Heavy Metal: Black and Silver
Anyone who actually gets the title is welcome to admit that they like all the wrong bands (just like me).
But here Michael Silver talking about rare earth metals at Breitbart, and I found some interesting stuff in it. Go read the whole thing. But here’s an interesting take:
First, last Friday the sole operating U.S. rare earth mine, Molycorp, announced it had acquired Neo Materials Technology, the patent holder of the process to produce rare earth magnet alloy. The material, Neodymium-Iron-Boron, is possibly the most critical use of rare earths, essential to making everything from modern electric motors to audio speakers to AppleTM earplugs to wind turbines and many, many other products. The unique aspect of the deal is that Neo’s operations are primarily in China. The upshot is that now that America finally has a domestic rare earth mine, at least a portion of the production will actually be shipped to China.
Well, I’d agree that doesn’t sound very good. But he goes on to explain:
As to the Molycorp deal, since the legitimate concern today is the potential differential between domestic Chinese prices versus prices its exporters charge globally, giving a possible unfair advantage to Chinese manufacturers, having Molycorp in China is a good thing. And given that Molycorp, as a U.S. public company, can be counted on to respect WTO and U.S. trade laws, the acquisition should, in fact, have the effect of encouraging equalization of Chinese export and Chinese domestic rare earth prices.
I get the point, at least at the start. The logical discussion still needs to happen around the US starting to look at its own rare-earth metal supply and figuring out how to more efficiently mine it. But since we all know that’s a 10-year proposition, let me posit that pulling this stuff out of China for now isn’t such a bad thing.
At some point, the demand for metals is going to skyrocket. It’s already on its way up. Here’s the five-year chart:
The price this year is flat, and there was a peak back near the beginning of the ’00s, but the local ramp is pretty astounding. If China is going to pay for all the R&D on how to effectively mine it so that we can later profit when some sensible administration opens up our land, then so be it. For once, I’m okay with them doing all the hard work (at least at a base level).
One other interesting note:
When President George W. Bush first went to China he tried to engage the Premier in a conversation on nuclear proliferation by asking the somewhat Reaganesque question, “Premier, what keeps you up late at night?”. To his surprise, the answer was: “How am I going to find 25 million jobs.”
Anyone who thinks that China is going to look for mechanized solutions and find labor savings is not thinking correctly. This is an economy that wants to keep a lot of people employed, and doing that in any way is job #1. Hopefully the US realizes that as it farms out more jobs and hires government workers to replace them…