The AP reports that the world's high-tech manufacturing hubs are on "high alert" in the wake of China's temporary halt of exotic metal shipments to Japan. According to the AP, China accounts for 97 percent of the global supply of the metals known as rare earths, which are vital to the production of everything from televisions to wind turbines.
Although the next great cold war will most likely be fought over energy resources and the like (with Africa as the eventual flash point) the "good" news is that two-thirds of the world's reserves of rare earths are outside of the Middle Kingdom. Unfortunately, those two thirds are scattered worldwide, and China has pushed its advantages of scale by relying on a familiar playbook: cutting prices until the competition disappears.
The rest of the world's rare earths aren't going anywhere, not until they are worth more than their cost of extraction. Doomsday scenarios of China cutting off the world's supply are enough to make a stock like Rare Element Resources (AMEX: REE) jump, but only a sustained increase in market prices can bring smaller producers online (and push industrial R&D to discover synthetic alternatives). China is not above playing the brinkmanship game, but in the end it knows what is good for its bottom line. Short of a war across the Taiwan Strait, nothing will prompt China to upset its virtual monopoly in the rare earths business.
No comments:
Post a Comment