Neodymium in the Rough

Brian Hicks

Updated January 24, 2006

They’re the stepchildren of the periodic table. Relegated to the bottom of the chart on the wall in your high school chemistry class, your teacher probably never even mentioned them. "Just worry about hydrogen and helium first, hotshot…"

Well, that was before the computer age.

Rare earth elements aren’t just a footnote to the history of mining and synthesis anymore. In computer manufacturing, these 30 periodic pariahs in the Lanthanide and Actinide series are making themselves known in a big way.

Now China wants to corner the rare earth market.

I like my metals like I like my steak

It should be no surprise to you by now that China has a massive hunger for materials. Just as it needs oil to fuel its expansion, the Middle Kingdom needs iron ore to make steel, copper to make piping, and just about everything else that comes out of the ground to make the skyscrapers that rise above it.

In 2006, China’s iron ore imports are expected to rise by 35 million tons, to a whopping 295 million tons, making it the world’s largest importer. The world market is expected to see price increases of about 20 percent as a result of China’s demand and Brazil’s monetary policy changes, making it more and more difficult for small investors to get in on the boom.

But China is in no short supply of rare earth metals, though they are plenty hard-to-find elsewhere.

China currently supplies 95% of the world’s rare earth metals.

What does this mean? Well, consider that rare earths are integral in small-scale electronics, computer disk drives, display screens, missile guidance systems, pollution control, and other devices that will keep the global economy running in the 21st century.

The total market is just about $1 billion a year, and just about 95,000 metric tons are produced a year, in comparison with 1 billion metric tons of iron ore.

But just because it doesn’t emerge by the truckload, don’t knock yttrium and other minerals that form rare earths after chemical tinkering.

One industry insider in Australia said, "In terms of volume it is tiny, but we are just as addicted to rare earths as we are to hydrocarbons, but we don’t know it."

Magnets of Mass Destruction?

Rare earth metals can be used for a range of purposes. The magnetic transfer of information I told you about in last week’s Wealth Daily on "spintronics" is executed by rare earths like neodymium.

Lanthanum is a highly efficient material for creating rechargeable batteries.

Cerium is used in the production of catalytic converters, which have played an important role in reducing automotive emissions in the US and now in China.

But rare earth metals also are used in guided weapons systems, causing some senators to raise a fuss when two Chinese companies purchased Indiana’s Magnequench, supplier of 85% of the rare earths used in such precision components.

Perhaps that deal was just as important to the United States’ security as the infamously blocked takeover of Unocal by CNOOC, but it sure got less press than the oil company (incidentally, Unocal also owned Molycorp, a rare earth mine operator).

As these metals prove their efficiency in military and civilian applications, usurping silicon from its place in its namesake valley and elsewhere while nanotechnology takes the stage, it makes sense that so many IT companies are moving R&D operations to China, where rare earths are nearby.

Nevertheless, China is far from cornering the market entirely.

Not So Rare After All

India, Russia, Malaysia, Kyrgyzstan, and Kazakhstan all have major natural rare earth resources. Chinese metal industry analysts say China probably controls something like 60% of the production capability, less than the 95% above. That is still an astounding market share, especially given China’s 30% of worldwide rare earth consumption.

But 60%…That leaves a lot to be found elsewhere. Leave it to Waking Dragon and Wealth Daily to find it for you.

– Sam Hopkins

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