By Frehiwote Negash –
China announced that it will be scrapping its quota system for the purchase of Rare-earth metals. The change in policy comes after the country lost a World Trade Organization ruling in which China failed to justify the existence of the quota system. In lieu of the quota system, Beijing will instead implement a resources tax. The move will be viewed as a positive one as this will open up the market for other players and reduce the worry of scarcity. When China imposed these restrictions in 2009, the intial goal was to develop its own rare-earth metal industry while attempting to corner the market. This hasn’t stopped others from trying to access these rare earth metals as countries like the U.S, Canada and the European Union tried to gain access to these metals and took China to court. For a country that exports and manufcactures on the scale that China does, they felt it was important for them to capture a sizable amount of that market. Consider that by 2010, China produced 97{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} of the world’s basic rare earth oxide production as welll as much of the processing business despite only having a third of the world’s deposits.
Rare earths metals are chemical elements found in the Earth’s crust that are essential to many modern technologies and affect every facet of daily life. Consider that we use these rare metals for oil refineries, airplanes, cellphones, medical CAT scans, wind turbines and hybrid cars and you have a clearer picture of how far reaching its properties are and why they are so valuable. The importance of these metals cannot be understated as these rare-earth enabled technologies stimulate economic growth, improve our standards of living, and help save lives.
With China and developing countries like India and Brazil on the rise, new emerging markets will require the use of the rare metal technologies. These are countries with emerging middle classes with purchasing power they have never possessed before. As long as the middle class keeps growing along with the country’s infrastructure, so too will consumerism. A good example that illustrates this point is the recent announcement by Apple Inc. Keep in mind that Apple products are seen as indicators of wealth considering its cultural significance and social currency.
Apple announced it had the most profitable quarter in “human history”. Hyperbolic statements aside, the key part of the story was that for the first time, iPhone sales in China have been greater than its total sales in the developed world. This fact indicates the growing market or these types of devices and technologies in the developing world. For potential investors that are considering getting involved in Rare Metal technologies, this might be the time to invest as there are new markets that await the these technologies.
Source: Mining.com, Investor Intel, BeyondBrics