CHINESE CORNER THE MARKET ON RARE MINERALS, PENTAGON WORRIED: DAVID PUGLIESE OTTAWA CITIZEN MILITARY NEWS

China stocks up on earthly resources; The vast majority of rare earth oxides needed to build everything from nuclear weapons to aircraft engines is now controlled by China, a Pentagon study concludes.

The Ottawa Citizen

Jan 24 2010

By David Pugliese

The Ottawa Citizen

As David Pugliese writes, some say the United States is right to be concerned about the country’s push to own the resources required for military might.

This spring, the Pentagon will produce a report for Congress acknowledging what has become obvious to military and high-tech firms in North America over the last several years.

The study will conclude that the vast majority of the rare earth oxides that the U.S. needs for its military might and economy are now controlled by China.

Such minerals are used in everything from nuclear weapons and Tomahawk cruise missiles to laser targeting systems on Abrams tanks to sonars and aircraft engines. The materials are also key for various electronic systems and green energy technology used in the construction of wind turbines and hybrid vehicles.

The U.S. government acknowledges that it imports 100 per cent of the rare earth material it needs for weapons and economic purposes.

The Pentagon study, to be ready by April, will look at how much of that comes from China, but with the Asian country controlling between 95 and 98 per cent of the world’s supply, the details are almost a foregone conclusion.

Defence analyst Martin Shadwick says the U.S. should be concerned.

“Anytime you’ve got one nation controlling certain materials, there is going be concerns raised,” said Shadwick, a professor at York University in Toronto. “When those materials are key for strategic purposes, then that just raises the level of worry.”

Rare earth materials are found in other countries, including the U.S. and Canada, but environmental concerns and high processing costs have caused such mining operations to all but shut down.

Analysts argue that China has already been using its monopoly on rare earth minerals to its advantage. It has manipulated prices and reduced exports, with the end result being to force some companies to set up manufacturing plants in China to be assured of access to the materials.

China also plans to further tighten world access to rare earth minerals, and in the future, will impose a ban on exports of dysprosium, a material essential to strengthening magnets used in the electrical systems of hybrid vehicles.

In October, the United States Magnet Materials Association called for more support for U.S. companies to identify and mine rare earth elements in North America.

“Worldwide demand for these materials is escalating rapidly, and over 95 per cent of currently available rare earth mining occurs in China or is controlled by Chinese-led interests,” the association noted. “Nevertheless, sizable deposits of the materials exist in the United States and Canada and are available for large-scale mining operations.”

But China’s interest is not just in rare earth minerals. Flush with cash, it has been buying up various resources at a time when prices are cheap because of the global economic downturn.

China is increasing its influence in Africa, offering billions of dollars in low-interest loans to various nations who are rich in minerals. Its oil industry is becoming more active in Nigeria with various investments.

Several years ago, China entered into a $3-billion deal with Afghan-

istan to develop the massive copper reserves in that country.

In August, it was announced that China was investing $1.9 billion in the Alberta oilsands. Around the same time, it increased its investments in Canadian mining firms, particularly in the area of nickel.

In November, China North Industries Corp., one of the country’s largest defence companies, announced that it would buy more than 1.6 million tons of aluminum from a Russian firm. U.S. military analysts have questioned the reasoning behind the deal since China exports its own aluminum.

But others believe that China was able to get a good deal since the Russian company was going through serious financial trouble.

Tai Ming Cheung, author of Fortifying China, points out that while China is a significant aluminum producer, it is also a major consumer. The deal, which runs between 2010 and 2016, appears aimed at both the production of military and consumer goods, he suggested.

University of British Columbia political scientist Allen Sens doesn’t see sinister motives behind the Chinese moves. He understands the U.S. concerns over rare earth material and other minerals, and agrees the situation should be monitored. But Sens also noted that, over the decades, other nations such as the U.S. have also undertaken policies to secure access to mineral and oil resources.

“In the case of China, this appears to be an economic-driven agenda, not a security one,” said Sens.

Shadwick said the Chinese have several motives, including securing supplies for the military as well as protecting their economic base. “A lot more exotic materials go into automobiles or civilian airplanes these days than 40 years ago,” he explained.

“If you want to be the workshop to the world, you better lock in the raw materials as much as you can and that’s what they appear to be doing,” he added.

For more Canadian Forces and Defence Department news or articles by David Pugliese of the Ottawa Citizen go to David Pugliese’s Defence Watch at:

communities.canada.com/ottawacitizen/blogs/defencewatch/

NDATE: 20100124

DOB: 2010-01-24 03:33:08

POSITION: 1

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