China’s recent decisions to allow defaults on commodity future contracts and subsidize raw material imports are seriously messing with the commodities markets, giving voice to paranoia in every sector of the economy. In the auto industry, that means the now-familiar cries from those who worry far too much about the availability of raw materials for battery making. Automotive News [sub] reports that worldwide demand for 15 “rare earth” elements will exceed demand by 40k tons “in the next few years,” raising challenges for the nascent hybrid and battery electric segments.
And it’s not just batteries that have folks worried. AN identifies “neodymium, the key component of an alloy used to make the high-power, lightweight magnets for electric motors of hybrid cars,” as being ripe for a global shortage. Terbium and dysprosium are used in neodymium alloys, while lanthanum is used in batteries. Analysts reckon that a Toyota Prius uses 2.2 pounds of neodymium in its motor, 22-33 pounds of lanthanum in its battery. Calculate Toyota’s goal of selling 1m Priora globally, and the problem is clear.
The so-called “rare earth” dilemma (like similar concerns over lithium supplies) is not new, but with every unanticipated move in China it takes on a new, unsettling significance. Well, for the Japanese automakers, anyway. For US firms, the problems aren’t as acute if for no other reason than that Detroit is so far behind in the battery game.
And while Detroit tools up to become as dependent on these rare materials as its Japanese competition, the peak-whatever paranoiacs will have another obsession to lose sleep over.
I, for one, welcome our new Mandarin overlords. The women mostly like us, and at the same time take cute to new levels (although the guys mostly have bad haircuts), the food is great once it’s been Americanized and MSG’d, and they all wear white socks. What could be better? I’m telling you, it’s a great time to be an American, I think.
Everything is made in China these days, including my next ex-wife.
Twotone
There was a big rare earth mine in the United States, but the EPA closed it down. I doubt that the Chinese have similar sensitivities.
Another Chinese foot-shot. Check out the Atlantic article on how the Chinese reneged on scrap metal contracts. They’re confident that “the Americans will have to trade with somebody” so they’re screwing all and sundry when it’s convenient. This worm eventually turns, and I’m seeing similar signs anecdotally among consumers, who increasingly are coming to believe “Chinese = hazardous”.
twotone : Everything is made in China these days, including my next ex-wife.
Is this your current wife you’re talking about, or are you just planning ahead once the current wife is out the door, and you’ve married a Chinese woman? I admire guys who can plan things so far in advance!
Twotone
I used to adore Chinese women. But if you date mainland Chinese girls, the malnurishment catches up with em by age 30 and their teeth start falling out.
The brilliance of outsourcing your entire economy to improve next quarter’s bottom line at the expense of long-term survival is coming back to roost. Kids, please thank your government for the dumbest tax system in the world that actually rewards this kind of behavior.
It’s not paranoia if they really are out to get you!
Do you really think the Chinese play nice and gentle in business? Have you been paying attention to their business practices elsewhere?
http://english.caijing.com.cn/2009-08-28/110230655.html
“China’s state-owned enterprises may unilaterally terminate commodities contracts as they try to cut massive losses from financial derivatives, an industry source told Caijing on August 28.
….
Most investment banks may “just swallow” any losses arising from canceled contracts, the executive said, adding that any losses are usually made up for with compensating trades.
Investment banks “just earn less” from such transactions, he said.”
I think massive materials conglomerates like Xstrata and BHP might have a strategy or two left to play out regardless of what the Chinese do.
A few Lithium and Rare Earth plays for you….
SQM and QTWW are certs in my book, ARU, AMLM and 000762 are a bit longer shots but well worth a punt…
SQM
“The Company’s lithium carbonate is used in a range of applications, including batteries, frits for the ceramic and enamel industries, heat resistant glass, primary aluminum, pharmaceuticals and lithium derivatives. SQM produces lithium carbonate at the Salar del Carmen facilities, near Antofagasta, Chile.”
ARU
“Arafura Resources Limited, formerly Arafura Resources NL, is a mineral exploration and resource development company. The Company will continue its exploration and development activities with particular focus on its Nolans project containing rare earths, phosphate and uranium. The Company’s projects include Aileron Basin, Reynolds Range, Davenport West, Bonny Well, Frances Creek, Hammer Hill, Laterite, Bonya Creek and Mt Porter. The Company’s subsidiaries include Arafura Group Holdings Pty Ltd, Arafura Rare Earths Pty Ltd, Arafura Uranium Pty Ltd and Frances Creek Pty Ltd.”
AMLM
“Based in the United States, the American Lithium Minerals company is one of the most important companies involved in the mining of lithium. With the demand for lithium expected to increase tremendously after most of the world’s countries will switch to electric and hybrid cars, American Lithium Minerals inc. will be established as one of the largest U.S. lithium carbonate suppliers.
The company currently holds rights over more than 16,000 acres of land in Montezuma Valley. The region is located in Nevada, neighbor to Clayton Valley in Esmeralda County. Early reports and estimates place the land in Montezuma Valley second only to lithium deposits found in Chile. The company’s 16,000 acres are located in Montezuma Valley, that is reported to hold over 700 million kilograms of lithium minerals.”
SHE:000762
“Tibet Mineral Development Co., Ltd. is engaged in the exploration and collection of ferrous metal mine. The Company is involved in the exploration and sale of chromite, the processing and sale of ferrochrome and the exploration of copper, iron, lithium and boron. The Company’s main products include ferrochrome, chromic salt products, ferrochrome ore and lithium salt products.”
QTWW (not rare earths)
I also just bought QTWW who supply the Q-Drive electro drive train for the Fisker Karma (that I have my name down for)…I reckon it would be very sweet Karma indeed if it went up enough to pay for the car!! haha so get buying QTWW my friends as I need it to go up to $85.17 with my current investment level for it to fully pay for the Karma!!
“Quantum Fuel Systems Technologies Worldwide, Inc. (Quantum – QTWW) is a fully integrated alternative energy company, and a player in the development and production of propulsion systems, energy storage technologies, and alternative fuel vehicles. The Company’s portfolio of technologies include electronic controls, hybrid electric drive systems (Q-Drive), hydrogen storage and metering systems, and alternative fuel technologies that enable fuel efficient, low emission hybrid, plug-in electric hybrid, fuel cell and alternative fuel vehicles.”
Cheers!
sutski
http://en.wikipedia.org/wiki/Mining_the_Sky:_Untold_Riches_from_the_Asteroids,_Comets,_and_Planets
Oh, wait, NASA is in a mess itself as well, with the chance of Chinese getting space development going in a meaningful way before the west.
Chinese girls sure are cute, toothless might be good for certain wifely duties.
Ah, the joys of using ICE cars for my transportation needs.
I will be able to choose from gas, LPG, CNG or ethanol mixes if it’s Otto cycle or diesel/biodiesel/WVO if its Diesel cycle.
Tree huggers can continue to drive their Priuses…
…increasingly are coming to believe “Chinese = hazardous”
Well, this customer have a perception gap with chinese producs… Hazardous isn’t coming to my mind right now
What’s to fear? China still owns about $300B worth of Freddi and Fanny bonds. Just default on them to retaliate.