A rare earth opportunity

Robert Clark
11 Oct 2010

First thing you need to know, there’s no shortage of rare earths.


But in case you weren’t worried, you should have been.


China, which supplies 97% of the world’s rare earths, cut off shipments to Japan during the nasty East China Sea dispute last month. 


The group of minerals known under the umbrella name as “rare earth elements” are essential in the manufacture of hybrid cars, missiles, mobile phones and communication networks.


They comprise the 15 elements in the periodic table from lanthanum to lutetium, as well as yttrium and scandium, to be precise, and they are in demand because of their special properties, such as the ability to withstand demagnetization at high temperatures.


They certainly matter to the telecoms business. Europium and yttrium are used in making optical fiber. Neodymium, praseodymium, dysprosium, terbium, lanthanum and cerium are essential to mobile phones and PC hard drives.


Now you know all this you’re thinking that, if China were going to play hardball with Japan on rare earths, it surely wouldn’t hesitate to do the same with the much-despised western capitalist economies, right?


Investors came to the same conclusion. Shares in the Hong Kong-listed Inner Mongolia Baotou Steel Rare Earth – which accounts for two-fifths of China’s rare earth output - leapt 40% in the days after the ban.


Incidentally, China has denied cutting off supply, but it’s telling that Wen Jiabao has promised it won’t use rare earths as a bargaining chip.


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