The move toward new and better technologies — from smart phones to solar panels — means an ever-increasing demand for rare earths that are scarce thanks to both geology and politics. Thin, cheap solar panels need tellurium, which makes up a scant 0.0000001 percent of the earth’s crust, making it three times rarer than gold. High-performance batteries need lithium, which is only easily extracted from briny pools in the Andes. In 2011, the average price of ‘rare earth’ metals shot up by as much as 750 percent. Platinum, needed as a catalyst in fuel cells that turn hydrogen into energy, comes almost exclusively from South Africa. But most of the rare earths are in China which has tried to control the export of it.
But according to industry estimates, around 40,000 tonnes of rare earth oxides were smuggled out of China last year, more than the official export volume of 28,000 tonnes. It has hurt overseas producers like Australia’s Lynas Corp and Molycorp, whose business plans were built on China’s efforts to restrict domestic supply and crack down on illegal production.
Greenwood, Colorado-based Molycorp is the sole U.S. domestic supplier of rare earths used in everything from smartphones to military jet engines and hybrid vehicles.
In 2011, it relaunched its huge Mountain Pass mine in California expecting prices to stay high after China, which dominates world supply, restricted exports. Last month it filed for bankruptcy protection as operating losses mounted.
Customs police in the eastern Chinese port of Qingdao last month arrested five traders following a nine-month investigation into a rare earth and ferromolybdenum smuggling ring worth nearly $18 million.
That was no one-off. Chinese authorities have been struggling since 2010 to smash an illegal supply chain in which rogue miners deliver ores to unauthorized separation facilities, with the finished products then disguised and shipped abroad.
“Traders go through all kinds of channels and make false product declarations at customs – marking it as alumina or even washing powder,” said Chen Zhanheng, vice-secretary general of the Association of China Rare Earth Industry.