Money and Metals

The Resource Investor looks at an unusual metals market. "In 2002, the United States imported 54% of its needs of rare earth metals. In 2003, that figure rose to 100% and has remained there since. What happened? The two U.S. producers of rare earth metal concentrates were shut down after a private group, which had gotten in 2001-2002 a donation of more than $5 million from a Chinese 'supporter,' raised environmental concerns. Within two years, the Chinese were producing nearly 100% of the world’s supply of cerium and lanthanum, rare earth metals (rems)."

"Of the 100,000 million tonnes of rare earth metals (rems) mined and refined each year, 46% (mainly cerium and lanthanum) are used to produce automotive emissions controls, mostly catalytic converters. The bulk of the rest of the rems produced are used to make permanent magnets mostly used in high efficiency and miniaturized electric motors."

"As of now, in 2005, no American manufacturer can produce a catalytic converter, a miniature electric motor, a high-density magnet, a nickel metal hydride battery or a hybrid vehicle without materials supplied by the Peoples’ Republic of China (PRC). To be more specific, none of these products can be produced without the agreement of Bao Steel to sell the American, manufacturer of the rare earth metals necessary. In the PRC it is Bao Steel that has cornered the mining, refining and manufacturing of the rare earth metals."

"For the immediate future, the only investment play for rare earth metals is Bao Steel and its partners, GM and ENER. If you truly believe that the future holds large numbers of hybrid cars and that catalytic converters will continue to be used to clean the exhaust of the world’s internal combustion engines then Bao Steel is the place to be driving on the greenest acres."