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China Limits Exports Of Rare Earth Metals
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China accounts for higher than 90 percent of global production. The country imposed export limits while it made efforts to build up domestic manufacturers so as to capture more of the proceeds. The country cited the need to limit environmental damage and conserve its diminishing resource. However, no restrictions were imposed on the production and use of rare earth by firms operating within the country. Various countries were concerned that China violated its free-trade commitments by limiting access to the rare resources. Rare earth metals are essential in the manufacture of weapons, hybrid cars, electronics such as mobile phones and flat-screen TVs, camera lenses and mercury-vapor lights.
The restrictions on metals and mineral products is broadly employed by numerous countries globally in for various reasons. This is the case with China’s move to limit the export of rare metals in order to address resource depletion and secure domestic supply. The limitation of exports is designed to meet varied policy objectives ranging from increase in fiscal revenue to environmental protection and development of processing sectors. The worldwide dependency on China as a source of raw materials particularly rare earth metals is a contentious matters because it imposes a number of restrictions on the export of minerals. The country scrapped its exports for rare earth metals citing various reasons. The rare metals are used by many nations for the manufacture of mobile phones and other high tech products necessary for the developed world. The move raised alarm from global technology producers and countries. As a result, efforts to develop and reopen new mines in the United States and other countries were increased.
Impacts of limiting the export of rare earth metals
Increase in cost of electronics
A major impact of China’s restriction on the export of rare metals is likely to be reflected in the prices of electronic products. They have a significant impact because they are crucial ingredients in many tech products used today including tablets, silicon chips, smartphones, light emitting diodes and laptops, camera lenses, compact fluorescent lamps, niche technology used by the medical profession marine propulsion systems and military. As new technology floods the market, the demand for rare metals is growing and is already in short supply (Bradsher, 2010).
The demand for electronic devices is not yet sustainable. Given that some of the key materials used to their production are in tight supply, in part because of China’s restriction measures, the costs of production is likely to increase gradually as the cost of inputs increase. Rare earth elements are used in the production of gadgets from magnets in speakers to glass display, making it harder, to headphones in order to make them more powerful despite their small size. Approximately 97% of rare earths is derived from China, which has become progressively more protective of its bounty. China’s monopoly has increasingly driven up prices on rare earth, therefore, raising costs for manufacturers. Cell phones aren’t the only products that the impact is likely to reflect on. Other such as wind turbines, batteries and solar cells that are key components alternative energy are also likely to be a high cost for industries and consumers. The demand for energy is high in industries, and this is likely to increase the cost of production of electronic goods.
Increase in cost of manufactured products
The manufacturing industry relies heavily on rare earth metals for the production of different goods. Metal alloys, high strength magnets, ceramic pigments, stress gauges, chemical oxidizing agent, colorants in glassware, plastics creation, polishing powders as additives for strengthening other metals. The shortage of rare earth metals could cause manufacturing companies that are already weakened by recession to stall or shrivel. The utilization of these materials has considerably skyrocketed, with demand outstripping supply. This is a serious issue for industries, and the supply squeeze has increased tensions in the delicate relationship between the different countries and China. The trade dispute ended up in the World Trade Organization. China's quotas have increasingly curtailing global supplies, forcing prices to rise significantly. The surge in prices of rare earth metals such as neodymium, which is necessary for the production of magnets and Cerium, which is utilized as an abrasive agent. As a result, speculators and hedge funds have been hoarding and buying rare earths as prices rises particularly quickly. Soaring prices affects a range of manufacturing industries including electric motor production and wind turbine.
Manufacturing industries’ competitive advantage will arise from advanced technology that guarantees the excellent performance of production lines. Industries need to constantly improve its production technology. Their competitive advantage is based on the belief that efficient production lines and technologically up-to-date machines with a high-quality passing rate and reliability will effectively reduce production cost. The lower cost is then passed on through the distribution line. Thus, the high cost of production that is associated with the China’s import restrictions. In addition, the restriction by China on rare earth exports has caused many firms to move their industries to China from the Europe and United States so that they could secure an inexpensive and a reliable source of raw materials.
Increase in cost of healthcare
Rare earth metals have facilitated an evolution in medical and health technologies. They produce a powerful magnetic field necessary in the operation of machines such as MRIs, that enable doctors to identify illnesses that otherwise were harder to detect in the past. Rare earth metals are also used for x-ray tubes, portable x-ray machines, nuclear medicine imaging, magnetic resonance imagery (MRI) contrast agents, genetic screening tests, cancer treatment applications, and for dental and medical lasers. Rare earth elements are also important in many modern surgical machines including those for robot-assisted surgeries. They are also used in pioneering technologies including cochlear implants. For example, Yttrium is utilized in the manufacture of cancer-treating drugs and solid state lasers. Hence, rare metals are essential to modern medicine.
Due to the unique magnetic, electrochemical and luminescent properties, rare metals also help make different technologies perform with reduced energy consumption, emissions, and weight and give them greater miniaturization, efficiency, speed, performance, durability, and thermal stability. Rare earth-enabled technologies and products help to maintain high standards of living, fuel global economic growth and save lives due to their unique properties such as magnetism, radiation emission that allow them to be used in a range of diagnostic and therapeutic applications in modern medicine.
China’s restriction on the importation of rare earth metals is central to the efficiency of health and medical applications from diagnostic techniques to drug treatments and surgical equipment. Chemical and biomedical researchers also use rare metals as catalysts. The restriction makes the medical processes that utilize the application to become more costly. Operations such as optical properties CAT scans, PET imaging, MRIs, and X-rays have become expensive.
Earlier, MRI machines made use of coils of electric wire as magnets. These were cooled in helium. But with the MRI systems powered by rare earth metals, they are now strong and lighter enough to provide an option to the older, costly technologies. However, the move by China has made the achievement of the goal unobtainable as the technologies used are still costly because they are made of rare earth metals.
The Health care cost as a percent of Gross National Product has grown more rapidly in the United States compared to other countries. The increased cost has become a major topic in public debate. How much value consumers get for these expenditures and whether the State should further intervene to control costs is a concern. The increase can be categorized into three components: increases in the volume of services, medical price increases and increases in the intensity of resource use. Intensity is reflected by changing technology, quality and other elements that make any medical service more resource-intensive than it was in the past. Technology is a significant factor in driving cost. A standard economist's presupposition is that technology is not adopted unless it produces greater benefits in relation to costs. This does not always apply to new medical technologies. This is because substantial government subsidies through tax subsidy to private health insurance and tax-funded government insurance programs cause medical providers to adopt technology that consumers may value less compared to the cost.
Reducing the increase cost of healthcare spending is a fragile balance that requires both producers and consumers to be equally motivated to do so. This requires the health care delivery system to spend less in order to achieve a higher aggregate saving. China’s intervention is important in swaying the factors of demand and supply. The intervention should typically address access to raw materials. In markets with the infrequent purchase and asymmetric information such as healthcare, China’s abolition of the limits could amount to a decrease in the cost of accessing healthcare services.
Increase in cost of other technologies
The end customer purchases and utilizes product and services from a manufacturer. On the other hand, the manufacturer is concerned with the production of products or services. Products often pass through various intermediaries before it reaches the end- user client. The intermediaries are not actual product or service users but merely a channel to reach end-customers. Hence, manufacturers and end users have a symbiotic relationship. This means that the manufacturer’s prices are reflected in the end product purchased by customers (Morrison & Tang, 2012). Technologies such as fiber optics, masers, nuclear fuel rods, radar detection devices, highly reflective glass, mercury-vapor lamps, nuclear batteries, computer memory, high-temperature superconductors
Other interesting uses of rare metals include the creation of typical hybrid automobile, to dissuade counterfeiting, in the identification of legitimate bills for the Euro bill supply and the reduction of weight of for motors. Additionally, rare metals are necessary in transport technologies. There is demand for more fuel efficient transportation over recent years due in large part, to advances in the applications of rare elements. Oil cost is a key component in transport businesses revenue performance. To further improve revenues motor vehicles and aero planes must develop a strategy to pass the continuously increasing costs to consumers. However, this requires a balance as raising prices is not easy due to the competitive nature of the business. The limitation in the export of rare earth metals has a significant impact in the cost of transport and business revenues.
Additionally, the increasingly unpredictable and restrictive nature of international trade of rare metals creates uncertainty for industries that rely on a supply of specific materials. This raises the risk for investment in both processing and mining facilities worldwide. With time, there is likely to be an explosion in demand for numerous items that require the use of rare earth metals. For example, the demand for batteries is likely to be driven by the demand for portable electronic devices such as readers, cell phones, cameras and portable computers. In addition, a concern for climate change, energy dependence and other issues is likely to drive the sale of hybrid and electric vehicles that use batteries made with the rare earth metals. Rare earth compounds are also used as phosphors, catalysts and polishing compounds. These are essential components in the polishing of optical-quality glass, air pollution control and illuminated screens on electronic devices. All of these products are likely to experience an increase in demand. Other substances that can be substituted for rare earth elements are costly and less effective.
The restriction may have a significant impact because it plays an essential role in national defense. The military uses communications equipment, precision-guided weapons, night-vision goggles, batteries, GPS equipment and other defense electronics. These give the military an enormous advantage. This means that the restriction has an impact on security as rare earth metals are key ingredients for the production of very hard alloys used in projectiles and armored vehicles that shatter upon impact. While substitutes can be used in place of rare earth elements in some defense applications, they not as effective and may reduce military superiority.
Increase in the cost of renewable Energy
The rare earth elements are crucial to the development of green technologies and high-tech products. In recent years, China has begun imposing export restraints on these elements in order to benefit its domestic economic development. The reduction in global supply has thus led to artificially high prices for importing nations. With China’s export restriction, the gap between supply and demand is increasing due to the shortage. The current system does not discriminate individual elements rather limits the total export of rare meals across the board. A major impact of the imposition of quotas on important rare earth metals is that it is squeezing the already starved market. The world requires high quantities of rare earth metals for clean energy and high-tech sectors. On the other hand, China wants domestic companies to increase profits by utilizing locally produced minerals to make more technologically-advanced products as compared to exporting the raw material. This means that there are no restrictions on the exports of finished goods. This means that importing countries could face a major crisis due to China’s reduced supply.
The use of rare metals in renewable energy is associated with the possession of diverse nuclear, chemical, metallurgical, electrical, catalytic, optical and magnetic properties. This has led to the creation of ever-increasing applications including mundane. Other emerging applications include the potential applications necessary in the absorption of ultraviolet light in corrosion protection, automotive glass and metal coatings in salty and corrosive environments. Futuristic applications of rare metals are in safe storage, high-temperature superconductivity and transport of hydrogen. Others include Hybrid automobiles, wind turbines, next generation rechargeable batteries, biofuel catalysts.
Rare metals are strategic raw materials that are crucially important for the development of green technologies that are vital in reducing greenhouse gas emissions and boosting energy sufficiency. With the restriction, countries may not succeed in shifting towards sustainable production of environmentally friendly products. This means that the world will continue depending on fossil fuels as a driver of economic growth. Meanwhile, the dependence on fossil fuel continues to impose massive economic, social and environmental costs. The pollution that results from burning of fossil fuels by vehicles and coal powered power plants has a serious impact on health. Pollution related diseases affect people’s quality of life. They range from mild to severe and result in chronic obstructive pulmonary disorder, asthma and lung cancer. Long-term exposure increases respiratory infections in general population.
Despite the necessity to rely on alternative sources of energy, the restriction makes fossil fuel the most viable choice. First, fossil fuel is easily available. It can be produced in large amounts compared to rare metals. Secondly, fossil fuel is the highest producer of Calorific Value in terms of energy (Hatch, 2012). Thirdly, fossil fuels are made of molecules of carbon, and hydrogen which makes them very stable compared to other types of energy sources. They are also economical in terms of costs unlike other alternative like solar power whose initial investment costs are too high. The use has led to serious environmental issues such as air pollution.
In hybrid vehicles, small combustion is combined with electric motors. Improvement in technology also affects fuel economy. Lighter weight vehicles have a longer gas mileage than heavy weight vehicles. Other improvements such as advances in transmission, the performance of the engine, aerodynamics are examples of technology that have an effect on gas mileage. Controlling for other variables, vehicles with lighter weight will be more fuel efficient than vehicles with a larger weight. Vehicle manufacturing companies produce vehicles with a particular fuel economy depending on available technology and innovation and other factors. The restriction affects the effort to reduce pollution. Although used in an only small amount, rare metal is essential for the production of such products, and there are no readily available options in the short term.
Platinum Group Metals such as Palladium have long been utilized in automotive catalytic converters to help reduce toxic emissions caused by internal combustion engines. Half of the overall demand of palladium goes towards automotive catalysts. Due to the unique properties of palladium as well as others, these materials are pivotal constituents for the functionality of catalysts. The demand requirements of these components are relatively inelastic. This leaves suppliers of catalysts and components subject to significant price supply and risk. Several firms have historically recognized considerable losses on materials utilized in production process owing to price volatility. Such a loss was experienced in 2002 by Ford Motor Company because it had stockpiled when prices fell by 75 percent (Massari & Ruberti, 2013). Latest and evolving technology requires the utilization of rare and specialized materials.
The restrictions on exports by China are likely to have an increase in the cost of renewable energy. It is costly to access rare earth elements used in many advanced energy technologies such as electric car batteries, wind turbines and energy-efficient lights, which help to reduce carbon dioxide and other emissions. Rare earth elements are necessary for LED lighting, compact fluorescent lighting (CFLs) and fiber optics. It will also be difficult to speedily develop emerging technology using rare earth magnets such as magnetic refrigeration which could potentially enhance the energy efficiency of refrigerators for commercial and domestic use. Rare earth will critically affect the development of our new energy technologies.
There are various impacts that would be felt by individuals, companies, and countries as a result of China’s efforts to limit the export of rare earth metals being the largest depositor, exporter, consumer, and producer of rare earth metals. Rare metals are essential in various sectors including electronics, manufacturing, medical science, technology and renewable energy. This means that the impact of China’s restrictions is likely to be felt in the specific sectors. China imposed export limits while it made efforts to build up domestic manufacturers so as to capture more of the proceeds. The country cited the need to limit environmental damage and conserve its diminishing resource. However, no restrictions were imposed on the production and use of rare earth by firms operating within the country.
The worldwide dependency on China as a source of raw materials particularly rare earth metals is a contentious matter because it imposes a number of restrictions on the export of minerals. The country scrapped its exports for rare earth metals citing various reasons. The rare metals are used by many nations for the manufacture of mobile phones and other high tech products necessary for the developed world. There are various impacts of China’s limits of the export of rare earth metals. Rare metals are strategic raw materials that are crucially important for the development of green technologies that are vital in reducing greenhouse gas emissions and boosting energy sufficiency. With the restriction, countries may not succeed in shifting towards sustainable production of environmentally friendly products. This means that the world will continue depending on fossil fuels as a driver of economic growth.
A major impact of the imposition of quotas on important rare earth metals is that it is squeezing the already starved market. The world requires high quantities of rare earth metals for clean energy and high-tech sectors. On the other hand, China wants domestic companies to increase profits by utilizing locally produced minerals to make more technologically-advanced products as compared to exporting the raw material. This means that there are no restrictions on the exports of finished goods. This means that the importing countries could face a major crisis due to China’s reduced supply. The Health care cost has also been affected with the percent of Gross National Product has grown more rapidly in the United States compared to other countries. The increased cost has become a major topic in public debate. How much value consumers get for these expenditures and whether the State should further intervene to control costs is a concern. The increase can be categorized into three components: increases in the volume of services, medical price increases and increases in the intensity of resource use. This means that the rising export prices are reflected in the end product or service purchased by customers.
Bradsher, K. (2010). Amid tension, China blocks vital exports to Japan. New York Times, 22.
Hatch, G. P. (2012). Dynamics in the global market for rare earths. Elements, 8(5), 341-346.
Massari, S., & Ruberti, M. (2013). Rare earth elements as critical raw materials: Focus on international markets and future strategies. Resources Policy, 38(1), 36-43.
Morrison, W. M., & Tang, R. (2012). China's rare earth industry and export regime: economic and trade implications for the United States.
Sherry Roberts is the author of this paper. A senior editor at Melda Research in write legitimate research paper. If you need a similar paper you can place your order for a custom research paper from cheap writing services for nursing students services.
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