From SCDigest's On-Target E-Magazine

March 12, 2012

Supply Chain News: Molycorp Rare Earth Metals Deal Causes more Concern of China's Dominance

Acquisition of Metals Processor Draws Questions because its Facilities are in China; US Metal Production will be Sent There?

SCDigest Editorial Staff

An acquisition announced Monday by US-based rare earth metals producer Molycorp of Canadian-based Neo Materials Technologies, which processes the metals into a usable form, actually has raised concerns that it may actually reinforce China's dominance of the industry - and therefore control over some manufacturing sectors.

SCDigest Says: Complicating matters, it also turns out that states and the federal government here remain reluctant to allow new rare-earth processing faciliites to open over environmental concerns. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

Rare earth metals are a group of 17 elements, such as yttrium and dysprosium, that are used in everything from cars and defense systems to smart phones and "green" energy products. Though they typically only represent a small fraction of the finished product's make-up, these metals add certain key characteristics to the product, such as heat resistance.

Though several areas of the world naturally contain these metals, over the past few decades China has become almost the sole producer of the products. That has caused increasing concern, as prices have risen dramatically and China has both quietly and publicly made moves to use its near monopoly to give its own manufacturers huge advantages. That includes setting rigid export limits on the metals that has served to send prices spiraling on world markets.

Increasingly, China has been using favored pricing on the expensive rare earth metals to lure Western and Japanese manufacturers to move production into the country. (See China Continues to Flex Rare Earth Metals Muscle, as Companies Moving Factories there to Avoid Shortages and Brutal Prices Increases in Global Markets.)

As the recognition of the bind the US and other countries were in, Molycorp was formed a few years ago to develop a rare earch mine in Mountain Pass, CA, raising and spending huge amounts of money to get the project off the ground and then more recently accelerate its production schedule.

In fact, Molycorp project wad actually a restart of the mine, which was once the world's largest rare earth producer but was closed a number of years due to falling prices for the metals then and some environmental concerns.

So, Molycorp's acquisition of a processing company ought to be seen as goods news for US rare earth production and capabilities, right? The deal clearly gives it significant new technological capabilities, particularly in powders that are used in making sophisticated high-performance bonded magnets.

However, some are concerned because it turns our that Neo Materials has its processing capabilities in two facilities it operates in China itself under its Magnequench division, serving Chinese and Western manufacturers there with those high tech batteries and other products.

(Manufacturing article continued below)