score:4, Insightful)

    by Anonymous Coward on Thursday October 25, 2012 @12:48PM (#41766797)

    Start putting tariffs on anything made with Chinese rare earths. Since China is a net exporter, they have the most to lose playing these games.

    • Which means most electronic devices of today. Including the iPhone.

    • Re:Trade war (Score:5, Insightful)

      by Dan East (318230) on Thursday October 25, 2012 @01:14PM (#41767277) Homepage Journal

      No, don't put tariffs on them. Why would the US want to sell or produce rare earths? They are a finite resource. If China wants to burn through their supplies so the rest of the world can enjoy cheaper technology, then that is their prerogative. Once it's out of the ground and used to manufacture products shipped to the US then it can be recycled for reuse in new products. Either way the material is no longer in China. This is a gamble China has made to try and prop up their massive industry and population, is to not only undercut worldwide labor with a very cheap workforce, but also burn through their physical resources as well.

      Nothing about China is sustainable, and there will be great sorrow and suffering in that country when the bottom drops out of various markets over the next decades.

      The USA's production at various rare earth mines simply idled or completely stopped as prices dropped and it was not longer profitable to mine them. The rare earths are still sitting there waiting for us when we need them. No hurry to get to those resources at all.

      • Re:Trade war (Score:5, Informative)

        by TubeSteak (669689) on Thursday October 25, 2012 @01:21PM (#41767401) Journal

        I feel like you're missing a key issue in the discussion.
        China controls ~90% of the rare earth refining capacity.
        That's what's being reduced.

        Why would the US want to sell or produce rare earths?

        So that the USA isn't beholden to China's monopoly on refined rare earths.
        Was that a trick question

        • by MeNeXT (200840)

          you missed his point. The only reason everyone else stopped refining rare earth was because China dropped the price by flooding the market with cheap rare earths. Once China is no longer able(unwilling) to produce cheap rare earths then the rest of the world will get back into production.

          • by tnk1 (899206)

            You have a point, but restarting a rare earth refining capacity is not exactly free nor without time constraints. Once you shut something like that down, it doesn't just come back online. Especially not with higher environmental standards that the US has. Until it comes back online, China will run rampant.

            If China is going to play games like this which introduce spikes into the market, they could cut off their nose to spite their face, but it will hurt us too. If we can't trust them to not play games, w

      • Re:Trade war (Score:4, Insightful)

        by Sydin (2598829) on Thursday October 25, 2012 @01:26PM (#41767481)

        Nothing about China is sustainable, and there will be great sorrow and suffering in that country when the bottom drops out of various markets over the next decades.

        There will be a great sorrow in every country, especially the US. We are all deeply tied into China's market, and whatever affects them, affects us. The next great depression will not also be a result of domestic economic negligence. It will be the result of China sinking, and dragging the world's economy down with it.

        • Re:Trade war (Score:5, Interesting)

          by MaWeiTao (908546) on Thursday October 25, 2012 @02:58PM (#41769001)

          China needs the West far, far more than the West needs China. If we lose China as a manufacturing base we'll just move elsewhere; South East Asia, India, South America, Africa. And a lot of that capability could always come back home. China understands this, which is why they're expanding into Africa. Furthermore, as their international reach grows their ability to keep out international politics is diminished. Nations are expecting them to get more involved which introduces them to all the problems the US has faced for at least a century. Unfortunately, they have the tendency to align themselves with oppressive governments which has been drawing ire, particularly in Africa.

          A lot of what's been drawing China's success is the expectation amongst Western companies that they have this massive untapped market. It's all based on a potential that has largely failed to materialize. It's not that dissimilar to investors dumping millions into dot coms in the hope that a large userbase will eventually lead to profits. So far it isn't paying off quite like people have hoped.

      • Go look it up. Their name is not very good. No they aren't abundant like silicon, aluminium, or iron, but they are not these extremely rare elements that you can't find many of. They are fairly plentiful.

        So if China wants to price things up too much there really isn't a good reason not to go after them in other locations.

      • You sir have learned the lesson from Age of Empires well. Always go out an mine the remote resources first - then when they run out and people are fighting, you'll have plenty of supply back home.

        Unfortunately in the US, we export coal (for example) while offering subsidies to those companies.
    • by zerotorr (729953)

      Start putting tariffs on anything made with Chinese rare earths. Since China is a net exporter, they have the most to lose playing these games.

      That's ridiculous. The largest purchaser of rare earth minerals are US companies. Tariffs are meant to encourage people to buy products from other countries, mainly the host country. There really are no other producers of rare earth minerals to choose from, not in quantities large enough to satisfy demand. That would be like increasing taxes on oil to encourage people to not buy from the middle east. There's just not enough being produced outside there to satisfy demand. The economy would crumble. Wha

    • by Ichijo (607641)
      Reducing production to increase prices is "playing games"? Don't you know how to read a demand curve [wikipedia.org]?
  • by bjdevil66 (583941) on Thursday October 25, 2012 @12:53PM (#41766863)

    They're capitalists, with all the dirty trappings and failings of western businessmen, only without the whole problem of human rights.

    Someone probably needs to remind these people that artificially manipulating prices like this can get burned badly in the end.

    • by Kenja (541830) on Thursday October 25, 2012 @12:59PM (#41766985)
      Try starting a Chinese company that competes with one of the party backed ones and you'll see how capitalist they are not.
      • by jovius (974690)

        Free market != Capitalism. Isn't it the ultimate capitalism when the state and the business go hand in hand reaping profits for as few as possible? Sure there might be competition, but it's fierce and probably bloody too.

      • by rsborg (111459)

        Try starting a Chinese company that competes with one of the party backed ones and you'll see how capitalist they are not.

        Sure they're capitalist - crony capitalist. Also see no-bid contracts, regulatory capture and laws written by lobbyists. The totalitarians in the USA look to China as a beacon of what is coming here.

    • Are you saying that the Chinese don't have Human Rights issues?

      What news outlet have you been watching? The chinese news?

      • by Drathos (1092)

        I think it's not that they don't have human rights issues, more that they don't consider them issues and just ignore them.

    • by Ichijo (607641)
      Reducing production when profits don't justify the current level of production is "manipulating prices"? Don't you know how to read a demand curve [wikipedia.org]?
    • by zmooc (33175)

      Communism is way to organize a state and a society. It does not say anything about how that state should operate on the world market, which is inherently capitalistic. In fact, communism cannot "pass" the border of the single entity that orchestrates it.

      Also note that this rare earth production being suspended smell a lot like a planned economy to. And that's about as communist as it gets. So is articifially manipulating prices in general.

  • 70% (Score:4, Insightful)

    by Githaron (2462596) on Thursday October 25, 2012 @12:55PM (#41766905)

    China has about 30 percent of rare earths deposits but accounts for more than 90 percent of production.

    It sounds like we should consider mining from the other 70 percent.

  • by Zontar The Mindless (9002) <plasticfish.info ... m ['gma' in gap]> on Thursday October 25, 2012 @01:05PM (#41767107)

    This is what happens when you outsource production of a key component of a critical technology. Quoth the fine article,

    The United States, Canada, Australia and other countries also have rare earths but most mining stopped in the 1990s as lower-cost Chinese ores came on the market.

    In other words, it sounds like we set ourselves up for this by going for the quick buck.

    • Yes, but maybe not in the way you mean. My understanding is it's not the labor costs that are the main concern, but the fact that these ores contain other toxic materials. Disposal of these material is most of the expense. And, of course, the that's no problem for the Chines
    • Re:Outsourcing (Score:4, Insightful)

      by Dan East (318230) on Thursday October 25, 2012 @01:26PM (#41767483) Homepage Journal

      This is simply inevitable. China has been producing rare earths at unsustainable and artificially low prices, which is why the rest of the world no longer needed to bother with mining and consuming their own finite resources.

      Everyone needs to grasp that this is an inevitability - the prices of various products (mainly higher technology) will have to go up, and thus the global markets and product will rebalance themselves. The manipulation was already done in keeping the prices too low, not in making them go up. Your complaints are coming way too late in this game - you should have been complaining at least a decade ago when they flooded the market with cheap resources, not now that the bubble has burst.

      Say a new hot dog stand opens up in town, and for the first month they sell hotdogs for 25 cents at a massive and unsustainable loss. Maybe that's long enough to run the other hot dog stands out of business, or at least make them realize it's just not worth bothering with. Then after the introductory price they go up to where the market belongs. Now at that point the other hot dog stands can re-open, with new owners or with their old owners - doesn't really matter. At the end of the day it's all the same end result - hotdogs cost what they're worth.

      My question is this - was it wrong for the rest of us to enjoy hotdogs for only a quarter apiece while we were able to? My opinion is no, that's not wrong of us, nor is it wrong that the world enjoyed lower priced rare earths (and thus technology) because of China's willing sacrifice of their finite resources.

    • Whose fault? Who's "we"?

      Subsidising unprofitable US producers would be extremely costly. It's extremely hard to fight market forces in a globalized environment (if it was just Montana vs Nevada, one could just pass a law). It's also most of the time counterproductive.

      Now this is beyonf "free markets", this is clearly price manipulation. And price manipulation is "legal" only when there's no law. OPEC has been manipulating oil for years. Why do they get away with it? Because they don't belong to the WTO and

      • Whose fault? Who's "we"?

        Since these elements are strategically necessary, I would say that "we" means the US Government. They are elected to look out for our interests.

        Subsidising unprofitable US producers would be extremely costly.

        That was not the only alternative. Another good solution would have been stockpiling. If it would take, say, three years to restart our own mines after a supply disruption, then the prudent thing (both economically and militarily) would have been to build up a strategic stockpile to cover three years of consumption before these mines were closed, to allow time fo

    • I always felt that if you were once a world leader in an industry, yet some other country is just doing it cheaper than you, the government should subsidize your final competing industry and possibly put tariffs on incoming goods to protect your last 10-5% industry. The US government should have thought about this around the 70s when Pittsburgh was struggling losing their steel. I'm not so sure the politicians are interested in this though as they're not always for serving the people, but more the people
      • From my understanding the old US steel mills that closed were mostly pre WWII and other countries had a competitive advantage because we bombed their old ones off the face of the planet or they never had them to begin with so they built new modern mills. The US steel industry should have spent some of the money from the good years modernizing but instead they remained complacent and advanced.
      • Re:Outsourcing (Score:4, Informative)

        by afidel (530433) on Thursday October 25, 2012 @02:24PM (#41768463)

        The problem with midwest steel wasn't largely dumping (there was some, but it was a fairly small percentage of the market), it was the fact that most of the steel plants were 40+ years old with few updates and they were competing with more modern plants using more efficient techniques and more automation. Steel consumption also was on the decline, from 1982-2008 the US only consumed about 45M metric tons of steel per year, the same amount as we did in 1941 and about half what we did in 1972. Today we produce about as much steel as we did in 1974 but we do it with less than 1/3rd the workforce, modern mills just aren't as labor intensive as the old ones and while that's bad if you're a worker unable to find a replacement job at comparable wages it's good for the economy overall.

    • by Type44Q (1233630)

      In other words, it sounds like we set ourselves up for this by going for the quick buck.

      Alternately... we were set up by the Chinese dumping cheap product (product subsidized by prison/slave labor and complete disregard for any/all environmental consequences).

  • ... And this strategy never works. Even in a cartel it rarely works because to make money output has to resume and to make maximum profit, the price has to be at the level that clears the market.

    Good luck to you china, I wonder how long before they can no longer stand their fast.

    • I beg to differ, OPEC has run successfully as a cartel for quite some time.

      Yes, they all more or less cheat, but not too much. In the end, they still drive the prices.
    • ... And this strategy never works.

      Tell that to OPEC.
      Price of oil when OPEC was created: ~$3/barrel
      Price of oil today: ~$100/barrel

  • so what? (Score:5, Insightful)

    by nimbius (983462) on Thursday October 25, 2012 @01:08PM (#41767163) Homepage

    America exports the worlds supply of helium, hasnt produced a millilitre more for over 2 decades, and keeps the price artificially low.

    OPEC sets quotas and prices for global oil supplies, and can suspend or restrict production whenever they feel the need.

    American agricultural conglomerates like ADM and General Mills collude to set the price at which they will accept corn from farmers. too much corn does not drive the price of it down, instead its maintained by dumping cheap corn as an export, or siloing it for next year.

    how has china in any way changed how capitalism has worked for the past 270 years? The only thing thats generated outrage is chinas willingness to take an aggressively competitive position in the global economy, instead of a subservient one. If you dont like it, consider pushing for more organized labor.

    • Unions, while fine in principle, will soon become a bureaucratic organization whose only goal is to screw the administration (country, company, whatever) over, not look after workers.

      A neutral party should look after everyone's best interests. Goverments could take on that role, but tight and inflexible controls or excessive interference in what should be strictly business are the sad reality.

      • by Rob Riggs (6418)

        Unions, while fine in principle, will soon become a bureaucratic organization whose only goal is to screw the administration (country, company, whatever) over, not look after workers.

        A neutral party should look after everyone's best interests. Goverments could take on that role, but tight and inflexible controls or excessive interference in what should be strictly business are the sad reality.

        Unions and representative governments reflect the character and will of their constituents.

    • by houghi (78078)

      You forgot De Beers and diamonds.

  • isn't one of the reasons we are still in Afghanistan that they have an imperial C4ton of rare earth minerals in the mountains??

    • by oodaloop (1229816)
      No. Or rather, they do have minerals, but that's not why we're there and we're not getting the minerals. We're leaving by 2014 without the contracts.
  • We should prepare ourselves for the future in which everything will have to be recycled.
  • by gurps_npc (621217) on Thursday October 25, 2012 @01:30PM (#41767551) Homepage
    Step 1. Develop a business model founded on being the cheapest.

    Step 2. Watch as almost everyone else gets out of the business because they can't profit at your price, leaving you with 90% of the market.

    Step 3. Now try to increase profits. When you realize you can't raise prices because the other 10% undercut you and make most of the profit, cut off production entirely.

    Step 4. Watch as the other 10% raise prices (to the level you wished you got) and make a profit at your expense. Then watch as they expand, cutting your original market share from 90% to 70%.

  • Now maybe my Molycorp stock will go back up! :D
  • I guess by "promote healthy pricing" they mean guarantee that every other major country will start their own mining operation and eventually all but put them out of business. I think they really meant they're greedy assholes driving the price up but my proposed end result is more realistic.
  • These guys also make cerium, right?

  • by hesaigo999ca (786966) on Thursday October 25, 2012 @04:03PM (#41770013) Homepage Journal

    They own a big portion of the American, debt, and now they are defining pricing for THEIR product (which is not OIL).
    I applaud them, but also at some point, am very concerned, this new business model (thanks to the oil industry precedent) is what is driving
    so many back into poverty!! I know not everyone should have a computer, but it is nice to know most households have one....

    The fact is, with MS pushing bigger software junk that makes you need better machines each time, we have no choice but to get the latest pc box....
    with the price going up for all components, we are back to paying about 1000$ for a decent box....thats sad!!!

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