China Hoarding Essential Metals

Western Countries Face Shortages of Mineral Resources

Nov 6, 2009 Martha R. Gore

Future-oriented industries, such as those manufacturing solar panels, are being held back by shortages because of China's control of essential metals.

While smelting companies in the West are reluctant to make substantial investments needed to obtain important minerals, which use processes that are labor and energy intensive, China, with a cheap labor force and lax environmental laws, can extract the materials at a cost that Western nations cannot meet.

Western Nations at China's Mercy

An example of what Western nations are facing, Speigel Online describes the situation faced by Ulrich Grillo in Germany. His company runs a zinc and sulfur processing company in the western city of Duisburg. He is also the head of the commodities policy committee of the Federation of German Industries (BDI). According to Grillo, German companies are becoming increasingly dependent upon Chinese sources of raw materials and his put them at the mercy of the Chinese.

What happens if China decides to block access to those metals? There are signs that this may already taking place as China is no longer willing to sell is rare commodities at rock-bottom prices. Already their government planners have begun to impose restrictions on this type of export. It could include not only some rare earth metals, but also important industrial metals such as:

• Lithium
• Cobalt
• Indium
• Gallium
• Tantalum

Lithium and cobalt are used in batteries, indium and gallium is used in thin-firm solar modules and tantalum is contained in the microchips used in mobile phones.

Metals Demand and Short Supply

In examining the rate of consumption of rare metals by Germany's Economics Ministry, it was found that the demand for these minerals will be increasing rapidly. For example gallium, which is used in photovoltaics, will grow by a factor of six. Companies like Siemens need these special materials to make X-ray machines and power plant generators.

Meanwhile, this year China decided to reduce its exports of rare minerals by about one third compared to the previous year. It is keeping the material for its own use as part of a new natural resources strategy that the Ministry of Industry and Information Technology is pursuing.

They have scaled back production, perhaps to get higher prices, which had fallen back as a result of the financial crisis. It apparently worked because the price of neodymium has been about four times higher than it was in 2003. Dysprosim, which is used in lasers, is now selling for a tenfold price over that same year. China's zinc inventories have more than doubled since March 2009 and its lead supplies have grown close to 600%. In addition, they are hoping to process the raw materials into finished products in the future.

China Accessing Minerals in Other Countries

While stockpiling its own mineral supply, China is also securing access to resources in countries around the world. As it fills up its warehouses, it is investing in iron mines in Australia and cobalt reserves in the Congo. It has more than $2 trillion in foreign currency reserves so it has plenty of money for foreign investments.

Alternatives to Mineral Supply from China

As Germany tries to find ways out of China supply trap, it may be setting an example that other Western countries can use. One option is to recycle valuable industrial metals. For example, Siemens completely recycles the indium in X-ray equipment. Another method is used by Contitech that generates magnetic fields with electricity instead of neodymium which makes it less dependent on foreign sources of minerals.

At the moment, China controls the world market in essential metals and it also has huge foreign currency reserves. As many Western countries depend upon their high-tech companies which use these minerals for job growth and recovery from the recession, how will this effect their progress?

Source: Der Speigel

The copyright of the article China Hoarding Essential Metals in International Trade is owned by Martha R. Gore. Permission to republish China Hoarding Essential Metals in print or online must be granted by the author in writing.

Field of Minerals

Map Including China

What do you think about this article?

---

NOTE: Because you are not a Suite101 member, your comment will be moderated before it is viewable.

post your comment

What is 5+5?