Jack Lifton refutes WSJ article: ‘How the Great Rare-Earth Metals Crisis Vanished’

2014-1-12-WSJ-PSThe WSJ article published on January 8, 2014 How the Great Rare-Earth Metals Crisis Vanished declares that the “rare earth crisis” is over, and as support refers to the conclusions of a “leaked” Pentagon report. It glibly declares, analyses, and dismisses, as a failure, a Chinese plot to maintain control of the production and pricing of the rare earths as having been defeated by the forces of the market and capitalism. But the real crisis is that western end-users of rare earth enabled components have proved that if you don’t capitalize the security of supply then when the market turns in your favor you are unprepared to take advantage of it. It is in the naked greed of the stock market where the real rare earth crisis was invented, fomented, sucked dry — and forgotten. The stock market flies no national flag and its players care little for apple pie or mom. Notwithstanding what this author states there is today no nation other than China that has in place a total domestic rare earth supply chain. Thus even if you do produce rare earths outside of China you must send them to China if you want to first refine mining concentrates and then to fabricate rare earth metals and alloys for use, for example, as magnets. In particular none whatsoever today of the “critical” heavy rare earths are produced outside of China.

I wonder of this author knows that the production of the light rare earths (only) today outside of China, which he apparently believes “solves” the total rare earth (light and heavy) supply accessibility problem, must in fact compete with Chinese produced light rare earths inside China itself. And that the real problem is pricing imports into China not export duties from China. So long as it is cheaper to buy rare earths within China than to import them the Chinese total supply chain will continue to absorb the world’s demand for the production of rare earth enabled components such as those for the F35. It is this aspect of the “security of supply,” the fact that its Japanese magnet supplier operates within China using rare earths available only from and in China, that has caused Lockheed to apply for a variance from the domestic supply requirements of the Defense Authorization Act every year for the last decade. China produces and consumes almost all of the magnet-critical heavy rare earths domestically. What heavy rare earths we receive are, like those for the F35, in finished goods only.

I would explain the Chinese motives as mostly genuinely driven by their domestic marketplace, which now, for the first time, is capitalizing the costs of environmental safety and management. This seems to be including a genuine effort to get at the heart of the problem, which has been the corruption that allowed things to get out of hand through a lack of regulatory oversight and enforcement leading to a massive oversupply not only of mining concentrate but also of refining capacity…[To read the complete commentary please log into InvestorIntelReport with your username and password. If you do not have a membership, please click here or email Sue@InvestorIntel.com]


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About Jack Lifton

Jack Lifton is a Founding Principal of Technology Metals Research, LLC. He is also a consultant, author, and lecturer on the market fundamentals of the technology metals, the term that he coined to describe those strategic rare metals whose electronic properties make our technological society possible. These include the rare earths, lithium and most of the rare metals. Jack Lifton is currently a non-executive Director for Texas Rare Earth Resources Corp. (OTCQX: TRER) and AMR, a private Turkish mining venture. He is a paid business operations/marketing consultant to Rare Element Resources (TSX: RES | NYSE MKT: REE), Ucore Rare Metals (TSXV: UCU | OTCQX: UURAF), Tasman Rare Metals (TSXV: TSM | NYSE MKT: TAS), and NovX21 (TSXV: NOV). He is also the founding co-principal of Technology Metals Research, LLC. His consulting is done through Jack Lifton, LLC, a consultancy he began in 1999 upon his retirement as the CEO of an OEM automotive supply company specializing in process chemistry and metals trading. Jack Lifton, LLC is a member of the Minor Metals Trade Association (www.mmta.co.uk) and Jack is an advisor to the Malaysian Academy of Science in Kuala Lumpur, and he is a member of that Academy’s Rare Earth Task Force.
  1. Jack,

    You wrote “Notwithstanding what this author states there is today no nation other than China that has in place a total domestic rare earth supply chain.”.

    I don’t see where the author states that there is there is today any nation other than China that has in place a total domestic rare earth supply chain. In fact, the author states “China is the world’s major extractor and only processor of rare-earth ores.”. Given that the author states that China is the only processor of rare-earth ores, I don’t see how one would conclude that the author believes there is today any nation other than China that has in place a total domestic rare earth supply chain.

  2. Jack,
    A little while back you mentioned Five Year plans, judging by the comments perhaps few understood the significance, but doubt anyone can fully understand the current RE market without understanding Chinese motives as initiated by Deng’s “The Middle East has its oil, China has rare earth.” speech in 1992.
    However he apparently also expanded in the same speech “…..it is of extremely important strategic significance; we must be sure to handle the rare earth issue properly and make the fullest use of our country’s advantage in rare earth resources.”
    (Deng’s in-laws decided they needed a little help and quickly acquired Magnaquench by stealth).
    Twenty years, or 4 x Five (not so hard to identify the stages, the analogy of a heroin dealer might help), we can see the results: “It is not the size of an individual REEs market, or even the whole critical materials market one should consider. Rather, it’s the manufacture of value added products enabled by these materials that counts – for example green energy (wind turbines, electric vehicles, solar cells and energy-efficient lighting) and consumer products (miniature speakers, cell phones, batteries, and screens) account for a large percentage of global GDP. We’re no longer talking a billion or two, we’re talking hundreds of billions, perhaps trillions of dollars.”

    http://aheadoftheherd.com/Newsletter/2012/Magnequench-Has-Left-the-Building.html

    • Tim,

      I’ve always thought that Chinese domination of the rare earths’ space was like Poe’s “The Purloined Letter.” Their motives and actions have been in plain site all along. The monopolization of American industries such as steel and oil attempted by such stalwarts as Carnegie and Rockefeller were terminated by Barack Obama’s intellectual ancestors, Theodore Roosevelt, William Howard Taft, and Woodrow Wilson who aggressively reigned in monopoly capitalism with their brand of early progressivism. Until China has such leaders with such ideas, which may well be never, our private enterprises are faced, in the case of the rare earths, with a kind of state imposed monopoly of interest, which can only be countered with a similar non-Chinese approach. However it goes against the American grain for modern progressives to fight a foreign monopoly logically by subsidizing even just an American “united” approach to competing with the foreign monopoly. So, even though the USA is one of the very few nations that could easily recreate a total rare earth supply chain and support it by requiring all suppliers to meet strict American standards of ethical and safe production our political class is too craven to even contemplate such logical actions in the face of activist environmental hypocrites who prefer foreign workers and children to suffer and die rather than American workers to prosper.
      Tell me how to overcome that.

      • The ONLY reason I could see to justify U.S. federal government intervention to facilitate, mandate, or whatever a U.S. total rare earth supply chain (or even a collective total rare earth supply chain across the U.S. and its close allies (Canada, U.K., Australia, and maybe France, Germany, Netherlands, Italy, Japan, South Korea, New Zealand, Israel) would be if it were determined to be vital for national or alliance security (military) purposes. As for any other reasons, let it be sorted out in the free market. But the other players don’t play fair and it isn’t a free market you say? Well boo hoo hoo, tough boogies.

        As for buy American mandates, give me a break. What do those do? They benefit a small number of owners and employees of some companies, which benefit is paid for by the rest of the economy (including not very well to do people). Oh yeah, and they benefit some politicians who get to dispense favors, while getting power and money in return.

        Any of you guys ever heard of Comparative Advantage? By the way, I run chronic balance of trade deficits with my barber, supermarket, and gas station – can’t allow that to continue. Oh yeah, I forgot, I run chronic balance of trade surpluses with my employer, which more than make up for those balance of trade deficits with my barber, supermarket and gas station. Maybe I should grow all my own food, do a Zuck and only consume flesh from animals I have personally killed, make my clothes starting with cotton I pick, etc. We can and should move the economy in this direction if our goal is to minimize national income and prosperity – we have a group in Wasjington, whether labeled as Democrats or Republicans who are giving it the old college try and trying to move us there as fast as possible, but they are so inefficient and incompetnet, that it’s taking a while – but give them time, they’ll eventually get the job done.

  3. Maybe the marketplace could sort this out if the federal government would take a break from generating new laws and regulations.

    I think we should insist that the federal government print the Federal Register on paper. That way, when the economy collapses, we will have plenty of paper to burn in our stoves to keep warm in the winter.

  4. Pingback: InvestorIntel Week-in-Review: Technology Metal leaders join 3D consumer printing tidal wave | InvestorIntel

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