Companies like Apple that depend on rare earth metals have nowhere to turn, but China

“China’s threat to clamp down on exports of rare-earth metals poses problems, because those exports account for more than 80% of U.S. rare-earth imports, according to the U.S. Geological Survey,” Sophia Cai writes for Barron’s. “China not only mines the minerals but also has most of the world’s processing capacity.”

“Apple and other tech firms might take a hit. Trade tensions took their toll on Apple stock at the end of last year and in the latest escalations. Shares tumbled around 40% in the final 3 months of 2018 and nearly 16% since the beginning of May, and may drop even further if rare earths become the latest casualty in the trade war,” Cai writes. “Apple stock was down 0.48% to $177.38 on Wednesday.”

Cai writes, “Goldman Sachs analysts wrote last week that Apple is likely getting ready for its annual ramp-up of new iPhone production, to prepare for fall introductions, ‘so even a short term action affecting production could have longer term consequences for the company.'”

Read more in the full article here.

MacDailyNews Take: Ooh, scary.

Rare-earth metals are found all over the world, including in the U.S.A. which is home to many advanced mining companies.

Underestimating the capacity of Americans to quickly adapt to fulfill a need or acheieve any goal is a fool’s errand.

U.S. astronaut and Apollo 17 commander Eugene Cernan stands on the moon.
U.S. astronaut and Apollo 17 commander Eugene Cernan stands on the moon.

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17 Comments

  1. “Ooh, scary.

    Rare-earth metals are found all over the world, including in the U.S.A. which is home to many advanced mining companies.

    Underestimating the capacity of Americans to quickly adapt to fulfill a need or acheieve any goal is a fool’s errand.” –MDN

    More stupid and short sighted commentary from MDN. Rare earth elements are a potent weapon the Chinese can wield that will slow production of our weapons of mass destruction. Anybody who doesn’t take the Chinese seriously, or the impact an embargo will have on our military and high tech industry are simply deluded.

    From the LA Times:

    “The development of alternative rare earth supplies is not something that can occur overnight,” said George Bauk, chief executive officer of Northern Minerals Ltd., which produces rare earths carbonate, a preliminary product, from a pilot plant in Western Australia. “There will be a lag time for the development of any new projects.”

    Each U.S. F-35 Lightning II aircraft — considered one of the world’s most sophisticated, maneuverable and stealthy fighter jets — requires approximately 920 pounds of rare-earth materials, according to a 2013 report from the U.S. Congressional Research Service. It’s the Pentagon’s most expensive weapons system and the first fighter designed to serve three branches of the U.S. military.

    Rare earths including yttrium and terbium are used for laser targeting and weapons in Future Combat Systems vehicles, according to the Congressional Research Service report. Other uses are for Stryker armored fighting vehicles, Predator drones and Tomahawk cruise missiles.
    The Pentagon didn’t immediately respond when asked about the issue.

    The threat to weaponize strategic materials ratchets up the tension between the world’s two biggest economies.”

    https://www.latimes.com/business/la-fi-china-trade-war-rare-earth-20190529-story.html

    1. You have no idea what the U.S. government has stockpiled. I don’t have a precise figure on rare-earths, but I do have a ballpark idea. In short, it’s not the problem the LA Times (smirk) makes it out to be.

      Don’t believe everything you read in the newspaper.

      1. The problem is we Americans don’t want to mine those minerals and pay a first world wage for it, and mining is only the first phase, there are many other support companies, infrastructure that need to be built and a fair wage paid to all…..

    2. “export” of rear earth metal to USA.
      That’s just a threat and not enacted yet, plus Apple builds in China (with parts from Korea , Japan etc)
      So how much that will affect Apple is hard to guess.

      Articles like that like to include Apple for search engine click bait reasons. Reading the whole long article I see they mention Apple like once and give no idea how a rare earth ban affects it.

    3. MDN is correct in this. The US actually imports a small amount of rare earth raw materials. Most of what US industry needs is processed into products like magnets and batteries IN CHINA. Also, the US has a large producer domestically, MP Materials, who intermittently shuts production simply because they can’t compete on price with China. Refining rare earths are the problem, as the process creates a lot of pollution, which is not a problem in China and is largely the reason they can refine so cheaply. If supply is a problem and the price comes up, domestic supply is not an issue.

      While I generally disagree with much of the rationale behind Trumps tariffs, I do not have any issue with prices for any product accounting for costs to prevent environmental damage, so I see this as a positive, as the price out of China was artificially low to begin with.

      BTW, the worlds largest deposit of rare earths was discovered last year off the coast of Japan, so long run China will have a major competitor in any case.

    4. Agreed. One of their worst.

      To enlighten the good citizens of MDN that may have had a short holiday week because some regulars are on early summer vacation while the fresh faced TTK interns are filling in:

      “China already accounts for some 90 percent of world production of rare earth minerals and has demonstrated its ability to prioritize its own Chinese customers with export restraints on rare earths imposed in 2009, causing anger and consternation worldwide.”

      During the Obama administration the president owned the rare earth mineral U.S. sellout debacle about the same time Hillary owned the Russian uranium U.S. sellout debacle, BOTH a THREAT, to national security. How many times did you hear or read either one repeated 24/7 for weeks on CNN or bannered on the front page of the New York Times. Answer, crickets : : : :

      Thank the maker balanced journalism juggernaut “The Hill” was on top of the story.

      “A U.S. bankruptcy court has decided to sell a California mine, the sole U.S. source of rare earth minerals, to a consortium including Chinese mining company Shenghe Rare Earth Shareholding Co.

      That is “sole U.S. source” of rare earth mining MDN, sorry.

      Story here:

      https://thehill.com/blogs/pundits-blog/economy-budget/339528-Rare-earth-rancor%3A-Feds-must-stop-Chinese-purchase-of-US-mine

  2. Africa has all of the rare earth metals currently used in manufacturing, China currently mines and imports them.

    Any company that is completely dependent on the resources of a foreign country has made foolish and stupendous error – always have a backup plan, and a backup to your backup – already in place.

  3. If you really want to do battle on a global scale with respect to tariffs and imports/exports, it’s best to plan ahead. This notion that the USA (or any country) can mine and refine ANYTHING quickly or scale such capacity quickly is crazy thinking. And, if you’re going to do it, you have two ways: 1) pump tax dollars into a private market which really isn’t capitalism or 2) pump investment dollars into it, which requires some stability for said investors. And stability isn’t really what we’re dealing with here with respect to China. It feels more like a game of chicken or comparing testicle size. I guess, at the end the day, I wonder how many industries will be turned on their heads to get better deals for other industries. Seems to me economies move a lot like water — naturally, slowly and with logic. When you start to dam things up and divert the flow, you might accomplish what you wanted. Or, you might just total screw your neighbors over the next time it rains.

    1. At that scale there is no such thing as capitalism and there never was, it’s do it or die at the end of the day. The Owens valley is dry for a reason….

    1. Shotblog, thanks for the article link. I remember Erlich and his book “Population Bomb” back in the 70s when he was a prof at Stanford. It was forced upon students as gospel despite containing mostly opinion and hyperscare fake truths to sell lots of books.

      He was wrong, as your article (a lengthy and back-and-forth read to finally get to an end point) indicates. Were it not for the USSR collapse and a few other lucky (for Erlich) unpredictable political events, Erich would have likely lost the bet nearly every year rather than only some. Erlich was a FUD fright-monger and retired rich without deserving it.

    2. The results of the famous scarcity versus technology bet only proved that commodity prices are gamed by the competitive influence of companies, states, and investors. In short, politics and legalese.

      Technology is powerful at price reduction but in mining at least, it’s seldom more powerful in the short term than trade forces. As your article states, Simon got lucky in timing of specific materials.

      Capital costs prevent immediate impact of any new technology, it takes years if not decades to play out. Then the true costs (often borne in pollution or health impacts) are calculated later, and spun away in corporate propaganda. End consumers are more innovative than MDN can imagine in their laziness and willingness to become dependent on cheap easy junk to distract themselves or attempt to but their way to happiness.

      Prices? That is just a wall street game now. Economists are very in tune with short term predictions taken from a few decades of history. But they suck at any predictions further out than a decade or two at most. Face it, solid economic data exists for merely a couple dozen generations, and most of that so-called data is speculative or poorly contextualized. The focus now is how to look good this quarter.

      The real data we should be focused on improving is sustainablility measures. Ability for all citizens to be healthy and productive, NOT corporate profits, should dictate trade policy. And … That is the core of national security. Open market prices should be nearly irrelevant to national security planning. Instead the supposed reasoning behind the Trump trade war is because US corporations spend more currency in China than the Chinese corporations spend in the US. Well duh. The US pays cash to receive labor and materials. The US is all about consumerism, spending cash is what everyone does. Few people build anything domestically anymore — by choice. A wise US leader would work hard to improve US resilience rather than trying to screw an economic frenemy.

      Will Apple suffer? No, not much. it has more cash than God. It may have to employ middlemen and shell companies to acquire the resources it wants but it will always jump borders to get it. Unfortunately mankind has carved up the planet into fiefdoms that prevent universal prosperity, then gave corporations the ability to function across borders, and to own resources, while balkanized laws restrict human freedom, locking citizens into land where they were born and giving them practically zero mineral rights under most circumstances.

      Why then should we act surprised at trade rows? Raw materials are intentionally made more “rare” because humans prioritize short term greed over health or well being. All that will be resolved in future resource wars.

      The next generation will start to care even if we don’t today. In geological terms, the Dark Ages to Modern Industrialization is the blink of an eye. If humans exhaust any natural resource in such a short span of time, then we deserve to go extinct. It looks like that is our intent, based on the pure wastefulness of our lifestyles. The amount of plastic junk and chemical waste humans have created in one generation is staggering and permanently damaging to the planet. We will not cure that with a pill.

      On the very long term (centuries), Erlich always wins. The planet is finite and humans suck at recycling or keeping a clean planet.

      In the very short term, only Trump cronies can predict the price of anything. Despite the tweets, Commodities are getting expensive on the market however, and company valuations are plummeting across the board. Good thing MDN has all the answers to easily win this stupid trade war.

  4. MDN flashes a NASA picture from 1972 to brag about American tech leadership? Wow. I thought MDN hated socialism. And talk about living in the past. No wonder you’re so bitter. If you can’t find a current example of US tech dominance, maybe that explains why you support a politician whose only idea is to return to a 1919 economic model. Do please let us know when the US is great again, with data to explain how you measure it.

    Let us remind ourselves that NASA is a publicly funded agency that hasn’t been doing all that great for the last few decades. Funding peaked at 4.4% of the federal budget in 1966, declining to less than 0.5% by 2017, which explains why today it is incapable of conducting any significant missions without the aid of international and commercial partners.

    Well, perhaps the other events of 1972 weren’t as bragworthy: Watergate and the US defeat in Vietnam. If it wasn’t for those darn heel spurs, I am certain Trump could have really turned the tide in that quagmire.

    Like Cookie at Apple, the leaders of the US have been coasting on past laurels.

    1. You are being unkind. The economic model isn’t from 1919. The Smoot-Hawley Tariff Act was passed in 1930. Now if you want to talk about political models, 1919 is about right (look up “Palmer Raids” and “Immigration Act of 1924”).

    2. “If you can’t find a current example of US tech dominance, maybe that explains why you support a politician whose only idea is to return to a 1919 economic model.”

      Cheap shot. 😡

      President Trump is at the very least working on righting the wrongs of tariffs and trade ignored by presidents for decades. We should all support him from both parties if he gets it right and criticize if he gets it wrong.

      Politically, please open your mind…

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