China stakes claim to rare earths

Rather that sell China all the iron ore, alumina, coal and other common earth dug up in Australia, the Aussies ought to be doing a swap. Shiploads of the former for buckets of the latter.

Rare earths are vital, and China owns them all

The U.S. Geological Survey recognizes 17 different rare earths, materials with science-fictionesque names like lanthanum and gadolinium. They are used in everything: glass polishing and ceramics, automotive catalytic converters, computer monitors, lighting, televisions and pharmaceuticals.

China has all but cornered the market.

"We are addicted to rare earths as much as we are addicted to oil," said Byron King, editor of Energy & Scarcity Investors, published by Agora Financial LLC. "Without these elements, much of the modern economy will just plain shut down," he said.

Without these elements, "you can say goodbye to much of modernity," said King. "There will be no more television screens, computer hard drives, fiber-optic cables, digital cameras and most medical imaging devices. You can say farewell to space launches and the satellites ... and the world's system for refining petroleum will break down too."

China accounts for about 97% of global rare-earth production -- 139,000 metric tons of material in 2008 -- and it also consumes about 60% of the world's rare earths, according to Sean Brodrick, a natural-resources analyst at UncommonWisdomDaily.com.

Meanwhile, the U.S., which is also a major buyer of rare earths, mined no rare-earth elements last year, USGS said.

China has made moves to buy up other rare-earth resources around the world.

When the credit markets collapsed last year, two Australian companies lost their financing. Lynas Corp. and Arafura, which plan to open mines in the next couple of years would have a combined production equal to a quarter of the annual global output of rare-earth metals

Sensing opportunity, China stepped in, with government-owned miners providing the money needed to finish construction of the two companies' mines and ore-processing factories.