China and Rare Earth Metals Two Sides to Every Story (Part One)

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Global Trade, Minor Metals

This is part one of a two part series.We would not be doing our jobs if we didn’t comment on one of the biggest stories of the week involving rare earth metals. Actually, let us qualify that statement, it is the biggest story on rare earth metals to finally reach the mainstream press. The timely piece from Bloomberg referenced an announcement made yesterday by the Deputy Chief of Inner Mongolia who is in talks with the Central Government to build stockpiles of these strategic rare earths in order to support prices. This particular announcement is new news. The older news, reported by The Australian and picked up by others, involves China limiting exports of vital rare-earth metals as well as stockpiling these metals. We first reported on these export restraints back on June 30th in this piece entitled: Obama Administration Fights Chinese Export Restraints on Key Raw Materials.Now there appears to be a flurry of coverage on the topic of China banning exports of some rare earths. Some are critical of what has been reported like Jack Lifton in this piece where he suggests readers ought to be skeptical of articles covering this story relying upon draft reports written by China rare earth industry participants as opposed to official China public policy. We can all agree with that. Other articles take a stand on the issue like this one from a great new blog called Terra Magnetica which covers the magnet industry The Sky is not Falling a Different Perspective on the Chinese MIIT Report on Rare Earths. Gareth Hatch, the editor of Terra Magnetica wrote a conclusion to that post which sums up the impact of China’s actions (or perhaps intended actions) around Rare Earth metals and the rest of the world’s strategies for securing long term supply of these metals:

Do we need to be vigilant when it comes to the near- and long-term Chinese strategy for their rare earth metals and other resources? Absolutely.  Do we need to develop those alternate sources for rare earths as quickly as possible? You bet!  Is the current fever pitch of wailing and gnashing of teeth on this subject warranted, coupled with near-apocalyptic language in the blogosphere, Twitterverse and even in the more conventional media realms?I don’t know for sure – but probably not.”

We’d have to agree with Gareth. We’d also add that China is often portrayed by the media as the evil villain dumping their cheaply made products, destroying jobs and now potentially creating a situation in which the Western World is beholden to them for rare earth metals. Certainly to some extent one could argue these points as truth. But as they say, every story has two sides. I’m reminded of a book that I read in graduate school called Getting to Yes. It’s a book about negotiation and I’ll never forget one of the examples about a negotiation over an orange. I can’t remember all of the specifics but essentially what happens is two people negotiate their positions over the orange and end up cutting it in half to create an equitable end result. However, the smart negotiator probes the other side to try and better understand the motivations and true needs of the opposite party. Through this process of mutual discovery, the parties realize that one actually wants the orange peel while the other wants what’s on the inside. Without a doubt, the rest of the western world must develop and invest in alternative rare earth mines as my learned colleagues Jack Lifton and Gareth Hatch both advocate.We will follow-up this post later this afternoon looking at China’s position on rare earths.If your firm purchases rare earth metals and you are concerned about this issue, join us at the Managing Supply Chain Risks for Critical & Strategic Metals Summit from Oct 20-22 in Washington DC. MetalMiner readers can attend the event for a 10% discount by clicking here.–Lisa Reisman

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