Article Summary
A few years ago China was the largest supplier of rare earths in the world with 95 per cent of the world production of rare earths coming from China . In 2010 China took a turn in its marketing strategy for rare earths. It restricted export of rare earth by imposing a quota of 40 per cent on exports of rare earths. Export to Japan was totally cut off due to some dispute between the two countries. The ensuing uncertainty about rare earth supply led to the sky-rocketing of the price of rare earths in the world market.
The high price of rare earths led to mining in other parts of the world like the US, Australia and Malaysia. Recycling of rare earths from discarded material also became common among the metal firms. Research and development aimed at innovating products that could make less use of rare earths. The car manufactures like Ford and Honda started using hybrid batteries that minimized the use of rare earths.
The high prices of rare earths led to increased mining in China ignoring the environment protection objectives announced by the state. Exports of rare earths from China found different ways as these were mixed with other alloys which did not face any export restriction. Some part of it was smuggled out. In this way rare earths supply increased creating a situation of overproduction of rare earths leading to a plunge in the prices of rare earths in 2012. Global recession and slow down of the Chinese economy led to the fall in the demand for rare earths. Prices fell further. China lifted its export quota as its share in world production came down to 80 per cent. Thus we see that China’s attempt to restrict the supply of rare earths to increase its market power actually boomeranged against it.
Works Cited
Varian, Hal R. Intermediate Microeconomics A Modern Approach. 8th. New York: W. W. Norton & Company, 2010.
WSJ. "The Rare-Earths Economics Lesson." The Wall Street Journal 22 October 2016. English.
