EDITOR: | August 4th, 2015 | 1 Comment

Critical Metals: The West is sleepwalking to its economic decline

| August 04, 2015 | 1 Comment
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SleepwalkersAnne-Marie Brady, professor at the School of Social and Political Sciences at the University of Canterbury in the New Zealand city of Christchurch, specializes in China, and has since 2008 been researching Chinese interests in the polar regions. Some time ago she saw on a Chinese website a map of Antarctica’s mineral resources. After she revealed her find, the map was swiftly removed.

She will in October be delivering a lecture on the subject of “China as Polar Great Power”, which is also the title of her forthcoming book. She says Chinese literature is “very, very clear about China’s interests in Antarctic minerals”.

And everyone else’s.

Reading Jack Lifton’s incisive summation of the global rare earth situation posted on InvestorIntel yesterday, and the West’s continuing weakness in that sector, it occurred to me that this is part of a much wider problem. As Jack wrote, the strategy being followed by Chinalco involves a concerted, well-planned consolidation of Chinese interests. And he added: “While American, European, Brazilian, South African, and Australian rare earth producers and juniors squabble with each other and promote their share prices as their only hope of raising new capital in a market dominated by China’s use … of the majority of the world’s rare earths as well as the majority of all metals, Chinalco is methodically planning to diversify its sources of raw materials and to seek out technology sales or purchases to improve its efficiencies.”

China has for long been focused on mineral security. Compare that with the U.S. and its 100% import dependence for 19 key minerals and the dangers of that situation for American security. So how’s that going? There’s been a great deal of talk in Washington, not too much action.

China, though, hasn’t said much, just getting on with the task.

Back in 2003, Beijing set out its policy. The paper noted that in 1949, the year the Communists came to power, China had only 300 properly developed resource projects, producing just 120,000 tons a year of crude oil, 32 million tons of coal, 160,000 tons of steel, 13,000 tons of non-ferrous metals, 10,000 tons of pyrite and less than 100,000 tons of phosphorous.

By 2002, China had 489 large mines, 1,025 medium-sized ones, well over 140,000 small ones, along with sand and clay quarries. It produced 167 million tonnes of crude, 1.38 billion tonnes of coal, 231 million tonnes of iron ore. And then there are all the strategic and technology metals dominated by China. China is also now the world’s leading gold miner.

But in March the Congressional Research Service, in its report China’s Mineral Industry and U.S. Access to Strategic and Critical Metals, showed how Chinese imports had grown.

  • Bauxite: 2003 — no imports recorded; 2012 — imports totaled 39,638,000 tonnes.
  • Chromium: 2003 — imports totaled 1,780,000 tonnes; 2012 — 9,290,000 tonnes.
  • Cobalt: 2003 — No imports reported; 2012 — 166,000 tonnes
  • Copper: 2003 — 2,670,000 tonnes imported; 2012 —7,830,000 tonnes
  • Iron ore: 2003 — 148,130,000 tonnes; 2012 — 743,550,000 tonnes
  • Nickel ore: 2003 — 8,400 tonnes; 2012 — 65,000,000 tonnes

None of those increases will come as a surprise what with the Chinese growth story well known. And it is not as if the world is about to run out of some metals, iron ore particularly; and China has not been able to dominate production of many, and is still import-reliant.

It is quite a different story with the critical and strategic materials. As Jack Lifton points out, China has been able to organize itself to retain a good grip in rare earths. It has also been able to ally itself with several emerging non-China REE players

And it remains top dog with tungsten, molybdenum, antimony and others. Non-China tin companies have been stymied with plans to open new mines because China switched its tin purchasing to Myanmar, thus removing one of the largest markets from western tin mining business plans. There have been strategic investments in niobium projects abroad. With graphite, Beijing has been working to rationalize production to eliminate smaller, less economic mining companies.

The study of Antarctica’s mineral wealth is just one more clue as to what Beijing is up to.

For years, I have been arguing here in Australia for a strategic reserve of key critical metals now being mined, or potentially mined, in Australia. This is not for use by industries here – Australian manufacturing has long been hollowed out – but as a source of future income, being able to sell antimony, tungsten and other critical metals at some future date when the prices were higher. But that will never happen in a country that saw its Reserve Bank in the late 1990s sell off a large proportion of its gold reserves – not a great vote of confidence in the yellow metal considering Australia’s role as one of the world’s major gold producers.

Now we are seeing China use its immense financial resources to buy up property and agricultural land around the world.

Jack Lifton is right about the failure of the West to address the rare earths issue with some long-term strategy. But it is a much wider issue than that: the West is sleepwalking to its economic decline.


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Comments

  • whaleblubber

    I would like to add my same (August 3) comment I did to your referenced Lifton article–
    When it comes to HREE/CREO China has no choice but to source from outside China. My bet is the chance for obtaining at least an infusion of Chinese money lies with the large deposits having the highest grade HREE/CREO and geologically right ores. Primarily based on this thinking, I have been adding shares in just such companies while they literally are dirt cheap. It is up to each investor/gambler to determine which junior miners meet those criteria. The Chinese are long-term thinkers and I am convinced they already have been doing just that for a long time as part of the ongoing and carefully orchestrated strategy now unfolding. Meanwhile, the not-so-bright and short-sighted West just sits around bitching, slobbering and with its thumb stuck up where it doesn’t belong. In stark contrast to the West in terms of time frame, when Deng instituted his “Opening Up” program in 1979, he wanted it to be tried for a century or so! If the country doesn’t implode owing to “social stability” (as it so often has in its long history), it will make this the Chinese Century. It is for just such reasons, irrespective of the current burps on the Shanghai Exchange, that the writing already is on the (Great) wall and in Chinese characters.

    August 4, 2015 - 10:36 AM

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