Chinese Rare Earths Producer Suspends Output 265
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."
not with a bang, but a little heard whimper. (Score:5, Interesting)
China is finally flexing its grip on the tech industry, more to come certainly.
Re:not with a bang, but a little heard whimper. (Score:5, Interesting)
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 :)
Re:not with a bang, but a little heard whimper. (Score:4, Interesting)
Actually, if you've been paying attention, they are mostly giving these sort of contracts to Chinese companies. They don't exactly love Americans.
Re:not with a bang, but a little heard whimper. (Score:5, Interesting)
Re:not with a bang, but a little heard whimper. (Score:5, Interesting)
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.
Four steps to bankruptcy (Score:4, Interesting)
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%.
Re:not with a bang, but a little heard whimper. (Score:5, Interesting)
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]
Re:not with a bang, but a little heard whimper. (Score:3, Interesting)
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 for Molycorp with the Chinese supply squeeze.
I think the Chinese will regret their decision.
Re:Trade war (Score:5, Interesting)
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.
Re:not with a bang, but a little heard whimper. (Score:5, Interesting)
A war on coal was when the coal operators murdered miners for trying to organize a union. They put a Gatling gun on a flatbed train car and rolled through a tent camp of miners, spraying bullets. The US military was finally called out to put the miners in their place when they decided to fight back. That was a war. What you're talking about is chicken shit political mudslinging.
You really consider it a war when the federal government finally makes the corporations that profit from coal bear some percentage of the cost it takes on the rest of us? A hundred years of dead miners, polluted waters, destroyed landscapes, polluted air, lung diseases, cancers, etc, but expecting coal operators to spend money on safety or power plants on technology to remove some of the pollutants and we have a war? My dad is currently laid off from an underground coal mine due to the downturn in the coal industry, just like he was laid off plenty of times 30 years ago during downturns in the coal industry. The current downturn in the coal industry is driven by last year's extremely warm winter and all-time low natural gas prices. Coal mining employment was higher under Obama than Bush until earlier this year.
War on Coal? What a load of shit.
Time for a little US modern history lesson (Score:5, Interesting)
That was the direct effect. The indirect effect was the migration of industries that were heavy users of steel out of the USA so they would not be stung by the markup on steel prices from the cosy little club of US steelmakers (that was the start of the offshore outsourcing of manufacturing the USA is suffering so much from now). Eventually that protected little club found that their greed had backfired and they had very few customers. The only ones that thrived were innovating, making high strength steels, and able to compete effectively on a level playing field in an international market. I was in the steel industry briefly in the early 1990s (not in the USA and we could not sell our stuff to the USA), so got to see the how bad it had become.
Sugar is the other US textbook case of overprotecting an industry and the industry thinking that it's survival was thus assured and that they could charge whatever they wanted - hence you guys drinking corn syrup in your coke and mucking up your kids livers at twice the rate than if they were drinking sucrose in their coke.
In short, protecting industries can really suck in the long term and the protected industries can get to the point where they are welfare addicts that have no hope of survival without a government propping them up.