In an earlier entry to this blog I noted China’s growing power in many commodities markets, notably those for rare earths. China took control of these markets from the mid-90s, when it flooded the market, bringing the price crashing down. This made other suppliers of rare earths instantly unprofitable and mining of these metals dried up outside of China.

Why are rare earths important? They are the special element in many of the new green technologies that must surely replace high carbon-emitting power generation and modes of transport. Rare earths are used in rechargeable batteries, suitable for powering electric and hybrid cars such as the Toyota Prius and a growing number of other brands.

Rare earths are important inputs in wind turbines

Rare earths also form a major part of computer-controlled devices and wind turbines. Their rarity give the same kind of power to countries that control the market, as oil gives to producers of that soon-to-be dwindling resource. If the future is to be dominated by carbon-neutral lifestyles, then rare earths are going to play a massive role. News of a major discovery of new reserves of these elements under the seabed on the floor of the Pacific Ocean naturally made all the headlines early this week.

The find, which may yield 1000 times the deposits known to exist on land, could offer developed countries a route away from dependence on China for these materials. Since taking control of the rare earths market, China has gradually choked off supply, forcing prices up rapidly. If the discovery of these new deposits is verified and details of the find were published this week in the online journal, Nature, this could be very good news for countries like the US and Japan and less so for China.

Marine damage often results from offshore miningThis Reuters article illustrates the market position nicely, showing that China has as big reserves on its territory as all other countries put together. But measured against a total known land-based reserve of 110 million metric tons, this new 80-100 billion metric ton find under the Pacific would be a game-changer.

The environmental impact of mining these rare earths, the direct costs of doing so, and the battle between the major players to acquire access to them in international waters, will also be key factors in what could become a new ‘great game’.