Politicians everywhere manage to get away with their swaggering display of confidence. Like the other day when Prithviraj Chavan was still the science and technology minister said rare earths metals are of too strategic significance to be allowed to be monopolised by any one country. Chavan’s statement needs to be read in the context of the world becoming uncomfortable with the Chinese stance on export of rare earth metals finding application in many high tech industries.
It is known that over the years Japanese companies in particular have become over reliant on supplies of such metals from China. But supply of these, with exotic names like scandium, yttrium and the 15 other elements in the lanthanide group which people outside the trade and users are unlikely to be aware of, was choked when Beijing in retaliation of a clash in September between a Chinese fishing boat and a Japanese coastal patrol vessel near islands claimed by both the countries prevailed upon its exporters to shun the Japanese market.
India agreeing to sell rare earths metals to Japan when Prime Minister Manmohan Singh was visiting Tokyo in October or Japan trying to develop rare earths resources in Vietman jointly with the host country should be seen against Beijing’s own way of using trade diplomacy to register its protest against Japan for the arrest of Chinese ship crew . China became a member of the World Trade Organisation in 2002, but as its continuing play with rare earths shows in one more instance, the country is not going to fight shy of using its political and economic power whenever the situation demands.
According to an Indian trade official, the rare earths issue has been played out so deftly that it is not easy to say that China ever put a ban on exports. Chinese Prime Minister Wen Jiabao denied of Beijing using rare earths as a “bargaining chip.” But hasn’t a ministerial colleague of Wen gave the game away by saying that Chinese producers and exporters of rare earths metals were so aggrieved by the Japanese aggressive behaviour that they stopped dealing with importers from Japan? A Xinhua comment used in a Newsweek article saying “rare earths are not only the special sauce of 20 per cent of the world’s high tech products but will also be China’s bargaining chips on the world’s negotiating table,” solves this piece of jigsaw puzzle. Export slowdown could also be due to China preserving rare earths metals for future domestic use. Who will fail to see the Chinese ambition of also becoming the world’s leading producer of all kinds of high tech consumer and industrial products?
The private sector in China is no doubt growing and prospering. But it is kept under official leash unlike in India or in other free market economies. So when Beijing decided to use the rare earths metals stick to send a strong message to Tokyo, the concerned Chinese suppliers were left with no option but to stop trading with Japan. China is said to have lifted the ban of late. Supplies are once again going to Japan, though volumes remain small. In a fresh development causing worries over supplies, China is linking sanction of rare earths materials export quotas to applicants who will be procuring materials from producers subjecting themselves to rigorous environmental norms during mining and processing.
Normally an exception will not be taken on this particular Chinese move since we also have experienced in our country that mining of rare earths would cause a high degree of damage to land, water and air in the absence of extraordinary care to be taken during extraction and processing. Rare earths could also be a source of radioactivity. But the new export restrictions have been announced in extraordinary circumstances and China to the discomfort of the importing countries has a 97 per cent share of the world production of rare earths metals. As the world has been smarting under Chinese export restrictions, Metal Bulletin said in an editorial that the “China-Japan spat has underlined the need for diversification in materials supply to avoid one-off disruptions, but the need for new supplies was already well recognised.”
India with rare earths reserves of 3.1 million tonnes is to ramp up production of metals to 7,700 tonnes from 2,700 tonnes by 2011 end when Indian Rare Earths Limited’s Orissa project is to be commissioned. Till recently an exclusive playing field for PSUs, New Delhi is now inviting local private parties to participate in extraction and processing of rare earths in JVs with public undertakings but as minority partners. Except for the mining part, foreign companies can team up with Indian PSUs in processing and refining of rare earths.
Ban or not, supplies of rare earths metals by China have shrunk considerably, hitting Japan the most in the process. The Chinese stance is the factor responsible for recent major price rises of these metals in the world market. Prices staying at these levels will, however, encourage countries like India and Vietnam to give greater attention to discovering rare earths resources and their mining.
