Excited about the new Call of Duty? One key plot element of the video game, rare earth minerals, may have more real-world significance than you think. In the game, the Chinese ban the export of REMs in response to a cyberattack, sparking a new Cold War between China and the US.
There haven’t exactly been Cold Wars or cyberattacks just yet, but tensions related to REMs are rising. In fact, China and Japan’s on-going island dispute may be the start of the next global resource battle.
China’s stranglehold on the REM market has become a huge cause for concern for the United States, Japan, Canada, and Australia due to their high REM usage. The seventeen elements including Scandium, Yttrium, and the fifteen Lanthanide elements that fall under the category of REMs are in everything from cell phones to solar panels and engines of hybrids to missile guidance and control systems. The Department of Energy and the Congressional Research Service (CRS) place China’s output of REMs at 90-95% of the current global supply. China, since it gained market dominance, has not only used informal measures to limit its exports and keep the price of REMs artificially high, but has also used REMs as a political weapon against Japan in 2010.
Following a territorial dispute in 2010, China banned exports of REMs to Japan. The export ban was enough to freeze Japanese electronics and auto manufacturing, the country’s largest industries. This overtly political move was highly criticized by many in the international community. The United States filed a joint complaint with the European Union, Japan, and Canada with the World Trade Organization (WTO).
The ongoing political dispute between China and Japan over a chain of small islands has caused some to fear another embargo, which would spell disaster for many American companies and in turn, affect almost all Americans. Computers, smartphones and televisions all rely on REMs, so prices for things like iPhones and laptops would jump if China were to shut down REM production. In addition to skyrocketing prices, development of new products by companies like Windows, Samsung and Apple would grind to a halt.
But is China’s grip on REMs and the islands dispute with Japan really cause for alarm? “The short-term relations between China and Japan [will get] worse before they get better…[but] Chinese manipulation of REMs is not that serious a concern,” says William Hurst, a professor of Political Science at Northwestern University with research focusing on the politics of legal institutions in China. He adds, “China will not have that much capability to control REMs in the future.”
Though called “rare,” REMs are actually quite abundant in the earth’s crust. Though China has a stranglehold on REMs now, it will not be able to stop the onslaught of foreign companies looking to exploit the numerous REM deposits outside of China. Currently, American policymakers are racing to establish a domestic supply of REMs through subsidies of companies like Molycorp Inc. Meanwhile foreign companies, such as the Lynas Corporation and the Great Western Minerals Group, are looking to establish mines in Canada, New Zealand, Vietnam and Australia. Japan and Vietnam have recently begun a partnership to form a research center on REM mining in Hanoi.
In the end REMs may not be affected by the China-Japan clash, but the disputes between the world’s second and third largest economies (respectively) is not to be underestimated. And with the recent “election” of the new Chinese president Xi Jinping – who is married to a Chinese general – the East Asian situation can only get more complex.