China produces some 95% of the world’s rare metals, mostly mined in Mongolia. With its virtual monopoly over the world’s rare earth elements (REE) supply, China is considering banning the export of some and drastically reducing the export of others to ensure sufficient supply for its internal demand. So why do we care?

REEs are essential ingredients in a variety of technologies that we rely on: low energy light bulbs, solar panels, wind turbines, semiconductors, smart phones (yes, the iPhone is included in this list), TVs, hybrid cars, smart bombs, lasers, Stinger missiles to name a few. Many industries will be impacted if such a ban is enforced and that will directly reflect on availability and prices in the short to medium term. The existing smuggling trade will flourish.

The Japanese government already has a “Strategy for Ensuring Stable Supplies of Rare Metals” and Japanese companies are trying to create agreements with countries like Kazakhstan and Indonesia to ensure a steady REE supply for themselves.

In the longer term, the supply of REEs will stabilize once again as private companies that were previously driven out of the market by China will reinvest in their mines to meet the gap.

So China is going to cut supplies and Japan is already hoarding- what are other countries planning on doing?

Related posts:

1. 2009 Gloom & Doom Update: Social Unrest in China
2. stuck in a rut
3. 2009 Gloom & Doom update:batten down the hatches!

Double, double toil and trouble;
Fire burn, and caldron bubble.

- Macbeth, Shakespeare

Chinese factories are laying off people as their exports have slowed down. The numbers reported today are 20 million unemployed or about 15% of their workforce. With fewer orders being placed by other countries not as many workers are needed. Chinese cities are seeing reverse migration patterns as unemployed people are returning to villages. Unofficial reports suggest that there are daily demonstrations taking place in the country against the police and government officials as more and more people have fewer and fewer options available.

The government has been offering new graduates civil service jobs in remote areas to reduce unemployment however it is for college graduates and does not address the rural migrant workers.

How long can this continue before the situation will fester into something large and ugly? Without any intervention by the Chinese government the cauldron will bubble over before the second quarter of this year is out

Related posts:

1. 2009 Doom & Gloom Update: Protests in Singapore
2. 2009 Gloom & Doom update: a spot of advice for 2009
3. 2009 Gloom & Doom Update: Third Quarter Outlook