In 2012, production and consumption of the rare earth metals used in production of clean tech reached more than 100,000 metric tons, according to IHS Chemical.
Today, the vast bulk of materials needed to build these technologies come primarily from China. Demand for these metals will rise by 50% by 2017, with China’s own consumption spiking 8.3%each year, according to the same IHS report.
The level of demand makes manufacturers outside of China extremely vulnerable to any controls that the country implements in order to reduce exports.
The nation can increase mining taxes and export license fees, build up strategic reserves, introduce stricter environmental guidelines, increase export duties, or provide tax credits for anything used in domestic production. It can make it far more difficult for companies to access rare earth metals, which would prioritize its supplies to domestic manufacturers of electronics, solar production, and other industries requiring their use.
Look for China to introduce new policies in the domestic mining, refining, and trading industries in the near future that ultimately have the same effect as export controls, but do not violate the WTO agreement. Meanwhile, the country has already taken up measures to reduce its exports and ensure domestic supply.
These steps keep rare earth metals within Chinese borders.
Fortunately, investors can anticipate these moves now and tap into alternative energy stocks before they take off from the rare earth metals war…
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Since China produces 55% of the world’s solar panels and aims to maintain its dominance in the clean energy sector, the supply of rare earths is vital to its strategic interests.