Rare Earths have hit the big time! How so? The premise behind one of the most popular computer gaming franchises on earth, Call of Duty: Black Ops II,
is a Cold War between China and the United States that becomes a shooting war very fast due to a ban on Chinese exports of rare earth minerals. Rare earths are a group of elements that are necessary to today’s modern industrial society: from game stations, computers and televisions– like the ones the user will be playing Black Ops on (which of course would mean war for gamers)—to technologies for green energy production and, from a national security perspective most importantly, modern weapons systems including drones, radar systems, tracking devices, etc…
The problem, as I’ve written previously, is that China is currently responsible for 95 percent of the global supply of rare earths, a near monopoly, and the Chinese government is actively using its stranglehold on rare earth to further its geopolitical and economic aims.
So is a resource war over rare earths possible? Possible, but I believe unlikely. When I first began to examine the rare earth problem I was less than sanguine about the world’s short-term ability to counter China’s politically motivated control of rare earths. As a result, I feared China would be able to extract more favorable terms than it would absent its rare earth domination across a range of economic and foreign policy negotiations. However, as so many so often have, I failed to anticipate the speed with which the market can respond price signals and develop technologies, substitutes and new sources of necessary inputs.
A New York Times article notes the steep price decline in rare earths over the past year. Depending upon the rare earth at issue, though still much higher than five years ago before China’s government really started to flex its rare earth muscles, prices have fallen by between a third and two thirds from their highs. As the Times tells the story, this is due to a number of factors: companies moving to China, countries drawing down domestic inventories, companies curtailing production, finding alternatives or discovering ways to use less rare earths in their products. In addition, new mining ventures have begun so additional materials slowly begun to enter the market.
Over the long-term there may be limits to the amount rare earths that can be freed up through conservation efforts, recycling and, in general, doing more with less, but for now, it seems we are safe from resource war type scenarios – aren’t markets grand!