Political & Elections

BigG · Guru

The Rare Earths Metals Crisis That Wasn't.

Abyss · Senior Member

BigG wrote:

Not a real crisis? Tell that to the guys trying to buy rare earth materials to keep their plants running and their workers employed.

Consider where the article is being published. What do you expect this particular publication to say? "We must have government support for a viable rare earths industry!" They have a philosophical ax to grind.

The US had a rare earths industry. It was crushed by Chinese government directed and subsidized competition. I have worked in specific plants that were shut down because the Chinese material was cheaper.

Without some US government support via loan guarantees, tax breaks, or such, why would anyone risk their capital in direct competition with a foreign, adverse,soverign entity? The Chinese can always cut prices and crush competition again. Bad luck for the guys who put their money in rare earth extraction.

How labile is capital? You don't just wave a magic wand and have facilities appear. The Chinese can profit now and cut prices to crush competition later. Then when the new wave of facilities has deteriorated and the workers moved on to other fields, they can raise prices again.

Technological improvements to reduce dependance on rare earths are possible. But if the RE based machinery from China is better, they will take that market.

The RE corner was aimed, not at RE per se, but high tech electrical machinery manufacture, a much higher "value added" activity.

I would dismiss the article as far right, free market "whistling in the dark". There is no way the short term time of horizon of private business can hope to compete with the decades long time horizon of an effective government.

There can be no free market when one major player can and does game the system. Unless we develop effective government, we will lose the current economic war.

Oh yeah. Ayn Rand was an ivory tower pseudointellectual twit with NO knowledge of how real people interact in the real industrial world. She would not know rare earths from geranium potting soil.

-- Edited by BigG on Thursday 25th of November 2010 07:05:02 PM

-- Edited by BigG on Thursday 25th of November 2010 07:14:59 PM

-- Edited by BigG on Thursday 25th of November 2010 07:20:40 PM

It's pretty funny that you think that there is something that our government can do in order to prevent Chinese economic supremacy. There is simply nothing that can be done.

Being angry won't change anything.

catahoula · Guru

Oh.

Still a good rant though, and I felt I had to say something even though it wasn't clear what it was in response to.

Ethanol subsidies (aka as central planning by running dog capitalists) promote certain behavior. Given the results are as inexorable as anything those godless communists can whistle up, the only argument is whether they've a clearer picture of what needs to be accomplished.

Those who go with the easy answer here will have to deal with the differences in cultural expectations, of course.

edited to add: then drop the spiel about government planning being superior because what you're really looking at is the comparitive advantage of ignoring the things industrialized nations currently pay attention to.

-- Edited by catahoula on Thursday 25th of November 2010 08:38:37 PM

BigG · Guru

In my closing comment, I was responding to the ad on the link.

Could you amplify your point about the Iowa corn growers?

I am suggesting that people who risk capital to provide critical materials might deserve some protection from foreign predation. Accelerated depreciation, perhaps a single year, to recover capital before the Chinese can react might help.

No other industrialized nation abandons minimum wage and environmental protection to compete because they don't need to do so. Their workers' jobs are protected by their laws. Forcing workers to subsistence level wages is a uniquely American thing among the G8 nations. Meanwhile we lead the earth in CEO and executive salaries while profitability and stock value lags. Are there just that many more smart people in the other G8 nations so there is more competition for CEO positions?

-- Edited by BigG on Thursday 25th of November 2010 08:08:57 PM

-- Edited by BigG on Thursday 25th of November 2010 08:10:07 PM

-- Edited by BigG on Thursday 25th of November 2010 08:13:52 PM

-- Edited by BigG on Thursday 25th of November 2010 08:20:21 PM

-- Edited by BigG on Thursday 25th of November 2010 08:21:25 PM

catahoula · Guru

The US had a rare earths industry. It was crushed by Chinese government directed and subsidized competition. I have worked in specific plants that were shut down because the Chinese material was cheaper.
Why don't we just go head to head with the communists? Wave the dominant finger at both environmental regulations and minimum wage laws?

Without some US government support via loan guarantees, tax breaks, or such, why would anyone risk their capital in direct competition with a foreign, adverse,soverign entity? The Chinese can always cut prices and crush competition again. Bad luck for the guys who put their money in rare earth extraction.
Are you suggesting that loan guarantees and tax breaks might be the typical American response to the splendid Chinese model of central planning?

If so, I agree, 'cause Iowa corn growers don't have to give a rat's ass about any 10 year plans the Russian government dreams up.

Oh yeah. Ayn Rand was an ivory tower pseudointellectual twit with NO knowledge of how real people interact in the real industrial world. She would not know rare earths from geranium potting soil.
The kind of ending that makes a good post - both meaty and irrelevant and it leaves the annoying twit that asked for it with nothing to say.:)

BigG · Guru

Not a real crisis? Tell that to the guys trying to buy rare earth materials to keep their plants running and their workers employed.

Consider where the article is being published. What do you expect this particular publication to say? "We must have government support for a viable rare earths industry!" They have a philosophical ax to grind.

The US had a rare earths industry. It was crushed by Chinese government directed and subsidized competition. I have worked in specific plants that were shut down because the Chinese material was cheaper.

Without some US government support via loan guarantees, tax breaks, or such, why would anyone risk their capital in direct competition with a foreign, adverse,soverign entity? The Chinese can always cut prices and crush competition again. Bad luck for the guys who put their money in rare earth extraction.

How labile is capital? You don't just wave a magic wand and have facilities appear. The Chinese can profit now and cut prices to crush competition later. Then when the new wave of facilities has deteriorated and the workers moved on to other fields, they can raise prices again.

Technological improvements to reduce dependance on rare earths are possible. But if the RE based machinery from China is better, they will take that market.

The RE corner was aimed, not at RE per se, but high tech electrical machinery manufacture, a much higher "value added" activity.

I would dismiss the article as far right, free market "whistling in the dark". There is no way the short term time of horizon of private business can hope to compete with the decades long time horizon of an effective government.

There can be no free market when one major player can and does game the system. Unless we develop effective government, we will lose the current economic war.

Oh yeah. Ayn Rand was an ivory tower pseudointellectual twit with NO knowledge of how real people interact in the real industrial world. She would not know rare earths from geranium potting soil.

-- Edited by BigG on Thursday 25th of November 2010 07:05:02 PM

-- Edited by BigG on Thursday 25th of November 2010 07:14:59 PM

-- Edited by BigG on Thursday 25th of November 2010 07:20:40 PM

catahoula · Guru

Is this true, BigG? Was it all just a scam to prod those DC central planners into chunking - excuse me, investing - some state dollars in a Ten Year plan of our own?

http://reason.com/archives/2010/11/23/rare-earth-ruckus

It’s a depressing contemporary truism: Whenever someone declares a crisis, some Capitol Hill busybody hurries to throw taxpayer dollars at it. Last March, as anxieties about Chinese export quotas were beginning to grow, Rep. Mike Coffman (R-Colo.) introduced the Rare Earths Supply-Chain Technology and Resources Transformation Act of 2010 which includes loan guarantees to companies producing and refining domestic rare earth metals.

Another truism: If the feds offer free money, there’ll be no shortage of corporations holding their hands out for it. In fact, Molycorp Minerals has already applied for a $280 million federal loan guarantee. The Department of Energy turned down the initial application, but the company has filed again.

Besides drawing out new supplies, shortages also spur innovation. In this case, several companies appear to be well on the way toward developing cheaper permanent magnets that don’t depend on rare earth metals. For example, the California startup NovaTorque has developed electric motors using low cost ferrite magnets that the company claims outperform much more expensive neodymium magnets. Hitachi in Japan is also developing a ferrite magnet that would be a cheap substitute for the neodymium magnets currently used in hybrid cars. Rare earth magnets are right now chiefly used for reading and writing hard drives, but that may not always be so. Researchers are working on new computer memories based on graphene oxide, a combination of common carbon and oxygen.

In the end, new supplies and innovation will ensure that the future of the world’s high tech economy will not depend upon the whims of the mercantilist mandarins who steer Chinese industrial and trade policy.

-- Edited by catahoula on Thursday 25th of November 2010 05:03:46 PM