By Bronwyn Herbert

China's dominance of a set of minerals, crucial to the electrical devices that drive the modern economy, is causing tension in the international community.

Rare earth minerals are essential in most modern day devices - iPods, flat screen TVs, hybrid cars and modern weapons.

China supplies more than 90 per cent of the world's rare earths and recently cut its supply of the minerals to Japan, amid a bitter maritime spat that has caused widespread protests.

Mathew Kaleel, a director of H3 Global Advisers, an investment firm specialising in commodities, says rare earths are now being recognised as strategic minerals.

"They are required for the smart missile technology for example, a lot of the components that go into advanced computer equipment, whether its for civilian or military purposes, they need very small parts of these rare earth so they're things which are not substitutable.

"China announced that it was cutting its quotas by about 70 per cent - now when you've got a country which controls 90 per cent of the global export market cutting those exports, you are effectively pulling out over 60 per cent of global supply of these really important components," he said.

"The Japanese can't make smart phones, smart missile technology, the components for wind farms and a lot of alternative technology."

There have also been reports, denied by China, that it also had halted some rare earth shipments to American companies.

So we've finally found a use for those damn windmills.

We can dismantle them for the rare earths they contain.

It is a good lesson for companies in the electronics industries, if you buy from the cheapest source only, you become captive of that supplier, as your old suppliers go out of production.

Hell, they only have to look at our grocery trade to see the scenario played out.

Smart manufacturers keep a number of suppliers going, to avoid just this situation.

Fortunately other suppliers can be reactivated, & established, before we all die of boredom, with no TV, or bombs.

I read Hugh White’s essay. On the whole I agree with his analysis. However it’s not clear to me that the “middle way” he advocates actually exists. Sometimes you really do have to choose between unpalatable options.

To John Jawrence Ward

Rare Earth Elements (REEs) are not that rare. Extracting them is, however, a difficult and potentially environmentally damaging process.

While China does have some unusually rich ore bodies it does not have a monopoly on reserves. It came to dominate the trade because it invested heavily in the technology of extracting and processing.

Given a determined effort the rest of the world could probably make a significant dent in China’s dominance in 5 – 10 years. The present impasse is not a result of lack of alternatives but a failure of political will and foresight.

It is also important to understand that unlike, say, oil, REEs are not consumed. They can be recovered and recycled. If the price is high enough the technology to do that would be developed.

Note also that Japanese scientists are searching for ways of making do with lesser amounts of REEs in their gadgets. I have little doubt they will succeed.

The Chinese arent stupid you know. But I think the West might be.

China has all of our technology and most of our expertise thanks to globalisation and corporate greed for cheap workers. Anyone really think they will honour "licensing" agreements and IP once the hostilities start?
Rare minerals will pale in comparison to what could happen if the US pokes the Chinese tiger too many times.
Seems they have forgotten Korea and Vietnam and the total failure and defeat they endured. And they were just friends of the Chinese. 1.3 billion Sun Tzus doesnt bare thinking about.

Best friends status is what Australia should be aiming for with China. Only with that sort of relationship could we hope to influence the authoritarian regime to change for the better and also keep security for ourselves and not have to waste lives and dollars following the US to its doom in WWIII.

China has all of our technology and most of our expertise thanks to globalisation and corporate greed for cheap workers.
mikk,
you've hit the nail on head there ! Same goes for India too with all our communication & banking networks. Our problems haven't even started yet.

China can not survive without a customer base.