Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

U.S. Prepares For Rare Earth Metals Major Supply Disruptions

Commodities / Metals & Mining Apr 05, 2012 - 05:55 AM GMT

By: Anthony_David

Commodities

Best Financial Markets Analysis ArticleIn continuation of the China vs. the-rest-of-the-world rare earth saga, the US, EU and Japan recently filed separate but coordinated complaints with the World Trade Organization (WTO) on the grounds that China was fortifying its stocks of those rare earth metals that were critical for the manufacture of technology products such as mobile phones, camera lenses, hybrid cars and weapons. The complaint also includes non-rare earth metals tungsten and molybdenum.


While announcing the move, President Barack Obama said, “We’ve got to take control of our energy future and we cannot let that energy industry take root in some other country because they were allowed to break the rules.”

US administration officials have been complaining that while China has access to large stocks at cheaper rates, the US is being forced to manage with small stocks at high prices. US officials claim that WTO forbids such unfair trade practices and since China is a member of the WTO, it must function within the WTO rules and regulations. In the absence of a resolution being found within 60 days, the dispute may be placed before a WTO panel for a ruling. Sanctions against China are a possible outcome of the process.

In spite of China’s repeated claims that restrictions on its export quotas since 2009 have been driven by environmental concerns and the need to conserve scarce resources, nobody has really been buying that argument. Chinese foreign ministry spokesman, Liu Weimin said at a briefing, “We think the policy is in line with WTO rules.”

He said that allegations of trade monopoly against China were groundless. It is a well-known fact that while China owns about 30% of the global rare earth deposits, it produces 97% of the global production. Liu said that sustaining that kind of production without damaging the environment is impossible. He added, “Despite such huge environmental pressure China has been taking measures to maintain rare earth exports. China will continue to supply rare earths to the international market.”

A major cause of friction between China and the US is the $295 billion trade deficit recorded last year. In fact, Obama issued an executive order in February this year to create a panel that would investigate unfair trade practices by various nations, including China. During a visit to the US in February, Chinese Vice President Xi Jinping requested the US to respect Chinese interests.

Co-incidentally, the rare earth complaint has come at a time of leadership transitions in both nations. While Obama will stand for re-election in November, Jinping is expected to take over the presidential reins in China in a power handover process within the communist party later this year.

Among other voices in both nations, China’s Xinhua News Agency said that the move by the US was rash and unfair and could damage trade ties. On the other hand, in the US, possible Republican presidential nominee Mike Romney said that Obama was not being tough enough on China. Vijay Vaitheeswaran, The Economist’s China business editor said, “The rhetoric over rare earths is overheated. There is no need for provoking a trade war over China’s stance on rare earths because simple economics and market forces will solve this problem.”

Analysts have pointed out that although the US has substantial rare earth deposits in Alaska and California, the nation appears to lack the political will to tap its own resources. However other countries have moved ahead and are seeking to become self sufficient in their rare earth supply. As Vaitheeswaran pointed out, “Restricted supply and higher prices have already spurred the development of big mines in Australia.”

Karel De Gucht, EU Trade Commissioner said that China’s restrictive policies gave the country a lot of advantage and its policies must be modified. The recent complaint follows the EU’s earlier challenge to China on nine other raw materials that included magnesium, silicon carbide and zinc. The WTO had ruled that export restrictions on these materials defied WTO rules. Since February, China has been increasing its supply.

In another development, on March 16, Obama signed an Executive Order (EO), titled “National Defense Resources Preparedness.” While the president claims the EO is a necessity to protect the country’s interest, analysts and bloggers have been creating quite a ruckus at the high handedness of the EO. Put simply, the EO empowers the president to control all civil energy supplies, which include oil and natural gas; limit and control all civil transportation, which clearly is almost 97% dependent on oil; and even re-enable a draft if the country’s military and non-military demands should require it.

Section 103C of the EO authorizes the president “in the event of a potential threat to the security of the United States, to take actions necessary to ensure the availability of adequate resources and production capability, including services and critical technology, for national defense requirements.”

The EO makes it clear that it covers “all forms of energy including petroleum, gas (both natural and manufactured), electricity, solid fuels (including all forms of coal, coke, coal chemicals, coal liquification, and coal gasification), solar, wind, other types of renewable energy, atomic energy, and the production, conservation, use, control, and distribution (including pipelines) of all of these forms of energy.”

In spite of all the criticism, it cannot be denied that this appears to be the first time that a concrete policy has been tabled should an energy crisis occur. For example, it’s a well-known fact that if Iran ever feels threatened by Israel or the West, the first step Tehran would take would be to block the Strait of Hormuz and cut off 40% of the world’s seaborne oil supply, which is about 20% of the total global supply and create a supply gap of about 20% in the US. Naturally, the results would be catastrophic for the US.

The EO does not mention rare earth metals as part of its scope but the possible effects of an oil-supply interruption are clear from the analysis of the EO. The similarity of the oil and the rare earth supply situation cannot be ignored. Should China feel threatened in any way, Beijing could very well cut off supply of rare earth metals to the western world thereby triggering a chain of catastrophic events in the global markets.

Section 303 of the EO permits the government to “enable rapid transition of emerging technologies,” which implies important technologies that have now been kept out of the market will be pushed into the market early if required. The same section states that the National Defense Stockpile could take control of strategic materials “if such transfers are in the public interest.” The provisions of the EO certainly imply that the president is well aware of the situations that could arise should the WTO complaint disfavor China.v

By Anthony David

http://www.criticalstrategicmetals.com

The mission of the Critical Strategic Metals Web Site

is to serve as a monthly compass for those who take a fundamental view of investment regarding the Molybdenum, Manganese and Magnesium metals markets, are concerned with the emerging critical under-supply of these strategic metals to Western nations and wish to profitability chart their course. Each month we will research and provide, in as short and concise a manner as possible, the most applicable information available on resources that will have the biggest impact on our day to day lives. Click here to sign-up for our FREE monthly report.

© 2012 Copyright  Anthony David- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules