Rare_Earth_Metals

• What are Rare Earth Metals?

• Where are they Mined and Produced?

• Why are they Important?

• Rare earth metals supply chain

• VRIO Analysis

• China’s Monopoly

• Global and Policy Implications

– Trade disputes

– National defense

– Human rights atrocities & black markets

– Clean energy technologies

• Q & A

GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 2

Agenda


What are Rare Earth Metals?

Rare Earth Metals (REMs) are a group of elements with special

magnetic, electronic, and catalytic properties that are widely used in the

production of complex engineered systems.

– Enabling devices that weigh less, are smaller, and more powerful

– Technically, not “rare” however, it is hard to find them in concentrations that are

commercially viable to exploit

* There are 17 rare earth elements – 15 within the chemical group called the lanthanides plus yttrium and scandium


Where are they Mined and Produced?

Source: European Commission http://ec.europa.eu/commission_2010-2014/tajani/hot-topics/raw-materials/

Production concentration of critical raw mineral materials


Why are they Important?

Source: peak resources limited http://www.peakresources.com.au/rare-earths/uses/clean-energy


Oh yeah…

• also used in the production of; batteries, cell phones, iPods, computers,

bicycles, cars, night-vision goggles, cameras, dental appliances, fluorescent

lamps, wind turbines, x-ray, aircraft parts & jet engines, fiber optic

cable…even toothpaste & hairbrushes!

Why are they Important?


Developing a new mine, including prospecting, siting, permitting and construction, can take a decade or more!

Supply Chain

• Value

– Extremely valuable, as main ingredients in highly profitable industries, such as

petroleum and technology.

• Rare

– Only found in a few countries in commercially viable quantities for mining.

Cannot be synthetically produced.

• Imitability

– No inorganic substitutes, and there are many factors that limit the development

and production of REMs.

• Organization

– Mining is mainly performed in poor countries, which have limited regulations and

environmental protections. Exploitation and other negative externalities are

present.


VRIO analysis

• Supplies 95-97% of Global Demand

• Largest REM Consumer

• Manufacturing is Growing in China

• Consolidating

• Establishing Stockpiles (reduce volatility)

• Power to Control Price


China’s Monopoly


Trade Disputes

• Senkaku Islands

– The islands are located near rich fishing grounds and potentially huge oil and gas

reserves

– In 2010, china cut off exports of REMs to Japan for 2 months, crippling Japan’s

high-tech manufacturing


Trade Disputes


National Defense

• National Security

– REMs are critical in the production of weapons & aircraft

• Foreign Dependency

– There is both economic and national security concerns over

dependence on foreign sources

• Home Industry Argument

– The united states was once self-reliant in domestically produced REMs,

but over past 15 years has become 100% reliant on imports, primarily

from china, because of lower-cost operations

• EPA & lawsuits have also hindered domestic production

• Poor countries and their citizens are exploited by the mining of

REMs

– No reinvestment in local communities

– Poor health, living conditions, wages

– Safely concerns over mining practices

– Destruction of environment – strip mining employed to extract oxides

– Contamination of ground water supplies

– Black market operations that funnel money to militant groups


Human Rights Atrocities & Black Markets


Human Rights Atrocities & Black Markets


Children Soldiers

• Democratic republic of Congo (Zaire)

– Mines the majority of the world’s coltan, which when processed is the

main ingredient in electronics equipment

– Substantial value and easily mined by hand. Also exploited by Rwandan

and Ugandan militia groups.

– UN estimates 15-30% of armed forces are children


Clean Energy Technology


REMs used in Clean Energy Technology


But, how clean?

• Significant environmental damage caused by mining and production

of REMs used in production of alternative energy sources

– Open pit mining

– Toxic ponds (tailings)

– Byproducts pollution – air, water & ground

– Very limited recycling of REMs in products

• Many applications of REMs result in very low concentrations in

scrap, making recycling difficult & expensive

• The truth is, clean technologies are not necessary clean and come

at a huge expense


Recycling of REMs

• REMs directly affect the competitiveness and national security

interests of the united states

– The slightest shift in exportation can cause severe economic and

security concerns

• Prices will remain controlled by china’s monopoly

– Not only do they control price and distribution, but they have exercised

this power for political gains

• REMs are the next crucial resource

– REMs are a critical element in the refining process of crude oil, as well

as, critical in electronics & military industries


The bottom line


Questions?

Rare_Earth_Metals

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