September 26, 2010

Technology Metals are heading into uncharted waters. Well, the waters are charted, but ownership is in dispute. On September 7, 2010, when Japan arrested some Chinese fishermen for venturing into what they called their territory, no one guessed how far the parties would take the dispute.

On the January 13th, Wen Jiabao, the Chinese premier, called for Japan to release the fishing crew unconditionally, stating that there may be retaliation.

“If Japan clings to its mistake, China will take further actions and the Japanese side shall bear all the consequences that arise,” Mr Wen said.

Japan sent home the crew the next day, but is keeping the captain pending further investigation.

China has responded by arresting four Japanese citizens for allegedly illegally filming a military site in China.

But the ante is being upped even further in this international game of maritime intrigue. Enter the importance of strategic resources.

TREM10 speaker Dudley Kingsnorth (as reported in the New York Times) says he has received calls from associates in the rare earth industry who said they had been asked to halt exports to Japan.

"I was told it was an 'unofficial ban,'" Kingsnorth said. "(China) requested major companies to withhold major exports to Japan with a clear indication that if they do export, it might impact on their export quotas."

According to Associated press, a spokesman for China's Ministry of Commerce, Chen Rongkai, denied that Beijing had ordered a ban specifically on exports of rare earth elements to Japan. However, Akihiro Ohata, Japan's Minister of Economy, Trade and Industry said that "We've heard from trading firms that (the reported rare earth export suspension) is happening, so we're checking what's going on."

China also has its share of ongoing disputes with the United States as well. Aside from currency controls, the US is helping fend of China's territorial assertions over portions of the South China Sea that are currently claimed by the Philippines, Malaysia, Brunei and Indonesia.

"China enjoys indisputable sovereign rights over the South China Sea islands and adjacent waters," Foreign Ministry spokeswoman Jiang Yu told reporters today in Beijing, according to Bloomberg. "We oppose the internationalization and expansion of the South China Sea dispute because it will only make the issue more complicated." This was in response to Secretary of State Hillary Clinton's statement that resolving territorial disputes off China's southern coast was "a leading diplomatic priority" for the US. Jiang said that Clinton's comments were "virtually an attack on China".

The dangers of leveraging strategic resources to achieve an outcome are well known in the world. In 2008, when Libyan president Muammar Gaddafi's son Hannibal was arrested and imprisoned in Geneva for beating employees, he threat ened retaliation that included the withdrawal of 7 billion dollars of government funds from Swiss banks, the cessation of multiple economic cooperation projects between the two countries, and a cutoff of Libyan oil exports to Switzerland. The charges were dropped and Gaddafi's son and daughter-in-law returned to Libya.

It may be that China will join the ranks of countries which use resource control to advance their nationalistic interests.

To protect itself, the United States and other Western countries must work together to develop secure and diverse alternate sources for technology metals, relying on neither one country or one company.

Sept 19, 2010

Senator Sherrod Brown (D-Ohio) has said that Chinese trade practices in the compeonents for clean energy are a violation of World Trade Organization rules.

On Platts Energy Week, Senator Brown said, “What we have done is operate within the confines of World Trade Organization rules... The Chinese haven’t. They haven’t because of currency, they haven’t because of other direct subsidies in clean energy.” He says that this could undermine the goals of the US stimulus plan.

Earlier in the week, Senators Carl Levin (D-Mich) Ron Wyden (D-Ore) and others joined Senator Brown in supporting a United Steelworkers petition to the US Trade Representative to bring a case against China before the WTO.

United Steelworkers, the largest labor union representing 1.2 million active and retired members, claims that various Chinese subsidies and preferences for domestic firms are harming U.S. companies and freezing them out of a growing market. Their case, filed on September 9, 2010 is 5800 pages long and identifies five predatory and protectionist practices used by China"

• Restrictions on access to critical materials
• Performance requirements for investors
• Discrimination against foreign firms and goods
• Prohibited export subsidies and prohibited domestic content subsidies
• Trade distorting domestic subsidies

“Green jobs are key to our future,” said Leo W. Gerard, International President of the USW. “Right now, China is taking every possible step – many of them illegal under international trade laws – to ensure that it will control that sector. America can’t afford to cede more of its manufacturing base to China."

Sept 19, 2010

Senator Sherrod Brown (D-Ohio) has said that Chinese trade practices in the compeonents for clean energy are a violation of World Trade Organization rules.

On Platts Energy Week, Senator Brown said, “What we have done is operate within the confines of World Trade Organization rules... The Chinese haven’t. They haven’t because of currency, they haven’t because of other direct subsidies in clean energy.” He says that this could undermine the goals of the US stimulus plan.

Earlier in the week, Senators Carl Levin (D-Mich) Ron Wyden (D-Ore) and others joined Senator Brown in supporting a United Steelworkers petition to the US Trade Representative to bring a case against China before the WTO.

United Steelworkers, the largest labor union representing 1.2 million active and retired members, claims that various Chinese subsidies and preferences for domestic firms are harming U.S. companies and freezing them out of a growing market. Their case, filed on September 9, 2010 is 5800 pages long and identifies five predatory and protectionist practices used by China"

• Restrictions on access to critical materials
• Performance requirements for investors
• Discrimination against foreign firms and goods
• Prohibited export subsidies and prohibited domestic content subsidies
• Trade distorting domestic subsidies

“Green jobs are key to our future,” said Leo W. Gerard, International President of the USW. “Right now, China is taking every possible step – many of them illegal under international trade laws – to ensure that it will control that sector. America can’t afford to cede more of its manufacturing base to China."

Sept 2, 2010

What happens on the political stage is critically important to the resource world. Earlier this summer, Senator Lisa Murkowski (AK) introduced the Senate RESTART Act (Rare Earth Supply Technology and Resources Transformation Act).

After the results of the Aug. 24, 2010 primary race in Alaska, Murkowski conceded to her Tea Party backed rival Joe Miller, who was supported by Alaskan Governor and former vice-presidential candidate Sarah Palin.

What does this mean for the RESTART Act? It was cosponsored by

• John Barrasso [R-WY]
• Michael Crapo [R-ID]
• Michael Enzi [R-WY]
• James Risch [R-ID]
• David Vitter [R-LA]

Sept 8, 2010

According to the Congressional Research Service (CRS), the following legislation has been introduced into the current 111th Congress. The CRS also suggests a few possible additional policies options:

• Authorize and appropriate additional funds for a USGS Assessment
• Support and encourage greater exploration for rare earth elements
• Challenge China on its export policies
• Establish a stockpile

Sept. 1, 2010

The 4Q2010 edition of Joint Forces Quarterly features TREM10 presenter, Lt.Cmdr. Cindy A. Hurst,  a Research Analyst in the Foreign Military Studies Office at Fort Leavenworth, Kansas.

In a powerful opening statement, Hurst highlights the link between resources and national security:

"On February 4, 2010, nearly 2 weeks after the Obama administration unveiled a $6.4 billion arms deal with Taiwan, a Chinese article posted on an online Chinese Communist Party–connected daily newspaper site, as well as on many Chinese blogs and military news sources, suggested banning the sale of rare earth elements (REEs) to U.S. companies as retribution."

How important are rare earth elements? Hurst reports that in Nezavisimaya Gazeta, Alexander Portnov, a professor specializing in geological and mineral sciences, wrote, “There can be no talk of developing nanotechnology if the country does not produce and use rare elements.” Portnov argues that a country’s extraction, production, and use of rare metals needed for technological innovation are “a precise indicator of its scientific and technical development.”

Read the full report:

http://www.ndu.edu/press/lib/images/jfq-59/JFQ59_121-126_Hurst.pdf

August 27, 2010

The Wall Street Journal (as reported in "The Australian") boldly states in an opening paragraph to an article: "THE world will belong to the countries who control the resources, such as rare earth metals, which power the 21st century."

Of course, this is why Evo Morales is visiting South Korea. Technology producing countries around the world desperately need access to resources. In some countries, like Japan and Korea, the state both directly and indirectly invests in securing the resources of the technology future. They understand that without the raw materials of technology, clean technologies will remain a dream, and national security will become a nightmare.

And so, a landmark Memorandum of Understanding has been signed between the state-owned Korea Resources Corporation and the Bolivian national mining company, Comibol. The countries will collaborate on developing and industrializing Bolivia's Salar de Uyuni lithium reserve. Other participants in the program include Korean firms Posco, LG International Corporation, GS Caltex and Daewoo International.

This follows another recent resources deal in which Korea Resources Corporation and Posco acquired a controlling stake in a Chinese rare earth mining company, Yongxin Rare Earth Metals.

At the Institute for the Analysis of Global Security, we have been working to illustrate the link between geopolitical stability and resources. This is why IAGS Executive Director and TREM Center Advisor Gal Luft is quoted in the Wall Street Journal:

The Japanese foreign minister, Katsuya Okada put it best. He said, "Until recently, the government took the attitude that this was something best left to market forces ... but the world has changed dramatically and the Government cannot just sit back any more."

August 10, 2010 - El Mercurio de Santiago

Translation by Emily Pehrsson - original clipping follows.

Gal Luft, Executive Director of the Institute for the Analysis of Global Security and analyst at the International Lithium Alliance:

Lithium expert warns that Chile could lose the leadership in the industry

The specialist said that as demand grows for batteries of electric cars, more players will enter the market. He also called for the elimination of current restrictions on their holdings operating in the country.

R. Fernando Road

The American expert on commodities of Lithium International Alliance and executive director of the Institute for the Analysis of Global Security (IAGS), Gal Luft, stayed only two days in Chile, long enough to determine that our country could lose its current hegemony in the lithium industry - which today reaches 45% of global supply - due to the entry of new players into the market.

Invited by Sonami and the Ministry of Mines to the seminar "Lithium and the National Economy,” which had the cooperation of “El Mercurio," the expert noted that it is essential that Chile remove the current restrictions on its [lithium’s] development and use because currently only SQM, linked to businessman Julio Ponce Lerou, and the Chilean Society of Lithium (SCL Chemetall), can extract this strategically classified mineral.

The result was that both companies held the necessary permits before the Constitutional Organic Law on Mining Concessions and the Mining Code prohibiting the delivery of concessions.

- Does it make sense to restrict the use of lithium on the basis of its potential use in nuclear power generation?

"Nuclear fusion has advanced little since the 70s and we still have to accomplish decades of technological breakthroughs in this field. It will be even longer before we can introduce a commercial use for it. Therefore, it makes no sense to restrict the use of lithium on the basis of its potential role in nuclear energy. We cannot predict whether the merger will be possible and therefore it would be sensible to liberate the regulatory restrictions on the lithium industry related to the merger. "

- Is this happening in another country?

"No. Each country has its own definition of what constitutes a strategic raw material. None of the major economies of the world considers lithium to be a strategic raw material, but its importance for the future of the world economy is increasingly being recognized.”

- Why is this?

"The importance of lithium will increase as the electric car industry grows, which requires a supply of batteries."

- Chile could lose its leadership in the global supply of lithium due to these restrictions?

"In the nineteenth century, half the world's oil came from Azerbaijan. As oil demand grew worldwide, people found more and more oil around the world. Today, Azerbaijan's oil constitutes only 1% of world supply. What I mean by this is that lithium is an abundant resource. As demand increases, more and more countries will develop their own lithium resources and the largest lithium producers now will lose their hegemony."

- Do you see any limitations on the future availability of lithium, and how may this impact the development of the electric industry?

"It is possible that in the very near future the supply will occasionally be interrupted with a well-known rise in prices, but I will not exaggerate that risk. Lithium forms only a small fraction of the cost of a battery and it is not likely that an increase in its price will have a significant impact on the overall cost of a vehicle or stop the electrification process. In short, I do not foresee a chronic shortage of lithium or a lithium peak in the future.

''None of the major economies of the world consider lithium to be a strategic raw material, but its importance for the future of the world economy is being increasingly being recognized.

“Lithium is an abundant resource. As demand increases, more and more countries will develop their own lithium."