Minerals and Economic Warfare, Part 1
The opening round…
Busy day (4 December 2024) and this one will be real short — look upon it as a teaser of a more detailed post as this developing story continues to spiral into regions none of us really want to visit.
The headlines are just now spreading from the more obscure doom and gloom sources to the mainstream media (NY Times, Wall Street Journal to name only two of them). The reason: China announced on Tuesday (at least publicly) that they intend to use their overwhelming monopoly of critical metals as an economic weapon. In this case, specifically against the United States.
This is nothing new. I refer you to a scenario that unfolded in 2010 between China and Japan. There was a dispute over some islands in the East China Sea that both nations laid claim to. China wanted them (they were, after all, in one of the many “China” seas), but Japan held fast to their historic claim to ownership.
What to do? Instead of dropping bombs or sending in the troops, China simply cut Japan off from some of the “rare earth” metals that were (and remain) critical to the production of sophisticated technology. The result: Japan caved — but really, with their economy threatened with ruin, what else could they do?
To quote an article from the World Economic Forum:
On 7 September 2010, a Chinese fishing boat collided with two Japanese coastguard vessels, off the islands of Senkaku in the East China Sea. Naturally, the coastguard arrested the captain of the fishing boat. Among the Chinese government’s responses was stopping the export of rare earth minerals to Japan.
The embargo sent Japanese industry into panic, especially the automobile sector for which rare earths for the production of magnets were indispensable; at that time Japan was totally dependent on China for nearly 90% of its imports of such materials. The incident was eventually resolved by the release of the fishing boat’s captain, but the prices of rare earths soared 10 times in a year following the incident.
Anyway, China’s recently stated plan (2 December 2024) is to cut off the ability of the United States to import several of the metals critical to our economic health and well-being. According to a 3 December 2024 article from the New York Times:
Sales of gallium, germanium, antimony and so-called superhard materials to the United States would be halted immediately on the grounds that they have dual military and civilian uses, China’s Ministry of Commerce said. The export of graphite would also be subject to stricter review.
Why now? Well, the NYT article proposed that the publicly stated intentions emanating from our newly-elected Commander-in-Chief may be a contributing factor:
China is central to many global supply chains, but it generally refrained from clamping down on its own exports during the first Trump administration, preferring instead to take more limited actions like buying soybeans from Brazil instead of the United States. But senior Chinese officials are worried that President-elect Donald J. Trump plans more stringent policies during his coming term in office.
Mr. Trump has promised to put hefty tariffs on goods from China and further sever the trading relationship between the countries. The move on Tuesday — one of the most aggressive steps China has taken to counter increasingly restrictive policies from the U.S. government — could foreshadow more economic conflict as Mr. Trump enters the White House.
How will all this shake out? It seems like now it will be our turn to test the stability of our convictions, and professed dreams of standing up to global powers that may not share the aspirations and motivations of many Americans.
An ancient Chinese curse warns us:
May you live in interesting times
And here’s another ancient missive (paraphrased from Aesop; c. 260 B.C.) that may also be germane:
Beware what you wish for, you may just get it
Should be an interesting several years as the United States — indeed the world — attempts to navigate the changes in policy predicted to come out of Washington. We can only hope that at least some version of cooperation and a global view will prevail, and we don’t end up experiencing what is euphemistically called “Buyer’s Remorse.”
Gotta run, but I promise to expand on much of this in several future posts.
Trump overvalues American economic leverage and he has no clue how long it takes to build out and scale up things like rare earth mining and refining or other types of manufacturing. He holds a bad hand that he cannot bully and lie his way out of. If the objective of his tariffs is to conjure a domestic manufacturing revival, he’ll be dead before that actually comes to pass via tariffs, and alot of other people and dreams will die along the way. His STEM idiocy killed over 100k people during COVID, for example, in a truly Darwinian fashion. Idiot accolytes who imbibed quack medicinals or didn’t get vaxxed paid with their lives in a natural selection demonstration. Trump won’t be able to bully China any more than Biden could control the Middle East. His fantasy worlds will not fool China like they did his voters.
One thing is certain: we’re gonna find out.
A big part of the future posts I promised has to do with the value (and/or lack thereof) of domestic manufacturing and mining, and the incredible lead time involved in any resurrection of on-shore primary industry (not to mention the incredible, long-term political and economic ramifications).
I’ve already started three rants on the subject(s), but haven’t found the time (or clarity of thought) to finish them. Maybe once “Marker Bed” is done and published I’ll be able to regain my focus and circle back to them…
I’ve been part of four large gold mine builds – two in South America, one in California, and one in Nevada. In all of them, there were years of exploration and development drilling by multiple companies, wheeling and dealing by those companies, years of feasibility analysis and design, and
gathering of 10’s to 100’s of millions of dollars of capital. And that is before sticking a shovel in the ground. Another project with over 800,000 ounces of resource in the ground in South Carolina still has yet to be built after 30 years and 6 times higher gold pricing. Why? Someone might not want a bunch of reactive arsenic, sulfides, and cyanide impounded on the surface in their back yard. I worked on a project in South America with a billion+ ounce silver resource that also has yet to be built. A provincial law prohibits any use of cyanide where this deposit is located, and development of the project cannot go forward. Once a project is green-lighted, there is a years-long process of building the processing plant and comissioning the mine itself. That might involve a mile long tunnel or pre-stripping waste. Gold mining has a bit of similarity to potential rare earth and other strategic metals mines in that the chemical concentrations of the target metals are very low in the ore, and there is a bunch of waste to be moved to get at the ore and metallurgical complications in processing the ores and refining the concentrates.
Some of the difficulties of developing a deposit are regulation and permitting, but most of them are due to mother earth’s tight grip on her hard rocks and her trace elements – and the realities of commodity pricing, chemistry, and moving dirt.
In the work I have done as a resource modeller and mine designer, the laws of statistics as they operate on metals with low concentrations in very skewed distributions made my job difficult and subject to significant error. A surveyor can measure a point’s location to a fraction of a foot. An accountant can count dollars. But trace metals humble everybody in their lack of accurate measurability at any scale. Entire investments and companies can and have gone down in flames because of this alone.
I see ridiculous blurbs on my popular news feeds about how gigantic resources are ripe for the taking in the US. People read these and get a false idea about how easy it is to find and extract such copious resources.
Hucksters and promoters like Trump and most politicians have no clue about any of this.
Yes, a complicated issue with many moving parts. Seems like if there was an easy and obvious pathway to a consensus, it would have already been taken. One more issue my kids and grandkids will have to wrestle with…
Knowing there is more to come in this series, let me just say this:
Trump knows exactly what he’s getting into and conning American citizens into unattainable enterprises is not a part of his itinerary.
Yep. He (indeed, anyone selected by the electorate to run the USA) certainly has more valid information to draw upon than I ever will. We can only hope and pray that they use the wisdom wisely, and in the best interest of the country. Thanks for your input — it’s always appreciated.