2. Agenda
• What are Rare Earth Metals?
• Where are they Mined and Produced?
• Why are they Important?
• Rare earth metals supply chain
• VRIO Analysis
• China’s Monopoly
• Global and Policy Implications
– Trade disputes
– National defense
– Human rights atrocities & black markets
– Clean energy technologies
• Q & A
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3. What are Rare Earth Metals?
Rare Earth Metals (REMs) are a group of elements with special
magnetic, electronic, and catalytic properties that are widely used in the
production of complex engineered systems.
– Enabling devices that weigh less, are smaller, and more powerful
– Technically, not “rare” however, it is hard to find them in concentrations that are
commercially viable to exploit
* There are 17 rare earth elements – 15 within the chemical group called the lanthanides plus yttrium and scandium
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4. Where are they Mined and Produced?
Production concentration of critical raw mineral materials
Source: European Commission http://ec.europa.eu/commission_2010-2014/tajani/hot-topics/raw-materials/
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5. Why are they Important?
Source: peak resources limited http://www.peakresources.com.au/rare-earths/uses/clean-energy
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6. Why are they Important?
Oh yeah…
• also used in the production of; batteries, cell phones, iPods, computers,
bicycles, cars, night-vision goggles, cameras, dental appliances, fluorescent
lamps, wind turbines, x-ray, aircraft parts & jet engines, fiber optic
cable…even toothpaste & hairbrushes!
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7. Supply Chain
Developing a new mine, including prospecting, siting, permitting and construction, can take a decade or more!
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8. VRIO analysis
• Value
– Extremely valuable, as main ingredients in highly profitable industries, such as
petroleum and technology.
• Rare
– Only found in a few countries in commercially viable quantities for mining.
Cannot be synthetically produced.
• Imitability
– No inorganic substitutes, and there are many factors that limit the development
and production of REMs.
• Organization
– Mining is mainly performed in poor countries, which have limited regulations and
environmental protections. Exploitation and other negative externalities are
present.
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9. China’s Monopoly
• Supplies 95-97% of Global Demand
• Largest REM Consumer
• Manufacturing is Growing in China
• Consolidating
• Establishing Stockpiles (reduce volatility)
• Power to Control Price
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10. Trade Disputes
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11. Trade Disputes
• Senkaku Islands
– The islands are located near rich fishing grounds and potentially huge oil and gas
reserves
– In 2010, china cut off exports of REMs to Japan for 2 months, crippling Japan’s
high-tech manufacturing
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12. National Defense
• National Security
– REMs are critical in the production of weapons & aircraft
• Foreign Dependency
– There is both economic and national security concerns over
dependence on foreign sources
• Home Industry Argument
– The united states was once self-reliant in domestically produced REMs,
but over past 15 years has become 100% reliant on imports, primarily
from china, because of lower-cost operations
• EPA & lawsuits have also hindered domestic production
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13. Human Rights Atrocities & Black Markets
• Poor countries and their citizens are exploited by the mining of
REMs
– No reinvestment in local communities
– Poor health, living conditions, wages
– Safely concerns over mining practices
– Destruction of environment – strip mining employed to extract oxides
– Contamination of ground water supplies
– Black market operations that funnel money to militant groups
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14. Human Rights Atrocities & Black Markets
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15. Children Soldiers
• Democratic republic of Congo (Zaire)
– Mines the majority of the world’s coltan, which when processed is the
main ingredient in electronics equipment
– Substantial value and easily mined by hand. Also exploited by Rwandan
and Ugandan militia groups.
– UN estimates 15-30% of armed forces are children
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16. Clean Energy Technology
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17. REMs used in Clean Energy Technology
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18. But, how clean?
• Significant environmental damage caused by mining and production
of REMs used in production of alternative energy sources
– Open pit mining
– Toxic ponds (tailings)
– Byproducts pollution – air, water & ground
– Very limited recycling of REMs in products
• Many applications of REMs result in very low concentrations in
scrap, making recycling difficult & expensive
• The truth is, clean technologies are not necessary clean and come
at a huge expense
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19. Recycling of REMs
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20. The bottom line
• REMs directly affect the competitiveness and national security
interests of the united states
– The slightest shift in exportation can cause severe economic and
security concerns
• Prices will remain controlled by china’s monopoly
– Not only do they control price and distribution, but they have exercised
this power for political gains
• REMs are the next crucial resource
– REMs are a critical element in the refining process of crude oil, as well
as, critical in electronics & military industries
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22. Questions?
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