I’ve been interested in Rare Earth metals since the run up on prices in 2010. Not because it was an investment opportunity but because it dramatically affected Fluorescent lamps prices, which had been stable or falling for the last decade. The subject is also interesting because it deals with global politics, which I’m interested in, and Chemistry, which I studied in college. Recently the BBC ran an article on this topic in their magazine.
In addition to Fluorescent lamps, Rare Earth metals are used in LEDs, Wind Turbines, and all matter of green energy. What is ironic: mining Rare Earth metals is one of the least green activities on this planet. And thanks to laissez faire government policies in China, almost all mining of Rare Earth metals was done in China. It wasn’t that China had the only supply. No, in fact Rare Earths are not rare, and can be found all over the world. China didn’t sweat the environmental degradation, whereas Western countries did. But that changed in 2010 when China got tired of fielding environmental complaints of their citizens and foreigners alike. Economically, it also made sense to keep the metals in country- letting their own manufactures buy at a subsidized price, while forcing foreign companies to bid on the metals limited by their export quotas. This drove the prices way up. There are no substitutes for these exotic metals, and no secondary sources. Speculators drove the market as well. This cause prices increases everywhere, which caused complaints to our government.
Just how dependent the entire world is on Chinese rare earths became very clear at the end of 2010 when China threatened to restrict supplies. The spike in rare-earth prices was very dramatic – up to 3,000% for some of them. Prices have since fallen back, but the shock was enough to prompt companies to begin to explore producing and refining rare earths elsewhere in the world.
Source and graph: BBC, and Bloomberg.