• Sun
  • Dec 28, 2014
  • Updated: 6:15pm

China shoots itself in the foot by trying to corner rare-earth market

Green-tech firms are trying to produce batteries that do not need raw materials in short supply

PUBLISHED : Monday, 02 June, 2014, 10:35am
UPDATED : Tuesday, 03 June, 2014, 1:07am

Apparently, somewhere in the universe, a little Japanese electric-battery-making-firm's stock recently soared, and I was surprised to find out about this from my mum's next-door neighbour in a small Maryland city called Greenbelt.

This neighbour was one of the early adopters of electric vehicles and is part of a group lobbying the local government to roll out incentives to widen the ownership base of these cleaner cars.

The concept is exciting, and China will likely be out of the loop on the discovery process

There are surely countless like-minded devotees in little towns all around the world watching the electric-car space with similar enthusiasm.

If its claims are true, the company, Power Japan Plus, has created a technology that allows batteries to charge more quickly and last much longer, which means fewer charges and ameliorates "range anxiety" and thus widens the potential demand for electric cars.

But there is another, interesting story about the cutthroat global race for green technologies.

Power Japan Plus's electric-car battery does not use any conductive metals, including rare-earth metals, common to traditional lithium ion batteries. Its "dual carbon" technology is based on cotton fibre - the material Thomas Edison used to make carbon fibres in his light bulbs.

A limited supply of the raw materials used in electric-car batteries has long threatened to cap growth in the industry. Some of those raw materials - the rare-earth metals - are produced primarily in China, which at one point attempted to effectively stop exporting the stuff.

If this action spurred the initiative to find alternative technologies, then China may pay a high price for trying to corner the rare-earth market.

China became the world's leading producer of rare-earth metals in the mid-1980s. Its prodigious output led to a supply glut, so mines shut down elsewhere in the world.

China's attempts, beginning in 2009, to severely restrict rare-earth exports were viewed by some as a ruthless attempt to force more foreign companies to move onshore with their production of hi-tech products used in the defence, energy and consumer electronics industries. At any rate, it would have given an advantage to Chinese companies competing in these areas.

Eventually China compromised, with less drastic export restrictions, but Beijing is still appealing a World Trade Organisation ruling that its bans violated global trade rules.

China says it just wants to cut pollution and conserve this precious resource; others say, "yeah, right".

As a Saudi prince once explained in the 1970s to compatriots who wanted to cut oil output and drive prices higher: If a country with a precious resource limits supply too ruthlessly, it risks encouraging mass investments in alternative sources of energy.

This is exactly what China did by threatening to corner supply in the rare-earth metals market; it encouraged a hunt for alternative inputs.

After the export-ban scare, mining companies raised funds to restart rare-earth mines in Australia, the US and elsewhere. And, clearly, green-tech companies are also looking to produce batteries that do not even need rare earths and other raw materials that have a limited supply, such as lithium or graphite.

Thus the cotton-based technology Power Japan Plus is launching. We have no idea whether this alternative battery type will start a new revolution in electric vehicles or just be another flash in the pan. Many online commentators are sceptical.

But the concept is exciting, and China will likely be out of the loop on the discovery process. This is a likely a matter of trust.

Note also that the world's most successful electric-car innovator, California-based Tesla, prefers to partner with Japanese and Korean companies and is planning a huge battery plant in the US rather than outsourcing to a country like, say, China, which is already a huge producer and has many of the raw materials.

Power Japan Plus was at an Indianapolis electric-vehicle show last week trying to round up interest and investors; most online industry commentators see Tesla or Japan's Panasonic as the big companies likely to explore using this technology.

These days, China seems to have trade-related tiffs on every front. Hong Kong auditors now might be kicked out of the mainland; US consultancy firms like McKinsey are strangely in the line of fire of revenge after the US accused China of industrial espionage; foreign companies based in China complain of harassment.

If more and more intellectual exchanges are driven from China's shores - either owing to retaliation, protectionism or lack of trust - this can't be good for the country's goal of moving higher up the technology value chain.


For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive



This article is now closed to comments

Masako Owada
China is right to reduce the production and export of rare-earth for the simple reasons that the pollution problems associated with it's production needs to be resolved first. If there are alternatives to rare-earth then even better as the polluting industry can be shut down. The market for rare-earth is practically worthless anyway as the export values to China is very low and the pollution problem very big.
China is indeed in no hurry to export their rare earth resources any faster or any further. Look at the environmental problem faced by the country! If the price of every single ton of rare earth sold cannot pay back the bill of pollution precaution, destroyed land recovery, the mining should have been banned in the very first place. We cannot let people enjoy economic benefit in the expense of externality any further. China is on the right track.
This article is based on utterly flawed logic. It was greedy corporations outside of China that decided to take their business to China for rare earths. The US Government did not realise the strategic importance of rare earths until the horse had been gone from the stable for years. At one point the American military would only have been able to wage full-on war for six weeks before running out of essential rare earths. The Chinese announced to the world years ago that they should look for alternative supplies and alternative technologies. The outright destruction of the natural habitat in China was heart-wrenching. The Chinese Government did the unpopular thing and put caps on exports - and rightly so. Why is it that China is always painted as the bad guy? It is their rare earth - they can do with it as they wish.
The US have as much rare-earth as China. Please don't force the Chinese to pollute their environment to sell to the US at a cost too prohibitive to the environment. The price of the rare-earth is ridiculously low anyway and overall the economic benefits is a big minus! The US and Japan should please mine and process your own rare-earths and pollute your environment. I'm sure China would be more than happy to import rare-earth from the US. So US please produce rare-earth for Chinese consumption.
So the author is saying when China had supplied most of the RE it's a bad thing and when China cuts production it's a bad thing. Forcing China to churn out the resource and ignoring its reasons to cut production is shameful while The U.S., Australia, and many countries have an abundance of the resource. The U.S. gave the same reason as China for restricting RE production to begin with.
The commenters below seem to all be the same person, they repeat the same mistakes.
China is not cutting RE mining, just RE exports. They don't care about the environment, they just want foreign companies to do all the manufacturing onshore.
It has nothing to do with preserving green space or keeping national wealth for future generations. If that was truly the reason, they would stop the mining all together. Instead they still mine and sell to companies based in China, while favoring Chinese owned companies first and foremost.
China should shut down all rare earth mining immediately, there is no profit in selling off limited resources that could be better used by the future generations. If outside earsling believe that this is China shooting herself in the foot, so be it.
All of this is being discussed as if China NEEDS to makes sales happen. I don't suppose the author of this article knows the term 'sustainable development'.
As much as everyone around the world will smirk at the idea of China being sustainable, I do feel restricting consumption is a right move.
Sadly, the world is too keen to put all its eggs in one basket, and when that basket breaks, move on to another.
Apparently the owner of the basket does not want it broken, and the world cries foul now.
It looks like the same person wrote the comments below with their different names? Wu Mao Dang perhaps?
Let China use its rare earth metals.
Let the world use a replacement of rare earth metals.
Let China look out for itself.
China is so superior and does not need the world.
Let the world look out for itself.


SCMP.com Account