Tuesday, February 15, 2011

Rare Earths Trade War is a Potential Korean Disaster

Rare Earths Are Important to Korea's Economy
Rare earths are a group of rare elements.  They are used in the manufacturing of technology products including smart phones and earphones.  In the article, this very interesting table was included, which points out the uses of rare earths in the production of products.





United States Usage
(2008 data)
Metallurgy & alloys
29%
Electronics
18%
Chemical Catalysts
14%
Phosphors for monitors, television, lighting
12%
Catalytic converters
9%
Glass polishing
6%
Permanent magnets
5%
Petroleum refining
4%
Other
3%

Source: geology.com


If you look at the list, perhaps you will notice electronics, TVs/monitors, and catalytic converters.  Did you ever hear of Samsung Electronics or Hyundai-Kia Motors?  In other words, rare earths are important to some of the most important Korean industries.
Earlier, the Seoul Gyopo Guide pointed out that North Korean-Chinese cooperation on rare earths was a troubling development.   Today, on Bloomberg.com, it was revealed that Australia blocked the Chinese takeover of an Australian company because Australia was concerned over the Chinese gaining further control of rare earths.

Conclusions
This issue will require constant attention.  It is certainly on the radar screen of all of the largest Korean companies.  Korea must secure rare earths sources, and given that China controls approximately 95% of these, it will make the South Korean-Chinese economic relationship more complex than ever.  Already, China is challenging Korea in another important industry, shipbuilding.   
You can easily conclude that a rare earths trade war has already broken out between the U.S. and China.  Korea's economy is not as large nor as diverse as the U.S.', and as such, it must avoid the economic warfare and secure sources of rare earths critical to Korean industries.  Not addressing this issue would be shortsighted at best, and a disaster at worst.

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