Rare Earths

The rare earths are a collection of 17 elements in the periodic table: lanthanum, cerium, and erbium, to name a few. These materials play an important and increasing role in electrical and electronic devices, including batteries and magnets (which are used in electric motors and geherators.) Considerable concern has been raised lately about the concentration of rare-earths production in Chinese hands: see for example today’s Business Insider post, which deals with the Chinese government’s push for consolidation of that country’s rare-earths industry into a smaller number of companies. See also this post regarding dependency of key U.S. military systems on rare earths.

I’m interested in discussing rare earths from two standpoints: overall U.S. economic and security policy, and investment opportunities/risks.

One particular factor that needs to be considered is substitutability: while it’s easy to panic about limited or restricted resources, it often turns out to be the case that vital-seeming substances become a lot less vital when human ingenuity creates substitutes (As in the case of synthetic rubber after Japanese capture of most rubber plantations during WWII)…I believe I’ve read about some cases in which rare-earths substitutes have already been developed for certain applications of these materials.

A couple more links:

USGS minerals information

Seeking Alpha on rare-earths investing

As always, nothing in this post is intended as investment device. Do your own due diligence, and IMO one should be especially careful in this area as it is precisely the sort of thing that attracts scamsters and bubble-level pricing.

Anyone out there with interest/knowledge in this subject?

2 thoughts on “Rare Earths”

  1. My understanding is that we literally have beaches of the stuff in the form of monazite sand dunes in Florida.

    We aren’t mining it because, up until now, the Chinese have had a comparative advantage with their richer ores. Part of it is that monazite contains a lot of thorium, presently considered an obnoxious waste product because of its mild radioactivity. If the nuclear energy industry ever experiences a revival here, the thorium might become valuable and the rare earths a valuable secondary product.

  2. I’ve always been perplexed by stories of China poising a stranglehold on the world economy via rare earths. As Vader notes, the raw resources are widespread and certainly NOT rare. Yes, even Florida near Jacksonville has substantial deposits as do Brazil and India. Current US regulations on radioactive mine tailings would make such deposits uneconomic because of the thorium and daughter elements in such deposits.

    The economic issue is the extraction and separation of the rare earth elements. This is difficult and expensive chemical technology and China seems to be striving for a dominent position in the market through economies of scale and comparative advantage.

    If the majority of production comes from China than we and the rest of the industrialized world could find ourselves at a short term strategic disadvantage from a boycott of exports and a long term mercantilist vertical integration of rare earth production and end-use consumption.

    The former could be dealt with with strategic stockpiles something like the Strategic Petroleum Reserves. Our government has long gone this route although we’ve cut way back on most materials since the carrying costs are substantial and globally free markets have reduced the risk. We will also need some maintenance of the skills needed to restart our own extraction and purification industry.

    Frankly, I see the whole issue much like the panic about rising uranium/yellowcake prices of a couple of years ago. Just a way to scare up some commodity trading business.

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