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Chile’s BioLantánidos Project: A Genuine Challenge to Baotou’s Rare Earth Monopoly?

Chile’s BioLantánidos project promises to deliver greener practices to toxic models but is the industry ready for a clean out? China’s rare earth element monopoly

While reading this article you are most likely simultaneously interacting with around 8 rare earth minerals. This may seem strange considering the name, however the 17 metals termed rare earth elements (REEs) are actually reasonably abundant. In fact, they occur within the earth’s crust more often than gold or silver [1]. The significance of REEs rests in their difficulty in extraction and their increasingly important applications. REEs are being used in areas such as phosphors for televisions, permanent magnets, rechargeable batteries for electric cars, wind turbines and solar panels, and in defence applications such as jet fighter engines and missile guidance systems [2]. Most relatedly, right now you are probably interacting via your laptop, tablet or mobile phone. Production of REEs has progressively shifted from India and Brazil in the 1940s, to South Africa in the 50s, to the U.S in the 60s, leading to the current supply centre, China. Despite reserves being located in at least 35 countries, China has continued to consolidate its grasp on the market, at present responsible for more than 95% of production. Within China, numerous regions boast deposits of REEs (see Fig. 1) however, the Inner Mongolian industrial centre of Baotou dominates production, accounting for a massive 75% of total global output.

Fig. 1: China’s Deposits of Rare Earth [3]

China’s industry has received increased attention in recent years due to the continued gravity of singular production and approaches to trade. The domestic narrative mirrors policy directives for other commodities as Beijing attempts to tighten industry standards and streamline actors. Increased policy attention since the turn of the millennium showcase both increased consideration toward the sector and a lack of efficacy for reform. In 2002, the State Council attempted to restructure the industry into a handful of groups but ultimately failed leaving an enduring fragmented industry of over 20 actors owning REE rights.4 Fig 2 shows the larger groups responsible for production within China. Fig 2: Major Production Bases & Capacities, 2015 [5]

Attempts to develop but protect national resources via cap-control policies since the mid-2000s has fostered a distracting spectrum of debate. Beijing maintains that export controls are intended to conserve exhaustible resources and to reduce pollution. The 2012 White Paper on the Situation and Policies of China’s Rare Earth Industry noted that, ‘the price of rare earth products has remained low and failed to reflect their value, the scarcity of the resources has not been appropriately represented, and the damage to the ecological environment has not been properly compensated for’[6]. As states have grown increasingly dependent on Chinese exports, Beijing has upheld policies vexing to those outside. States reliant on such elements have been assertive in claiming Beijing’s prerogative is more strategic. Such arguments rest in China’s monopolistic behaviour and ability to create price differentials. Foreign companies are restricted from investing in the industry and more vexing, companies requiring REE inputs are often forced to relocate to China to ensure a stable and affordable supply of the minerals [7]. This has the effect of promoting domestic downstream business in high tech and green tech industries.

As a result of the steady increase to resource taxes and other restrictive policies, the United States, Japan and the European Union filed a WTO complaint in March of 2013. Found in violation of trade rules, China has since scrapped its export controls and quota system. Rulings and discourse surrounding trade violations and strategic reserves however, have overshadowed the largely ignored implications of China’s extraction methods. The real cost of Baotou’s industry dominance Baotou’s hegemony in REE production has come at an enormous burden to the environment, both locally and nationally. Industrial plant discharges feed into an opaque wasteland covering an area covering around 10Km2, meaning the local basin is host to toxins that cause cancer of the pancreas, lungs and blood. Estimations suggest that the mines surrounding Baotou produce roughly 10Mt of acidic and radioactive wastewater, which makes its way into the area without any treatment [8].

Worryingly, for every tonne of REE produced, 60,000 m3 of waste gas containing hydrofluoric acid and 1-1.4 tonnes of radioactive waste are also produced [9]. Reagents, which are injected into the ground to extract the minerals, contaminate water supplies, not only tainting drinking water but also conditional local agriculture. 2014 saw a local dam leakage that affected over 3000 farmers, tainting almost 3,300 acres of farmland- a stark reminder of negative externalities The most concerning byproduct perhaps, is the discharge of a cocktail of heavy metals, acids, and radioactive material which make their way into the Yellow River, flowing through nine provinces. The Chinese government itself estimates that almost two-thirds of the river’s water is too polluted for consumption while the river’s fish catch continues to drastically decline. The waterway, often remarked to be the ‘cradle of Chinese civilisation’, has become far from an incubator for creation. Enter Chile’s BioLantánidos Project In 2011, Minera Activa in a partnership with other stakeholders raised a private investment fund known as FIP Lantánidos in an attempt to explore for and exploit rare earth minerals. Corfo, a Chilean government institution tasked with supporting innovation for increased productivity, supported the fund. The project, now known as BioLantánidos, is expected to begin production by the end of 2016. The company is aiming to bring production capacity to 10,000 tonnes of rare earth concentrate per annum. The project represents a tectonic shift in the way in which REEs are extracted. Unlike current Chinese operations, which rely mostly on pumping ammonium sulfate into the ground to bring minerals out, the BioLantánidos project presents novel extraction methods. Chilean production will first dig out the clay before putting in through a tank-leaching process with biodegradable chemicals, before returning the clay to the earth. Once the process is complete, pine and eucalyptus trees are then replanted on site. So what’s the catch? The industry itself faces harsh entry barriers, evidenced by the recent collapse of the established U.S. producer Molycorp. China’s mounting export restrictions caused a surge in prices, which as China has eased have fallen (see Fig 3.). While Molycorp had been expecting its Mountain Pass site to be at full capacity (19, 050 tonnes) in June this year it collapsed with $US 1.7 billion in debt. As supply from BioLantánidos enters the market the risk also stands that prices will fall even further. Fig 3: Selected Rare Earth Oxide Prices, 2008-2013 ($US/Kg) [10]

The BioLantánidos Project is largely betting on the allure of green mining and alternate supply chains to disrupt China’s monopoly and establish alternatives. A large problem for REE development in the U.S. was the lack of capacity in refining, alloying and fabricating to process production. The same may be the case for Chile. Diverting toxic practices from scarred areas such as Baotou may essentially come down to whether buyers see diversity of supply and environmental conservation as essentials worthy of a price premium. Something for us all to consider in our daily interaction with these increasingly useful elements.

Mark Eels is Young Australians in International Affairs Climate Change and Energy Security Fellow.

This article can be republished with attribution under a Creative Commons Licence. Please email with any questions or for more information.

Image Credit: References: 1 Jost Wübbeke, “Rare Earth Elements in China: Policies and Narratives of Reinventing an Industry,” Resources Policy 38, no. 3 (2013): 1–11, doi:10.1016/j.resourpol.2013.05.005. 2 Marc Humphries, Rare Earth Elements: The Global Supply Chain, CRS Report for Congress, 2013, 3 Wübbeke, “Rare Earth Elements in China: Policies and Narratives of Reinventing an Industry.” 4 Ibid. 5 ResearchInChina, China Rare Earth Industry Report, 2014-2018, 2015, doi: 6 Wübbeke, “Rare Earth Elements in China: Policies and Narratives of Reinventing an Industry.” 7 Leslie Hayes-Labruto et al., “Contrasting Perspectives on China’s Rare Earths Policies: Reframing the Debate through a Stakeholder Lens,” Energy Policy 63 (2013): 55–68, doi:10.1016/j.enpol.2013.07.121. 8 Stefania Massari and Marcello Ruberti, “Rare Earth Elements as Critical Raw Materials: Focus on International Markets and Future Strategies,” Resources Policy 38, no. 1 (2013): 36–43, doi:10.1016/j.resourpol.2012.07.001. 9 Hayes-Labruto et al., “Contrasting Perspectives on China’s Rare Earths Policies: Reframing the Debate through a Stakeholder Lens.” 10 Humphries, Rare Earth Elements: The Global Supply Chain.

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