Published on Tuesday Sept 14 2010
Circled above are the 17 Elements that make up the Rare Earth Table
It's the bubble you've probably never heard of: The rare earth bubble. And it's due to pop in 2012, potentially devastating the industries of western nations that depend on these rare elements.
What industries are those?
The automobile industry uses tens of thousands of tons of rare earth elements each year, and advanced military technology depends on these elements, too. Lots of "green" technologies depend on them, including wind turbines, low-energy light bulbs and hybrid car batteries. In fact, much of western civilization depends on rare earth elements such as terbium, lanthanum andneodymium.
So what's the problem with these rare elements? 97 percent of the world's supply comes from mines in China, and China is prepared to simply stop exporting these strategic elements to the rest of the world by 2010.
If that happens, the western world will be crippled by the collapse of available rare earth elements. Manufacturing of everything from computers and electronics to farm machinery will grind to a halt. Electronics will disappear from the shelves and prices for manufactured goods that depend on these rare elements will skyrocket.
These 17 rare earth elements (REE) -- all of which are metals -- are strategic resourcesupon which entire nations are built. In many ways, they are similar to rubber -- a resource so valuable and important to the world that many experts call it the "fourth most important natural resource in the world," right after water, steel and oil. Without rubber, you couldn't drive your car to work or water your lawn. Many medical technologies would cease to work and virtually all commercial construction would grind to a halt.
Many of the strategic battles fought in World War II were fought, in fact, over control of rubber, most of which now comes through Singapore and its surrounding regions (Malaysia and Indonesia).
Global shortage of Rare Earth Elements coming...
Now, by threatening to cut off the world's supply of rare earth elements, China appears to be attempting to monopolize this extremely important strategic resource. According to information received by The Independent, by 2012 China may cease all exports of rare earth elements, reserving them for its own economic expansion.
An article in that paper quotes REE expert Jack Lifton as saying, "A real crunch is coming. In America, Britain and elsewhere we have not yet woken up to the fact that there is an urgent need to secure the supply of rare earths from sources outside China."
And yet virtually no one has heard of this problem! People are familiar with peak oil, global warming, ocean acidification, the national debt and the depletion of fossil water, but very few are aware of the looming crisis in rare metals... upon which much of western civilization rests.
For those who still aren't convinced this is a big deal, consider this: Without rare earth elements, we would have no iPhones. Yeah, I know. That's a disaster, huh?
We would have no fibre optic cables, either. No X-ray machines, no car stereos and no high-tech missile guidance systems for the military. And here's the real kicker: No electric motors.
Demand outstrips supplyThe problem with the supply of rare earth elements is that demand has skyrocketed over the last decade from 40,000 tons to 120,000 tons. Meanwhile, China has been cutting its exports. Now, it only exports about 30,000 tons a year -- only one-fourth of the demand the world needs.
In order to build more "green" technologies, the world will need 200,000 tons of rare earth elements by 2014, predicts The Independent. Yet China now threatens to drop exports to exactly zero tons by 2012.
It isn't hard to do the math on this: Without China's exports, the western world will quickly run out of rare earth elements.
Kiss your "green" wind-turbines good-bye. And your Toyota Prius production lines, too. No more iPhones and iPods either. Without these rare earth elements, entire industries grind to a halt.
Can we mine it elsewhere?China isn't the only geographic region where these rare earth elements are found, but constructing mines to pull these elements out of the ground takes many years. Some mines are under construction right now in other countries that could help fill the demand for REEs, but making them operational is "five to ten years away," says Lifton.
That means these other mines won't really be operational until 2015 - 2020. Meanwhile, China could cut off its supply in 2012. That leaves a 3-7 year gap in which these rare earth elements will be in disastrously short supply.
This brings up a couple of very important realizations related to investments:
It is almost certain that the prices for rare earth elements will skyrocket over the next 2 - 5 years. This creates a huge investment opportunity for people willing to take a risk and bet their money on rising prices of these metals.
There's another big investment opportunity here, too: Recycling rare earth elements. As prices leap higher, it will become more economically feasible to harvest rare earth elements out of garbage dumps and landfills where people are discarding electronics such as motors, computers, sound systems and other such items.
Some smart entrepreneur will no doubt make a fortune by setting up and operating a rare earth element reclamation operation of some kind. These elements, after all, aren't destroyed when they're thrown away. They sit around in the trash for eons, just waiting to be reclaimed and re-used.
Lead, for example, is a metal that is successfully recycled today. Something like 85% of all the lead used in America today is reclaimed out of lead-acid batteries and other similar devices. If similar programs could be initiated for the rare metals, we could go a long way towards meeting society's demand for these elements without having to keep mining them out of the ground.
Because let's face it: Mining these rare earth elements is a very DIRTY business. That's part of the contradiction in "green" technologies, by the way: To manufacture them, you need rare metals mined out of ecologically disastrous operations in China. It's the (literal) "dirty little secret" of the green industry. All these wind turbines, solar panels, hybrid car batteries and fiber optics may seem green to the consumer, but behind them there's a very dirty mining business that rapes the planet and pollutes the rivers in order to recover these "green" rare metals.
In any case, unless scientists find less-rare alternatives to many of these rare earth metals, we are looking at a serious global supply crunch for the years 2012 - 2020. Add the "rare earth elements bubble" to your list of other bubbles to watch out for in the years ahead.
Some of the 17 rare earth elementsDysprosium - Makes electric motor magnets 90% lighter
Terbium - Makes electric lights 80% more efficient
Neodymium - Used in motor magnets
Lanthanum - Used for hydrogen storage
Praseodymium - Used in lasers and ceramic materials
Gadolinium - Used to manufacture computer memory
Erbium - Used in the manufacture of vanadium steel
Ytterbium - Used to make infrared lasers