December 08, 2022

China’s Rare Earth Industry’s Big Advantage is not Just in Mines

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China’s Real Rare Earth Infrastructure is based on a dedicated, and educated, specifically Experienced, and Skilled rare earth industrial and R&D workforce, financed, where needed, and supported by the State.

There is a debate among Western economists on the value and effect of industrial policies, set by governments, on the marketplace. It’s argued that when governments, instead of the markets, pick winners and losers in industries it never ends well.

China’s admittedly authoritarian central government does exactly that; it defines an industrial policy for the long term, and it picks winners and losers. But, unlike the American government, it does not careen from policy to policy based on the politics of the moment. China’s government’s long-term focus is on the growth of the overall economy, price stability, and domestic social harmony.

I think that it is the issue of price stability that has caused the Chinese central government to step into its domestic rare earth’s industry lately. Stable, or at least predictable, prices allow the long term planning characteristic of the Chinese industrial economy.

Just before Christmas China announced that it had formed a large and state-supported vertically integrated rare earth products’ company called, eponymously, China Rare Earths. This event, a merger of the rare earths operations managed by three mostly state owned and state controlled  companies has been widely reported. What journalists seem to have missed is that this will be a well financed rare earth company from the start. The Peoples’ Bank of China (the PBOC) is the lender of last resort to any State Owned Enterprise (SOE) and if that enterprise is producing anything required by the current industrial policy then profit and loss take a back seat to security of supply. In rare earths, for example, mining and separation are today rarely, and then only barely, profitable especially in any country with strict worker health and safety and environmental management regulations. The profit is in downstream products, metals, alloys, and magnets, phosphors, and catalysts. This is why stand-alone rare earth ventures even with separation capability and capacity, such as Lynas Rare Earths Limited (ASX: LYC), make relatively little profit, while by contrast China’s vertically integrated, and so far, mostly private Shenghe Resources, which is vertically integrated from the mine to the magnet does much better in sales volumes and profits than Lynas.

China’s rare earths industry has had a long learning curve, and this has generated the world’s largest rare earth R&D, rare earth mining, and rare earths production (processing and manufacturing) engineering reservoir of skilled and well-educated individuals dedicated to rare earths, in the world.

China Rare Earths inherits this human infrastructure, and, unlike, an American venture, such as MP Materials Corp. (NYSE: MP), does not go far to seek out specifically educated, experienced, and skilled engineers and workers from outside of the new company.

Each year China has a ruthlessly competitive national exam to determine admissions to its top universities. Last year some 15 million sat for the national exam. The top tier was selected for China’s most prestigious universities. Those chosen were mostly directed to what we call the STEM curricula, (the hard) sciences, technology, engineering and mathematics. This choice of direction is made in accordance with and support of China’s Industrial Policy, of being independent of the West in 10 technologies by 2025, and becoming a permanent center of technological innovation, superior to any other nation.

The United States, where social forces are denigrating college admissions’ qualification through the cancellation of blind testing, and where even mathematics may be branded as “racist” by half-witted college faculty and administrators, is surviving today as the top tier innovation nation through the work of legacy researchers, many of whom are foreign born, and most of whom are already in their peak productive years.

The American military pretends to be surprised by Chinese prowess in modern weaponry, and the American mainstream media simply does not report on China’s astounding space program. Both are described as based on stolen intellectual property by a smug American media. Can they say the same about China’s dominance in rare earths and battery materials and the end-use consumer products mass produced in China based on those groups of metals?

The United States can and will supply its military needs for rare earth and battery metal enabled products from domestic sources or through domestic processing of imported ores, and, perhaps, restrictive tariffs to politically level the price competition.

But such self sufficiency will not be possible for the entire civilian economy. Compromise and rationing are the future of the domestic supplies of technology metals for green energy purposes. The best we can hope for is a hybrid energy supply, green where possible, but mostly from fossil fuels and nuclear, if the US intends to retain a domestic industrial economy.

More than ever now, the domestic production, processing, and fabrication of the critical metals and materials needed for a broadly prosperous technological society is itself critical. Depriving ourselves of STEM graduates to ensure those skills survive chosen is a step towards the national suicide of America’s standard of living.

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7 responses

  1. Marie Avatar
    Marie

    Jack, Can you advise some mine to metal companies that investor intel has written or done interviews on?

  2. 38BWD22 Avatar
    38BWD22

    Yes, Jack, I have the same question as Marie above. I have looked at many of the names on-and-off for years. *Maybe* Neo Materials might be the closest to a somewhat integrated m-to-m supplier (?). US Rare Earths? Lynas (with their planned Texas facility)? Appia? Vital? UCore? So many small entrants, but I have no idea who may actually wind up doing anything…

    Perhaps when one or more of the above actually PRODUCE processed RE oxides (better if they can integrate making magnets too), then I will pounce and buy.

    Until then, I’ll just keep holding on to the Dysprosium Oxide and Terbium Oxide I have bought from Tradium (tradium.com) in Frankfurt. They will hold the materials, after you buy, for you for 2% per year. Maybe that’s the only good way to invest in Rare Earths now?

  3. maplelegion Avatar
    maplelegion

    Tracy Weslosky posted a very good article on ASM ( Australian Strategic Materials : ASX : ASM ) on this INVESTORINTEL SITE on the 11th JAN …and their Mines to Metals strategy , fast tracking now towards delivery . Jack is very familiar with the story . New clean technology , a 50 year mine life in NSW Australia and a materials thirsty South Korean and universal materials supply need Ex China , are potent drivers to the ASM story

  4. Steve Mackowski Avatar
    Steve Mackowski

    In 2004 on my first visit to Bao Tou, I ignorantly asked how many rare earths engineers were in China. 25,000 of which 3,000 had Post Docorates. Australia at the time? 5 max. Says it all. There education system is something to behold.

  5. Nick Pingitore Avatar
    Nick Pingitore

    Hi Jack,
    The Chinese Society of Rare Earths, founded in 1969, has some 4,000 members. In 1983 it launched the Journal of Rare Earths. No rest-of-world equivalents.
    I checked to see whether I could join (I follow their journal and even published a paper there), but political party membership was one of the questions – Democrat and Republican were not on the list.
    There follows material from their website about the society – rough Google translation. A bit different than my other society memberships, e.g., Amer. Chem. Soc., Amer. Assoc. Advancement Sci., Sigma Xi, Materials Research Society, etc.
    “The purpose of the China Rare Earth Society is to adhere to the basic line of the party as a guide, unite and mobilize the majority of rare earth science and technology workers in accordance with the “four” comprehensive strategies of building a well-off society in an all-round way, comprehensively deepening reforms, comprehensively governing the country according to law, and comprehensively administering the party strictly Layout, implementing the policy that science and technology are the primary productive forces, insisting on taking innovation as the primary driving force for the development of the rare earth industry, taking talents as the primary resource supporting the development of the rare earth industry, and placing innovation at the core of the overall development of the rare earth industry.”
    “As a social organization under the leadership of the Communist Party of China, give full play to the political core and ideological leading role of the party organization, unswervingly follow the development path of socialist groups with Chinese characteristics, continuously enhance the political, advanced and mass character, and promote an open, pivotal It focuses on providing rare earth science and technology public service products, integrates into the national innovation system, closely unites around the Party Central Committee with Comrade Xi Jinping as the core, and contributes to the sustainable and healthy development of the rare earth industry and the realization of the Chinese dream of the great rejuvenation of the Chinese nation. The power of rare earth tech workers.”

    1. Jack Lifton Avatar
      Jack Lifton

      Nick,
      Thanks for the detailed information on the focus of the Chinese Society of Rare Earths. I was twice invited to speak at CSRE conferences, and I did, but I was never asked to.join the society. You can see why.

  6. Rob Dubeck Avatar
    Rob Dubeck

    Do you know Auxico Resources. They have licensed technology from Central
    America Nickel for the use of their patent-pending ultrasound assisted extraction process
    (“UAEx”) for mineral extraction.
    The UAEx process is a sustainable metallurgical process for the refining of critical minerals using
    ultrasound technology. The laboratory results demonstrate that when combined with certain acids and used at various frequencies, this ultrasound process breaks up the ore into finer particles in a much quicker time than conventional methods. This reduces the cycle times significantly for the leaching of ores, leading to lower operating and capital costs.

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