Mineral Trade War Looms In East Asia

The Senkaku/Diaoyu Islands dispute
is a continuing source of tension
between Japan and China.

NEW SOUTH WALES, AUSTRALIA (THE AUSTRALIAN)--Due to the recent flare-up of a territory dispute between China and Japan, China is reportedly planning to halt all rare earth sales to Japan. Japanese companies are scrambling to find alternate sources, which shows in recent deals with companies like Lynas Corp and Alkane Resources. Unfortunately these sources have lower concentrations of  heavy rare earths such as dysprosium and neodymium that Japanese companies require to make everything from wind turbines to handheld electronics. In light of China's recent attempts to corner the global gold market, experts are also keeping watch on gold prices. Source: Rare earths a victim of Japan-China islands spat (Reliability: Medium)

Comment: China enacted a similar rare earth embargo on Japan in 2010, causing the price of some rare metals to more than triple. Two years later but still with few alternate sources for the heavy rare earth metals, Japan again faces potential shortages. Alkane Resources' Dubbo Project does contain heavy rare earths, but since Japanese companies will be required to process the metals in Japan it will almost certainly take a few years to develop before it significantly affects global prices.

Future Rare Earth Processing Plants Likely to Trigger Public Protests In Concerned Countries Due To Health And Environmental Concerns; Companies Likely To Decrease Their Dependence On China

Executive Summary:
While rare earth mining and processing companies like Australian Lynas and US Molicorp tend to decrease their dependence on Chinese resources, they are likely to face multiple challenges.  Costs are highly likely to be one of the decisive factors for the location of rare earth processing plants. However, the public opinion’s safety concerns are likely to remain a major  challenge for rare earth companies. Moreover, social media, in countries with significant Internet access and government controlled news sources, is likely to remain one of the most effective tools for public campaigns.

Discussion:
Lynas, an Australian based company, received a temporary operating license for the world’s biggest rare earth processing facility in Malaysia. Production will begin in October 2012. Molycorp recently reopened its rare earth mine in Mountain Pass, California which was closed down in 2002 because of low-cost Chinese production. It is believed that the increased activity of Lynas and Molycorp in the production of light rare-earth elements will weaken world market prices due to the growth in supply. Lynas will likely face the following challenges: health and safety concerns for locals, renewing the temporary license and activists trying to shut plant down after Malaysia’s elections.

Protesters at the Lynas’ office in Australia

While Lynas’ Mount Weld mine  is located in Western Australia, the company established its processing plant in Malaysia. According to Lynas, the main reason for this move was Malaysia’s lower costs. As the mining related costs are highly likely to be higher in Australia than in China, Lynas had to decrease its rare earth processing costs to remain competitive in the world market.
Malaysian activist are geared up to blockade the ore shipments from Australia once it has been mined and to demonstrate one of the biggest examples of civil obedience in the nation. This has been sparked by major health and safety concerns for the locals. Mitsubishi mined rare earths in the 80’s in Malaysia’s Perak State and it is thought that they were responsible for birth defects and and leukemia among residents. Malaysia’s Prime Minister, Najib Razak, has said that the plant is “factually and scientifically safe”.
It is likely that health risk related concerns about rare earth processing plants will be one of the key agendas for future plants all over the world.
The example of Malaysia shows the role of  social media where the ruling political parties have a tight grip on traditional news sources but they were unable to handle social media so average Malaysians were able to carry out a huge protest against Lynas’ rare earth processing plant.  While Lynas ultimately received the temporary operating licence from Malaysian authorities, the country’s Facebook and Twitter users were able to postpone the licence grant, causing financial damages to the company. Nevertheless, Lynas’ underestimation of the role of social media also contributed to the protesters’ success.

Analytic Confidence:
Analytic confidence for this assessment is medium. Source reliabilities range from medium to high, sources were corroborated, analysts had low expertise and worked in a team. The subject is highly complex and the time available for the task was adequate.

Methods And Processes:
Using Gmail - our group shared contact information amongst ourselves. This included e-mail address, phone numbers, twitter handles and google plus information. That way, we had multiple methods of communication. We used google docs to create, share and work on our SFAR and called each other to coordinate our next steps. We then used google hangouts whilst simultaneously working in google docs to write our SFAR. We then independently brushed up and refined our work before submitting to the Blogger platform.
The use of these collaborative tools was essential as we have very different schedules. The ability to work on things separately was useful but the ability to work simultaneously without being in the same room was essential. The combination of google docs and hangout were perfect for our needs and allowed us to work without any communication delays that we would have found with e-mail or texting. I found the screen share function of google hangouts particularly useful for sharing pictures that I thought we could insert into the final product.

Authors:
Dean Atkins - deanatkins88@gmail.com
Google+     Twitter

Social Media Endangers Lynas Plant In Malaysia

Creative protests flooded the Internet

NEW YORK (SA) -- Lynas and Molicorp represent the two most significant rare earth market players outside of China. While Malaysian authorities gave permission for the Australian-based Lynas to open up its rare earth processing plant, a lot of Malaysians protest it and promised to block shipments from Australia. The ruling political coalition controls news sources in Malaysia, which normally would make an effective protest almost impossible. In spite of this fact, the protesters, using social media like Facebook, Twitter and Blogspot with the support of opposition politicians, made their case well-known in Malaysia and all over the world. Moreover, Lynas CEO Nicholas Curtis admitted he did not recognize the power of social media. This unprecedented role of social media in Malaysia underlines the fact that it can threaten or even destroy a company's position in any country. Source:  Buy Lynas: Intriguing Hybrid Asset Class (Reliability: Medium)

Comment: Social media produces its content extremely cheaply, while being sometimes inaccurate but immediate in its impact.

 

Rare Earth Source Unlocked in Malaysia

SYDNEY (WSJ)—Australian company, Lynas Corp., won their battle to open a strategic minerals’

Lynas Corp plant in Pahang, Malaysia

processing plant in Malaysia. The Malaysian Atomic Energy Licensing Board (AELB) statement approving  a two-year temporary operating license for a rare-earth refinery in Pahang was released on 3 September 2012.  The processing of rare earths from Western Australia's mines is planned to begin next month. . The AELB held off final approval of the project after protests concerning the perceived radioactive waste hazard.  Source: Rare Earth Boost From Lynas Win (Reliability: High)

Comment: Shares in Lynas closed up 41 percent a share on Thursday. Lynas intends to produce one-sixth of the world’s supply of rare earths after reaching full capacity. 

Activists Threaten Protests For New Malaysian Rare Earth Refinery

Kuantan, Malaysia is east of Kuala Lumpur

KUALA LUMPUR (NYT) -- Malaysian activists, worried about radioactive byproducts from a newly constructed rare earth refinery near the town of Kuantan, Malaysia, have threatened to "to paralyze the whole port until the raw materials leave our port."  Lynas, the Australian company that owns the refinery, plans to begin processing activities in October 2012.  The company is currently seeking to address the core concerns of the protestors and claims that there are no radiation hazards.  Source:  Protests Promised Over License for Malaysia Rare Earth Plant (Reliability:  High)

Comment:  Lynas, one of Australia's largest companies, claims that it is providing the first new source of rare earths from sources outside of China from its mining operations at Mt. Weld in western Australia.