The Battle for (Rare) Earth Part 3
- By Stefan Hammond
- January 24, 2023
Humanity only learned to extract and refine minerals from the earth a few centuries ago. Sometimes it seems we don't care that those minerals were created eons past and that their supply may be finite.
The parallels with our use of petroleum are obvious, and it's little surprise that current trends in rare-earth extraction, refining and distribution reflect many of the same geopolitical fears and opportunities.
But a recent Scandinavian discovery may change the equation in 2023 and beyond.
Ubiquity
“Every day we unwittingly interact with an array of rare earths — they’re in the planes that transport us through the air, in the sonar systems that scan the sea floor and everything in between,” wrote Investing New Network
“There are 17 rare earth elements,” said the Washington-based non-profit organization Institute for Energy Research (IER). “While these elements are common in the earth’s crust, they are found in tiny concentrations and are mixed together, making them difficult to isolate.”
According to the IER, “global consumption of rare earth elements in 2019 was about 210,000 metric tons — 10.5% more than in 2018 and about 4.7 times greater than the 45,000 metric tons used 28 years ago.” The rise can be chalked up to tech hardware manufactured in the last few decades — all our shiny new devices require rare-earth elements to function.
Scarcity
“Until 1948, most of the world's rare earths were sourced from India and Brazil. Through the 1950s, South Africa was the world's rare-earth source,” says Wikipedia. “Through the 1960s until the 1980s, the Mountain Pass rare earth mine in California made the United States the leading producer.” However, nowadays, “the Indian and South African deposits still produce some rare-earth concentrates, but they are dwarfed by the scale of Chinese production.”
Our shiny new devices require rare-earth elements to function
“China currently accounts for 60% and 87% of global rare earths mining and processing, respectively,” says Quartz Magazine. “China's monopoly on rare earths has been on Capitol Hill committee agendas for well over a decade; its role in the global supply chain is huge,” says Newsweek. “That role begins with an abundance of domestic facilities that process local- or foreign-sourced raw material and ends with the country's status as the world's top exporter — and the U.S. as its top client.”
Various organizations and media outlets see a national security angle in a situation like this. But never ignore entrepreneurial focus on geologically limited commodities.
Investor's delight
“Ongoing environmental crackdowns in China are likely to continue to impact the global rare earths sector, largely because China is the world leader in production, accounting for 105,000 of the 130,000 tons produced in 2017,” saysInvesting News. “China is also getting increasingly restrictive in the amount of rare earths it exports,” which “has created volatility in the sector that was further exacerbated last year when the U.S. included rare earths on a list of critical metals and minerals out of China that would be heavily taxed.”
Lithium (essential to lithium-ion batteries) leads the pack — with the main culprit being electrically powered vehicles. “Traditional automakers have hastily announced plans to build 13 lithium-ion battery plants in the U.S. by mid-decade,” says investors.com. “The planned ramp of EV production will triple demand for the light, silvery white metal by 2025. Yet supplies of lithium have little chance of keeping up.”
But before any random crypto bro decides to cash in their NFTs in favor of lithium futures, let's revisit an earlier entrepreneur who came up short trying to leverage a fundamentally Chinese commodity.
Market, uncornered
During the Gold Rush frenzy of the mid-19th century, Joshua Abraham Norton “made a successful living as a commodities trader and real estate speculator, becoming one of [San Francisco's] more prosperous and respected citizens.” However, his speculative acumen took a turn for the worse when he attempted to corner the local rice market in December 1852.
“Norton thought he saw a business opportunity when China, facing a severe famine, placed a ban on the export of rice, causing the price of rice in San Francisco to increase,” says Wikipedia. The entrepreneur shrewdly purchased the entire rice cargo of a Peruvian ship, hoping to corner the market.”
Parallels with our use of petroleum are obvious
Unfortunately, Norton's dream of hefty profits evaporated: “Shortly after he signed the contract, several other shiploads of rice arrived from Peru, causing the price of rice to plummet.”
Norton survived this disaster and achieved fame later in life when he declared himself "Norton I., Emperor of the United States" and strolled the streets of San Francisco, accompanied by his dogs Bummer and Lazarus. Wikipedia: “Norton has been immortalized as the basis of characters in the literature of Mark Twain, Robert Louis Stevenson and Christopher Moore.” He remains one of San Francisco's more beloved eccentrics.
Discovery
Norton had no real China strategy, but current conditions warrant one. “Bit by bit, Western companies and governments are reassembling their rare earths supply chain, trying to reverse decades of the hollowing out, outsourcing, and offshoring of the critical industry to China,” says a November 2022 article in Quartz. “This month brought a promising development: new investment in a Norwegian rare earths processing firm. It’s a vital cog in the eventual establishment of a transatlantic supply chain spanning Canada, Sweden, and Norway.”
And in January 2023, “Europe's largest known deposit of rare earth elements” was “discovered in northern Sweden.”
Swedish mining company LKAB announced they had “found a deposit of rare earth metals exceeding 1 million tons of rare earth oxides.”
"No rare earth elements are currently mined in Europe, at the same time, demand is expected to increase dramatically as a result of electrification, which will lead to a global undersupply, and this at a time of increasing geopolitical tensions,” said LKAB in a statement.
“According to the European Commission’s assessment, the demand for rare earth elements for electric cars and wind turbines, among others, is expected to increase more than fivefold by 2030,” said LKAB. “Today, Europe is also dependent on imports of these minerals, where China completely dominates the market, a factor which increases the vulnerability of European industry."
All industries are vulnerable to supply-side shocks. But the discovery indicates that Norton-like attempts to corner the market are short-sighted at best.
Stefan Hammond is a contributing editor to CDOTrends. Best practices, the IoT, payment gateways, robotics, and the ongoing battle against cyberpirates pique his interest. You can reach him at [email protected].
Image credit: iStockphoto/RHJ