The cost of high-tech products is set to rise dramatically as a result of a lack of suppliers as China moves to consolidate rare earth mining operations, according to a report published on Tuesday.
The report published by The Information Network — which conducts market research for the the semiconductor, computing and telecommunications industry — says that the price of technology will continue to rise until non-Chinese rare earth mines are producing the vital materials.
"We estimate that the Chinese held 90 percent of capacity of rare earth oxides with 103,300 tons, but its share will drop to 67.2 percent in 2014 based on output of new mines coming on stream," noted Robert Castellano, president of The Information Network, in the report.
Castellano also said that by 2014 Chinese capacity would increase by around 10 percent whereas non-Chinese capacity will increase 500 percent during the same period.
The terms rare earth refers to a collection of 17 chemical elements, — which include Dysprosium, Lanthanum, Cerium and Europium — that play a key role in the production of many high-tech products such as computer memory, DVDs, rechargeable batteries and mobile phones, as well as military equipment.
The Information Network also notes that prices of Ceria have increased 1300 percent during the last year alone and similarly observes that price increases of 170 percent in Europium are beginning to filter down to manufacturers of end-user products.
"During the past 20 years there has been an explosion in demand for many items that require rare earth metals. China being China capitalised on its rich rare earth deposits and cheap labour to drive down prices to a point that nearly every mine outside China was forced to shut down because they couldn't compete on price," said Castellano. "The ROW [Rest of World] being the ROW allowed China to take away business because of cheap labour," he added.
On Sunday, Xinhua — the official press agency for the People's Republic of China — reported that Chinese authorities are considering tightening pollution criteria for rare earth miners and closing down producers whose capacity is 8,000 tonnes or less of rare earth materials.
According to Reuters, the state planner for Baotou city in September outlined plans to consolidate rare earth mining in the area and provide a monopoly for Baotou Steel before the end of 2010.
In some instances substitutes for rare earth materials can be used but are often more expensive and less effective, Castellano notes.
He also says that China's decision to stockpile rare earth supplies will likely add to the 37.8 percent shortfall felt during 2010. By the end of the year Chinese supplies are expected to equal 103,300 tonnes of rare earth materials whereas the ROW total is just 11,500 tonnes.
Despite China's domination of the industry, the report notes that the country only holds 36 percent of rare earth material reserves globally. The United States holds approximately 13 percent of reserves and according to the United States Geological Survey, Canada and South Africa have significant rare earth mining potential.