SHANGHAI-China is building strategic reserves in rare-earth metals, an effort that could give Beijing increased power to influence global prices and supplies in a sector it already dominates.
China is building reserves of such rare-earth metals as neodymium.
Details of the stockpiling plans haven't been made public. But the outlines of the effort have emerged in recent statements from Chinese government agencies, state-controlled companies and reports in government-run media. The reports say storage facilities built in recent months in the Chinese province of Inner Mongolia can hold more than the 39,813 metric tons China exported last year.
China controls more than 90% of current global supply of rare-earth metals-a group usually classified as 17 elements and sometimes are called "21st Century gold" for their importance in such high-tech applications as laser-guided weapons and hybrid-car batteries. Beijing has been tightening its exports with a quota policy.
Mining companies around the world have responded by taking steps to increase production. Many rare-earth minerals aren't actually rare, and China doesn't have a monopoly on deposits of any particular rare-earth elements. The U.S. Geological Survey recently estimated that China has about half the world's 110 million metric tons of rare-earth deposits, however. Mining in the U.S. and elsewhere fell off several years ago, in part because of environmental concerns. Australia's Lynas Corp. U.S.-based Molycorp Inc. and other companies are ramping up operations. But a new mine can take a decade to develop, and processing of rare-earth elements will remain concentrated in China for years.
Industry observers say that if the stockpiling efforts further restrict China's exports, that could raise hackles higher in foreign capitals, where some governments already are threatening to challenge Beijing's quota regime by bringing complaints to the World Trade Organization.
"In my view, [a reserve] makes the Chinese position worse," said Steve Dickinson, an attorney at the Seattle law firm Harris & Moure.
Further limits on Chinese exports of rare-earth elements also threaten to raise costs for companies in an array of industries, including cellphones, oil refining and high-technology batteries.
David Fuller's view This is the latest chapter in a familiar story for Fullermoney subscribers.
Over 30 years ago, China's economic liberator and visionary, Deng Xiao Peng said that China would become the Saudi Arabia of rare earth metals. That was before most of the many tech products which require rare earths metals had been invented or commercialised.
As China planned, the rest of the world was sleepwalking.
China's policy of first restricting exports and now the stockpiling of rare earths metals has implications which extend well beyond the sector.
I think we can forget legal recourse as a solution as it will only benefit lawyers. Trade agreements with strong allies may help in a few instances but a world long accustomed to 'just in time' purchases of previously abundant resources now has little option but to follow China's lead and stockpile essential commodities. Uranium is an obvious example, as I have said before, but so are other industrial commodities and staple foods.
Countries which lack the vision or capital to do this leave themselves vulnerable to additional shortages in future. In the case of key industrial commodities this can jeopardise GDP growth. With foods, shortages can result in social unrest, as we have already seen.