Critical and strategic failure of rare earth resources

SME Annual Meeting and Exhibit 2010

Volumn , Issue , 2010, Pages 67-73

  Kennedy, J ^a  

^a Wings Enterprises Inc   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ADVANCED WEAPONS SYSTEMS; GREEN TECHNOLOGY; HEAVY RARE EARTHS; MAGNETIC COMPONENTS; RARE EARTH OXIDE; RARE-EARTH RESOURCES; STRATEGIC FAILURES;

OXIDES; RARE EARTHS;

RARE EARTH ALLOYS;

EID: 77954221937     PISSN: None     EISSN: None     Source Type: Conference Proceeding    
DOI: None     Document Type: Conference Paper

References (88)

1. We will only examine U.S. domestic issues in this paper.
2. The United States has been a net consumer for three decades, culminating in record financial and trade imbalances for 2009, expected to exceed $1 trillion (goods, services and debt related to the current budget).
3. The estimated size of the banking crisis is in the trillions, with the total risk exposure for just mortgage backed Credit Default Swaps exceeding $50 trillion. Most of this securitized mortgage debt reflects households borrowing against inflated housing values from foreign banks. I would speculate that the value of the aggregated mortgage 'default values' will roughly equal the accumulated trade imbalances.
4. The Federal Deficit may exceed $2 trillion for 2009, with estimated multi trillion dollar deficits predicted by the GAO for the next decade.
5. This numbers simply represents an imbalance in federal promises vs. tax receipts. A federal deficit exceeding $1 trillion will consume the majority of all available capital on a global basis. This, of course, crowds most other productive uses of capital. This number does not reflect the impact of future demographic obligations (see vi).
6. The exception being the DoE. However, that will not last forever if overall macro-economics do not improve.
7. Please see "The internationalization of industrial supply chains and the location of innovative activities" by Brian Fifareck, et al, Carnegie Mellon.
8. Also see Off-Shoring and Innovation by Francisco Veloso - CEEAplA.
9. Brian J. Fifarek, Francisco Veloso and Cliff I. Davidson.
10. High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner.
11. Also from presentation materials by Terry K. Clagett and Walter Benecki from the 2008 Magnetics Conference in Denver.
12. Presentation materials by Terry K. Clagett and Walter Benecki from the 2008 Magnetics Conference in Denver.
13. We will only deal with Rare Earths for this discussion, although there are many other important areas where the U.S. is failing at every level.
14. December 2008 Congressional mandate, to reflect the outgoing administrations 'free trade preferences / credentials.'
15. This list has been reviewed by Rick Lowden, acting head of Industrial Policy for the DoD, Jim Hedrick with the USGS, and many others.
16. Federal Register February 2009 - Sec. 843-109-364. The Bush administration forced through its "Free Market" ideology in a December 12, 2008 meeting. This forced the DoD to adopt semantics into its arsenal and redefines the term "Critical." Semantics do not perform well on the battlefield.
17. st Century Military publication, 2008
18. Comprehensive work by the National Academies, 2008
19. USGS data on Import Dependence, 2007.
20. From multiple sources including USGS, China Rare Earth Society, Dudley Kingsnorth, Jack Lifton, and multiple trade Journals. The lowest percentage used was +95%, but the most frequently used percentage is 98%.
21. Dudley Kingsnorth and others - public articles and presentations at the 2008 SME convention.
22. Dudley Kingsnorth and others - public articles and presentations at the 2008 SME convention.
23. Dudley Kingsnorth Clint Cox, etc,. - public articles and presentations at the 2008 SME convention.
24. Dudley Kingsnorth, Clint Cox and others - public articles and presentations at the 2008 SME convention.
25. Dudley Kingsnorth - public articles and presentations at the 2008 SME convention.
26. Also "High Performance Magnets" - from the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner.
27. Dudley Kingsnorth - public articles and presentations at the 2008 SME convention.
28. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner
29. Dudley Kingsnorth Clint Cox - public articles and presentations at the 2008 SME convention.
30. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner, and a similar presentation by MoIy Corporation (Mountain Pass).
31. Santoku, formerly Nuclear Corp., then Rhodia, before Rhône-Poulenc then Research Chemicals, currently purchases metals and some alloys from China directly. Dudley Kingsnorth Clint Cox - public articles and presentations at the 2008 SME convention.
32. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner, and a similar presentation by MoIy Corporation (Mountain Pass). Also conversations with Rick Lowden, acting head of Industrial Policy for the DoD.
33. DARPA and SAM data. "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner.
34. DARPA and SAM data. "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner.
35. Dudley Kingsnorth, Clint Cox - public articles and presentations at the 2008 SME convention. Also conversations with Rick Lowden, acting head of Industrial Policy for the DoD.
36. Jack Lifton. Also extrapolated from 2008 SEM presentation materials by Dudley Kingsnorth and others, including interviews with the technical director of Toyota.
37. Dudley Kingsnorth Clint Cox - public articles and presentations at the 2008 SME convention.
38. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner, and a similar presentation by Moly Corporation (Mountain Pass). Also conversations with Rick Lowden, acting director of Industrial Policy for the DoD.
39. Dudley Kingsnorth, Clint Cox - public articles and presentations at the 2008 SME convention.
40. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner, and a similar presentation by MoIy Corporation (Mountain Pass). Also conversations with Rick Lowden, acting director of Industrial Policy for the DoD.
41. Federal Legislation, and conversation with Cornel Holder, director of the National Defense Stockpile.
42. Conversations with defense contractor Magnesium Electron and Kyu C. Cho - Materials Engineer for the Army Research Laboratory and many others including Trevor M. Riedemann at the MPC Rare Earth Materials Section of Ames Laboratory (part of DoE). Trevor Riedemann: " MPC is dependent on foreign sources of high purity REO for the preparation of high purity REM for fundamental research on rare earth bearing materials within the DOE complex Ames Laboratory's Materials Preparation Laboratory who said that they were 100% dependent upon China for all high grade REO, REE and RE-Alloy materials."
43. Context from Federal Register February 2009 - Sec. 843-109-364. When "Critical" means "DoD Dependent."
44. Dudley Kingsnorth, Clint Cox - public articles and presentations at the 2008 SME convention.
45. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner, and a similar presentation by Moly Corporation (Mountain Pass). Also conversations with Rick Lowden, acting director of Industrial Policy for the DoD. Also conversations with Gary Smart former metallurgist with Santoku (Formerly Nuclear Corp, then Rhodia, before Rhône-Poulenc then Research Chemicals), and Les Hammond who recently developed two new REO refineries in China.
46. Mountain Pass is owned by Molycorp, but was formerly part of Chevron. Mountain Pass was the largest producer of rare earths, world-wide, for decades. Nationalist policies inside China helped force its closure through aggressive pricing policies.
47. The Pea Ridge mine operated for 38 years as an iron ore mine. Rare earths were discovered in the late 70s. In the late 80s the USGS determined that the heavy REO deposit was Strategic and Critical to the United States. The former owners never initiated production due to lack of capital and increasing pricing pressure from the Chinese. The Pea Ridge deposit has four of 19 materials that the U.S. is 100% import dependent. The Pea Ridge deposit also has recoverable values of Tellurium (Te), Molybdenum (Mo), Cobalt (Co) and Tin (Sn).
48. Dudley Kingsnorthx - public articles and presentations at the 2008 SME convention.
49. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner, and a similar presentation by Moly Corporation (Mountain Pass). Also conversations with Rick Lowden, acting director of Industrial Policy for the DoD. Also conversations with Gary Smart, formerly a metallurgist with Santoku (Formerly Nuclear Corp, then Rhodia, before Rhône-Poulenc then Research Chemicals), Les Hamond (who recently developed two new REO refineries in China) and Cornel Holder with the DoD-NDS.
50. That same year, the State Council approved the establishment of the Baotou Rare Earth Hi-tech Industrial Development Zone.
51. Dudley Kingsnorth, Clint Cox - public articles and presentations at the 2008 SME convention. Also Moly Corporation (Mountain Pass). Also articles by the Chinese Society of Rare Earths.
52. Moly Corporation (Mountain Pass), Tony Mariono, Jack Lifton, Clint Cox and others.
53. This represents a new threat to Western Economies. Mature Western economies depend on high value production and manufacturing to off-set wage, capital and regulatory advantages in emerging economies.
54. Dudley Kingsnorth, Clint Cox - public articles and presentations at the 2008 SME convention.
55. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner, and a similar presentation by Moly Corporation (Mountain Pass). Also articles by the Chinese Society of Rare Earths.
56. Dudley Kingsnorth, Clint Cox - public articles and presentations at the 2008 SME convention.
57. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner, and a similar presentation by MoIy Corporation (Mountain Pass).
58. Dudley Kingsnorth, Clint Cox - public articles and presentations at the 2008 SME convention.
59. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner, and a similar presentation by MoIy Corporation (Mountain Pass).
60. U.S. & European capital markets, traditional banking or project financing will not support projects that have an inherent competitive disadvantage without some type of guarantee (this project is far too costly for Venture Capital).
61. Eriez Magnetics, Magnequench and other U.S. Producers of REO dependent technologies have moved facilities to China. Other companies in the green technology and wind turbine business such as Vestas, Gamesa, GE, Nordex, & Suzlon have also relocated production facilities to China.
62. To reiterate, wealth can only come from 3 things: Agriculture, Natural Resources or Manufacturing. All other human institutions spring from this.
63. I cannot think of an exception, including Magnequench, the Patent holder and producer of REO magnet technology for military guidance systems. In fact, the actual facility that produced the RE-Alloy magnets required for the Cruise Missile, smart-bombs and other weapons systems was packed up and moved to China in the 90's.
64. Mathematically: Unit Production = X, Unit Margin =Y, Sale or Royalty value of patent = Z. The value of Z must be smaller than the expected value of X*Y. Z is subject to pirating. The accumulated value of X*Y aggregates in China. The value of Z may be owned by a network of global investors and is evenly dispersed.
65. From the title "In inquiry into The Nature and Cause of the Wealth of Nations" and the entire work National interests were measured by the accumulation of gold bullion, or a positive balance of trade.
66. It should be obvious by now that you cannot trade 'Services" for manufactured goods indefinitely...
67. Outside of a 'national context,' what is best for a country,' comparative advantages cannot be achieved because people (as a nation) are immobile, but capital flow is not. Consequently, in the absence of national constraints, comparative advantage becomes the global aggregation of all potential profits (rents). In a senses, outside of a national context, the "Invisible Hand" is nothing more than a "rate collector" in the service of the new 'global empire of money.'
68. Skill levels are easily overcome through automation, or the absence of automation (e.g., hand sewn toys).
69. Adam Smith, In inquiry into The Nature and Cause of the Wealth of Nations 1776. The famous illustration shows that the Butcher, Baker and Brewer seek their own gains, but through the division of labor all three will benefit.
70. This is how it is explained by the proponents of "Neo-Traders," as the maximizing of competitive advantage. Although it is true that if we can export all manufacturing to a nation with no wages, regulations or environmental consequences, we will have the cheapest products. However, that benefit can only accrue to those invested in said company, and all accumulated gain flows to said group. Of course you can quickly see that this is unsustainable, but remember the world of 'global finance' is build on a series of exit strategies, where every investor believes that they will exit in the penultimate round.
71. This is in fact, the ultimate outcome.
72. The global financial class has no nationality, but their allegiance to the rules of finance are perfectly aligned.
73. The U.S. economy is currently based on consumption. Consumption is based on oil-backed dollars. Oil-Backed dollars are based upon an agreement with OPEC nations that converts world energy consumption into dollars, for the purchase of oil. That relationship, that replaced the gold standard in the early 1970s, is under attack as the United States wages wars in 3 Islamic nations and provokes resentment from most of the other members of OPEC. Without the support of OPEC, trading oil for U.S. currency reserves, the system will fail.
74. Business Week magazine June 15, 2009 "Innovation, Interrupted."
75. See Congressional Testimony from Dr. Robert D. Atkinson to the Committee on Science and Technology, Sub Committee on Technology and Innovation October 4, 2007.
76. The purchasing and managing companies were run by son-in-laws of the Premier himself, Deng Xiaoping.
77. Insight Magazine, Vol. 19, Issue #5, February, 18, 2003. Also Congressional Testimony of Frank J. Gaffney to the House Armed Services Subcommittee July 2005.
78. The stock market in its current state is no longer sustainable. Historical returns from 1980 back provided nominal, single digit, returns over U.S. Treasuries and inflation. Today it reflects a mathematical impossibility. Since 1980 investor expectation are for double digit returns in perpetuity in an economy growing less than 3%. Every investor holding out for what he believes to be the peak price, and selling to a new investor seeking the same double digit return. It is a series of exit strategies starting with the original entrepreneur and investment banker selling out to the public markets, to the newly incentivized signor management and board of directors and an endless parade of demanding and transient shareholders (day traders, index funds, hedge funds, retail traders, momentum players, technical players, etc.,) the average turn-over in a mid-capitalization company is about 90% per year, with some individual fund portfolio turnover ratios at several hundred times per year. If the average turnover is about one year, then the term "trade" or "bet" is a more accurate term than "investing (implying a long view)".
79. Recent history of Chinese industrial policy for REOs suggests that they will once again drive prices below Western production cost to maintain their near-monopoly position.
80. Dudley Kingsnorth, Clint Cox - public articles and presentations at the 2008 SME convention.
81. Also "High Performance Magnets" - a paper presented at the Strategic Materials Conference in Ohio, April 2009, by Ed Richardson, Thomas & Skinner, and a similar presentation by Moly Corporation (Mountain Pass).
82. Asia consumes well over 90% of rare earth oxides, elements and alloys. Asia is hungry for more rare earths, especially the heavy lanthanides. Asia alone is projected to consume over 100% of global production for many rare earth oxides, elements and alloys. In fact, Toyota's projected production of the Prius alone would consume 100% of global production for two or more rare earth oxides, elements and alloys. It is also well documented that industry and innovation are interdependent.
83. The majority of REO mines and rare earth refining facilities in China are supported, subsidized, owned or controlled by the Chinese Government including the establishment of the Baotou Rare Earth Hi-tech Industrial Development Zone, an entire City dedicated to Rare Earths (Baotou's population is 2.5 million people).
84. Neo Trade is a revisionist historical view of "Free-Trade" developed and refined within the Chicago School of Economics. It presumes that Americas' historical success was the result of theoretical free market conditions, when in fact America employed a National Industrial Policy in conjunction with our National Defense since the founding of the Republic.
85. Not to be confused with really bad ideas like ethanol, or other political decisions.
86. As measured in Gold Bullion.
87. This is of course lost on the financial class, transient shareholders, multi-nationals, the neo-traders, whose only allegiance is ever greater returns. Unfortunately it is this group of people who influence much of our national and international policy.
88. Throwing off the yoke of the 'moneyed class' was one of the most fundamental principles in the founding of this Nation.