Update: I’ve done a bunch more reading on this since I wrote it and I don’t totally agree with everything I said anymore. Specifically, the monopoly was a long time coming and export quotas have been ticking down since 2005. Yes, the market failed, but China’s export quotas may have as much to do with protecting natural resources as sending a message to the market. Will file an update soon.
Today we got some awesome lulz and a few, well, less awesome, being the first day of the fourth month which is dedicated to chicanery and such.
Tonight I was reading up on mining and recycling of rare earth metals like the stuff in super strong magnets, wind turbines, hybrid car batteries, compact fluorescents and LEDs. I found a Government Accountability Office (GAO) report about rare earths in the defense supply chain. Strangely, it was published on April Fools Day one year ago.
The thing about rare earth metals as a commodity is that right now, one country (China, you guessed it) supplies about 97% of the word’s stocks. They drove the prices down in the 1990s and 2000s such that global competitors went out of business. But now they have strict export limits and last fall enforced an unofficial embargo that drove prices into a tizzy. It raised all sorts of concerns like, crap, how did one country come to dominate the global market on the lifeblood of all tech hardware? What happened to other sources? What happened to the engineering know-how to refine the stuff? Why aren’t we recycling our junked electronics since they are chock full of valuable materials that have already been pulled from the earth’s crust? It’s almost like no one is thinking ahead about how cracking infrastructure, from science education to supply chain insurance, could bring even information economies to their knees, and instead thinking about how to shave off a half cent per unit by following cheap labor. I was told there was, like, an invisible hand waving a wand over the market, but…APRIL FOOLS!
The GAO report isn’t horrifically alarming, mostly because there’s so much missing data. Apparently people in the Air Force were thinking about rare earth shortages as early as 2003, and the Navy gave it a passing glance in 2006, but DoD had only started to look at their dependence on rare earths in a comprehensive way this time last year. They were set to publish a report last September, but I haven’t looked for it yet.
What really impresses me about the report is that somebody, at some point, realized this was so important that Congress really needed to ask GAO to do a little gum-shoeing. To me that means that someone, somewhere, is freaking out. When you start to look at what it would take to dislodge the rare earth commodity monopoly, some aspects look rosy (basic mining operations back up by 2012), some look disconcerting (full refinement ability requires major infrastructure and about 15 years), and some look downright gloomy (rare earth tailings are radioactive, require massive amounts of water and the most promising US mine is in thirsty California, separating distinct elements from ore is incredibly difficult, few people are even talking about recycling). It boggles my mind to realize that a series of episodes of neglect and systemic failure put 95-97% of the supply chain for critical and as-yet unsubstitutable materials under the control of one country, and the biggest reason seems to be that that country undercut everyone else’s price.
So rather than developing domestic sources as an insurance policy for a critical market–for example, a robust recycling regimen, the feasibility of which sets rare earths apart from, say, oil, considering about 82% of waste electronics in the US gets landfilled–the US and others just followed the lowest price, and expected the invisible hand to do the rest.
That’s a good one! You totally got me! Ok, enough kidding around, how are we actually going to fix this?