The Inner Mongolian city of Baotou is like an LS Lowry painting come to life: a faded industrial landscape of chimney-stacks and coal depots, shunting yards and steel plants. But amid the outskirts of this north China steel town there is one clutch of buildings that are noticeably more modern than the rest. They are home to a research institute that has suddenly become the envy of the world.
The showpiece headquarters of the 'Pioneering Rare Earth Hi-Tech Development Zone' is home to 400 research scientists who specialise in a group of 17 metals known as 'rare earths'. Until recently, most people had never even heard of these obscure elements.
New Generation Aircraft Concept of Chinese AVIC
Known in China as 'industrial vitamins', rare earths are an essential component in green technologies such as electric cars, solar panels and wind turbines. Rare earths are not only essential for civilian life; the world's hi-tech armies also need rare earths for a host of applications from toughening tank armour to guiding smart-bombs and powering night-vision goggles.
Given their global application, it may come as a surprise to know that 95 per cent of world rare earths production is controlled by a single country – China. Last year China's ministry of commerce announced drastic cuts in the amount of rare earths it would make available for export. Quotas were cut by more than 70 per cent for the second half of 2010 to only 8,000 tons, compared with 29,000 tons for the same period the previous year, at a time when global demand for rare earth elements (REEs) was picking up fast.
Analysts say quotas are expected to shrink by a further 11 per cent this year. Rare earths demand has tripled in the past decade to an estimated 136,000 tons this year. By 2014 some analysts are now predicting a 20,000-ton shortfall in key metals.
Prices of the most sought-after rare earth metals and oxides have spiked in the international markets, with some dealers reporting that neodymium (used in computers and lasers) is now impossible to obtain outside China. At $72 a kilo, cerium oxide, used in polishing glass and lenses, is now 15 times more expensive than it was a year ago; neodymium has more than tripled in value to $115 over the same period. Analysts do not expect them to cool off for at least two years.
