At the first look, one might not be able to find a connection, perhaps an eerie link, between your very essential phone and tablet, the plane that flies over your head, the wind turbines and solar panels poised to be the future of our energy demand, next-generation laser-guided missiles, lifesaving medical equipment and many more.
But on closer sight, the dark connections start becoming more evident and a dreadful potential, of a major conflict, becomes clear. All the aforementioned things are connected, by the explosive ring of Rare Earth Metals and China. It might very well be the most tragic threat, of our times, plotted in plain sight.
Why Are Rare Earth Metals Important?
Rare Earth Metal are a group of 17 heavy metals and they tend to occur in the same ore together, so if you do find an enriched ore, you will be able to extract almost all the 17 rare earth metals together. Quite contrary to the name, Rare Earth Metals are not that rare, for example, Cerium, a Rare Earth Metal is more abundant than copper.
Then what makes them special? It is the fact that they are hardly ever available in a concentrated ore, which makes them very difficult to be extracted and be refined economically. Due to this specific problem, the production of these elements usually remains constrained.
Apart from the various commodities mentioned at the beginning of the article, a major factor driving the demand for Rare Earth metals is the high requirement of such minerals in the production of ‘Green Technology’.
So, everything from Wind Turbines to Lithium Batteries for electric cars, need Rare Earth Metal as a very essential raw material. As the green technology sphere is set to grow remarkably fast in the coming decades, the importance of Rare Earth Metal is certainly going to expand.
Rare Earth Metals are essential raw materials for many advanced industries, for more than 200 products they are considered necessary components. But other than this one of the biggest factors resulting in the massive significance of Rare Earth Metal is that no close substitute is available for Rare Earth Metals.
This factor coupled with the fact that recycling of these elements is not done on a large scale, make their industrial and technological significance grow even larger.
The China Connect
China commands an overwhelming control over the current and potential future production of a group of very vital minerals, essential for the growth of the next generation Green Technology, Strategic Technology and the advancement of the modern human era in general.
One more factor adding to this quasi-monopoly kind of status of China over the production of Rare Earth Metals is that the production process is quite labour intensive, and due to the cheap labour available in China, it has got a very significant advantage over many other western countries, to the point overwhelming global Supply Chain.
According to Maastricht Economic and Social Research Institute on Innovation and Technology, between 1988 and 2013, China increased its Rare Earths production by 237%, while the rest of the world decreased its production by 66%.
China strengthened its monopoly by implementing four related economic measures. First, it banned foreign companies from taking part in any part of the supply chain, leaving room only for the creation of joint ventures with Chinese companies.
Second, Beijing introduced production and export quotas for both domestic companies and joint ventures. In 2018 China limited the production of rare earth elements to 45,000 tonnes, for the first semester of the year. Third, most of the companies were merged into a single mega-company and new exploitation licences were banned. And finally, China implemented a strict and well-controlled pricing system.
On 19th October 2020, China passed a new law on export control, allowing the government to ban exports of strategic materials to specific foreign companies. This is just a continuation of a very treacherous trend of controlling the supply of very important material. Chinese President Deng Xiaoping once made a remarkable statement- ‘There is Oil in the Middle East, there is Rare Earth in China.’
The Implication of the China Connect
Due to the enormous dependence on China for supplies for these elements, the demand for Rare Earth Metals is faced with tremendous price volatility due to unilateral decisions taken by China. Industries have no option other than to maintain stockpiles to insulate themselves from such measures, which offers little help.
According to a study, European industries are facing a shortage of these elements, due to which the EU has added them to the list of 14 Critical Minerals. But this uncertainty regarding the supply of these elements don’t only have business implication, it can have massive national security implications as well, as these elements are also a crucial component of all the advanced military technologies.
But this is not a problem revolving around only Rare Earth Metals, the problem is deeper and rooted in an ideology based on a closer world, with national interests coming before shared priorities. Rare Earth Metals are just an example, we observed the same problem recently with certain countries deliberating plans to ban the export of Covid-19 Vaccines.
The problem begins when resource distribution is given a strategic orientation. Under such a scenario our society and global economy at large are poised to face massive problems. In a world based on working with each other on various issues, such practices work in contrast to what we envisioned to achieve when we laid the foundation of a more globalized world.
This trend of ravaging geoeconomics will just work against every fundamental cooperation principle we have ever formed. The onus is on the countries blessed with such crucial resources or has the power to influence the distribution of such resources, to work towards a more equitable world with a common goal of shared prosperity as the motto of our united global endeavours.
We should never forget that the Japanese attacked Pearl Harbour only when the USA banned the export of oil to Japan and the British colonized India only for its rich resources. As we enter the 3rd decade of this year, caution must be maintained, that whether for our petty selfish interest are we brewing war for our future?
Written by - Piyush Pandey
Edited by - Akanksha Sharma
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