Dominating the World China and the Rare Earth Industry

Full text

R19-2013
Nabeel Mancheri
Lalitha Sundaresan
S. Chandrashekar
Bangalore, India
NATIONAL INSTITUTE OF ADVANCED STUDIES
International Strategic and Security Studies Programme
April 2013
DOMINATING THE WORLD
CHINA AND THE RARE EARTH INDUSTRY

Nabeel Mancheri
Lalitha Sundaresan
S. Chandrashekar
International Strategy & Security Studies Programme (ISSSP)
NatioNal iNstitute of advaNced studies
Bangalore
April 2013
Dominating the WorlD
China anD the rare earth inDustry

© National Institute of Advanced Studies 2013
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table of Contents
Acknowledgement v
Executive Summary vii
China & the Global Rare Earths (RE) Scene – A Review 1
Background 1
What are Rare Earths? 2
Why are Rare Earths Important? 3
Typical RE Usage 5
Rare Earth Value Addition Chains, Global Demand & Global Supply 7
The Global RE Industrial Ecosystem Network 7
Global RE Supply 9
The Evolution of the Global RE Industry & Current Competitive Dynamics 11
Historical Setting & Evolution of the RE industrial Ecosystem 11
The Dynamics of Competition in the Global RE Industry 14
China’s Strategy in Rare Earths 17
Initial Focus on Mapping RE Resources and on Mining 17
Deng Xiaoping and New Orientation 18
The Push for Global Dominance 19
China’s Grand Strategy in RE 20
China’s Strategy Implementation – Division & Coordination
of Work, Command & Control 23
The Chinese RE Industrial Ecosystem 23
The Division of Work 23
Mining 23
RE Intermediates Manufacturing 24
Technology, R&D & Innovation 24
Medium & Long Terms Strategic Plans 25
China’s Creation of National Capabilities in Rare Earths 25
Case Studies on China’s Strategy in RE 27
China’s Rare Earth Strategy Case 1 - the Acquisition of Magnequench 27
China’s Rare Earth Strategy Case 2 - the Attempted Acquisition

iv NatioNal iNstitute of advaNced studies
of Molycorp and the Mountain Pass RE Mine 29
The Role of Informal Networks in Strategy Formulation & Implementation in China 32
The Future of the Global RE Industrial Ecosystem 33
Conclusions 37
Annexure 1: Use of Rare Earth Intermediates by the Global RE Ecosystem 39
Catalysts 39
Auto Catalytic Converters 39
Batteries 40
Fuel Cells / Hydrogen Storage 40
Glass 40
Glass / Substrate Polishing Agents 41
Metallurgy 41
Phosphors 42
Ceramics 42
Permanent Magnets 43
Other Uses 43
Annexure 2: The Rare Earth Economic Network 45
Annexure 3: Rare Earth Economic Network Rankings 47
Annexure 4: Major Events in the Evolution of the Rare Earth Industry 49
Annexure 5: Global Rare Earth Reserves and Production 51
Annexure 6: Important Events tracing developments in China on Rare Earths 55
Annexure 7: R&D on Rare Earths in China 57
Publications on Rare Earths – the US and China – A Comparison 59

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The authors would like to thank Professor V.S.Ramamurthy, director, NIAS for his encouragement
and support while this study was being carried out.
Our thanks are also due to all members of the International Strategic and Security Studies
Programme and particularly Prof. Rajaram Nagappa for his comments and constant encouragement.
aCknoWleDgement

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exeCutive summary
The available evidence suggests that
China’s current domination of the global Rare
Earths (RE) Industrial Ecosystem is the result
of a well-thought out carefully crafted dynamic
long term strategy.
China has cleverly used the dynamics of the
transition of the RE industry from the growth
into the maturity phase of the lifecycle to build
a dominant presence in most value chains of the
RE ecosystem.
China controls not only the raw materials
but also the production of key intermediates
that go into many hi-tech growth industries.
In contrast the US which actually pioneered
many of the breakthrough discoveries in RE
materials has allowed its once dominant
position in RE to erode. It is now dependent
on Chinese largesse to make sure enough RE
materials and intermediates are available for its
use. The US today has no industrial capacity in
RE allowing global market dynamics to move
all of them to China.
RE shortages and price increases will affect
many sectors of an advanced economy. These
include not only large economic value adding
industries but also many defence products and
industries.
Though the RE industry is currently in the
maturity phase where a slowdown in growth
is indicated, the use of RE in critical green
products like hybrid cars, wind mills, lighting,
fuel cells and many other advanced consumer
and industrial products suggests that the
industry may grow considerably.
New demand from emerging markets like
China and India is also likely to fuel the growth
of the RE industry.
China is well positioned to use its
dominant position in RE as a part of its larger
global strategic aims. Its cutting off of RE
supplies to Japan as a consequence of a minor
spat provides fairly hard evidence that it will
use economic levers for furthering its global
strategic positions and interests.
Through the tracing of the evolution of the
RE industry in China the study also sheds light
on how strategy is formulated and implemented
in China.
There is always a long term national
interest in the evolution of the specifics of a
medium terms strategy via the five year plans.
The strategies seem to be formulated keeping
in mind both constraints and opportunities
and they are adaptable to changing global
conditions. The grand top down view seems
to be seeded with lower level ideas on how to
further Chinese global and national interests.
Well-connected eminent technocrats seem to
be able to access top level officials within the
CPC and the Politburo and they seem to provide
the micro detail for making sure the top down
strategies are grounded in the realities of the
dynamic global environment. In the case of
Rare Earths there seem to have been close links
between XuGuangxian, the father of the Rare
Earth Industry in China and Deng Xiaoping

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the Chairman of the CPC and the head of the
Politburo.
The other thing that emerges clearly
from our study on RE in China is that strategy
implementation is closely linked to strategy
formulation. China seems to have in place
methods and processes to ensure that the
various arms of the government associated
with the implementation of strategy, function
in an integrated way to ensure that Chinese
interests are well protected. The insights that
we obtained from our two case studies on how
this integration of thought and action take place
suggest that informal networks to major power
centres within the Chinese establishment play
a key role. Irrespective of how the integration
happens the Chinese RE industrial ecosystem
has dynamic capabilities that can seamlessly
connect strategy formulation with strategy
implementation. Apart from the more advanced
countries in the west such capabilities do not
exist in many of the newly emerging economies.
China appears to be well on its way to becoming
an advanced economic and industrial power
that seems to manage continuity with change in
an adaptive dynamic way.
Though informal networks also play a role
in the more advanced economies of the west
most of the division and coordination of work
within the government industry ecosystem are
governed by more formal rules and procedures.
By contrast the Chinese industry ecosystem
is still largely government dominated and
informal networks seem to provide the
integration mechanisms for implementation of
complex strategies.
Though the pace of radical breakthroughs
in the discovery of new RE materials with
unusual properties is slowing down there are
still possibilities that such breakthroughs can
happen. In case such discoveries take place they
could well take place in China. Even if it were to
happen elsewhere the Chinese RE ecosystem is
well placed to exploit it in a major way.
China’s success with its strategy on RE is
of course dependent on the continued use of RE
intermediates in many key industries especially
those dealing with a greener future. Current and
future research can throw up new discoveries
and approaches that could substitute for Rare
Earths in many key applications like catalysts,
motors and batteries. In the mature phase of an
industry such possibilities increase. However
because of their special position in the Periodic
Table Rare Earths have unusual properties that
confer on them special advantages that may not
be easily substitutable in all applications.
While eventual substitution of old
technologies with new technologies will take
place the crucial aspect that will determine
the success of China’s longer term strategy on
Rare Earths is the timing of such breakthrough
discoveries in key application segments. The
limited insights obtained from our study
indicate that in the short to medium term
China is well-poised to take advantage of its
dominant position in the global RE industrial
ecosystem. If this were to be so it would be a
vindication of the forward looking long term
strategic thinking that seems to govern much of
the Chinese behavior.
In the case of Rare Earths, China has
successfully caught up and even overtaken major
global players. However an advanced economic
and industrial country is typically characterized
by its ability to create new industries through
radical innovations. Playing catch-up is of
course important and China has demonstrated
that in RE as well as in several other domains
it can do so quite well. In the existing RE

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ExEcutivE Summary
industry China should be able to exploit any
major breakthroughs if they happen. However
this is still not quite the same as creating a new
industry of the future via radical breakthroughs
within the Chinese ecosystem. This is the kind
of advanced economic and industrial power
that China aspires to become. Whether it will
do so and whether its internal dynamics will
allow such things to happen is an open question
and a subject for future investigations.

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baCkgrounD
China’s rise as a major economic and
military power is evoking concerns across
the world. From the position of a laggard
and follower country China has successfully
transitioned into a country that has been able to
catch up with the more advanced countries in
many military and economic spheres of activity.
It is now trying to become an innovation power
house like the US. China believes that the most
important key to this process of transformation
is the ability of a country to generate new
knowledge that will spawn the industries of the
future.
Most studies that try to evaluate a country’s
capabilities in science and technology focus on
some macro easily measurable performance
indicators. These include funding for Science
& Technology, patents, publications, citations
of papers and other related indices. A few
studies from entities like the Rand Corporation
extend this to try and assess a country’s ability
to assimilate knowledge and use it for the
production of new products and services that
could either transform existing industries or
create new industries. China has also been
studied using such frameworks.
China & the global rare earths (re)
sCene – a revieW
The International Strategic & Security
Studies Programme (ISSSP) at the National
Institute of Advanced Studies (NIAS) has
taken a slightly different approach towards
understanding the growth of China and the
role of technology in fostering and advancing
this growth. Through a number of detailed
case studies we have been trying to understand
China’s strategies not only for creating
capabilities in technology but also for trying
to build globally dominant positions in many
industries of strategic and economic importance.
We have looked at Chinese capabilities in:
• the development of ballistic and cruise
missiles;1
• the development of single crystal
super-alloy turbine blades for use in jet
engines;2,
• the development of an Ant-Ship Ballistic
Missile System that can strike an Aircraft
Carrier in the high seas;3
Each of these studies uses a different
approach though all of them address the
complex organization and coordination issues
that are needed for the development of high
technology products and systems. Our studies
reveal that China does not necessarily operate
1 S. Chandrashekar, Sonika Gupta, Rajaram Nagappa, Arvind Kumar “An Assessment of China’s Ballistic and Cruise
Missiles” NIAS Study Report R4-07, 2007.
2 S. Chandrashekar, Rajaram Nagappa, Lalitha Sundaresan, N.Ramani “Technology and Innovation in China A Case
Study of Single Crystal Superalloy Development for Aircraft Turbine Blades”, NIAS Study Report R4-11, June 2011
3 S. Chandrashekar, R.N. Ganesh, C.R. Raghunath, Rajaram Nagappa, N. Ramani and Lalitha Sundaresan “China’s
Anti-ship Ballistic Missile Game Changer in the Pacific Ocean” NIAS Study Report R5-11, November 2011.

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in a top down mode. In almost all the case
studies that we have explored, though China
has clear strategic plans these are carefully
crafted and executed with the help of working
level people at the lower levels of the hierarchy.
China has always taken advantage of its trained
manpower (engineers and scientists). Many of
them hold powerful positions within the party
and are well connected to the higher echelons
of decision making. These powerful technocrats
link the lower levels quite effectively with the
higher levels of the government and the party
to craft and execute industry specific strategies
that are in consonance with China’s Grand
Strategy.
More recently China has established a
dominant position in the global Rare Earths
Industry. It effectively controls the entire
global supply chain in Rare Earths (RE). This
control extends all the way from mining to the
production of key intermediate products such as
magnets. Many of these intermediate products
are critical inputs for high growth industries
such as hybrid cars, windmills and lighting.
These are also the industries in which China is
trying to build scale for future dominance.
China created a furore in the world high
technology markets when after a minor spat
with Japan it imposed a ban on Rare Earth
exports to Japan. It has followed this up with a
number of actions that further restrict exports.
Such a strategy does raise global concerns.
This report is an attempt to understand China’s
strategy for establishing a dominant position in
the global Rare Earths Industry.
What are rare earths?
The Rare Earth Elements include 15
lanthanides with the atomic numbers 57 to 71
in the periodic table.4 It also includes Scandium
which has Atomic Number 21 as well as Yttrium
with Atomic Number 39. Both Scandium and
Yttrium have physical and chemical properties
that are very similar to the fifteen lanthanides.
All 17 of these elements occur together. Since
their physical and chemical properties are also
very similar they are difficult to separate.5
The 17 rare earth elements are divided
into two groups. The Light Rare Earth Elements
(LREE) are those with atomic numbers 57
through 63 (lanthanum to europium).The
Heavy Rare Earth Elements (HREE) have
atomic numbers from 64 to 71 (gadolinium to
lutetium).Scandium and yttrium have properties
similar to the heavy rare earths and are included
within this group. This is the classification used
by the US Geological Survey in its many reports
on Rare Earth Elements (REE). Typically, light
rare earth elements are more abundant than the
heavy rare earth elements in the earth’s crust.
Despite their name, Rare Earths (RE)
with the exception of the highly unstable
promethium are fairly abundant in the Earth’s
crust. Since they occur together they are also
generally produced together and in economic
terms qualify as an industry. Rare Earths are
4 Electrons fill the 4f suborbital slots creating the RE elements. Since the 4f orbital is an inner orbit it creates special
optical, magnetic chemical and other properties that make Rare Earths useful for many applications. The elements
as they occur in the Periodic Table are Lanthanum (La), Cerium (Ce), Praseodymium (Pr), Neodymium (Nd),
Promethium (Pm), Samarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Holmium
(Ho), Erbium (Er), Thulium (Tm) and Ytterbium (Yb)
5 See http://minerals.usgs.gov/minerals/pubs/commodity/rare_earths/; for data on rare earths as well as defini-
tion of rare earth elements.

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China & the Global RaRe eaRths (Re) sCene – a Review
key inputs to many intermediate industries
that go on to feed other industries producing
a variety of products. Thus individually
as well as taken together the Rare Earth
Elements connect a complex interdependent
network of industries. Understanding the
nature of these linkages and how this
network of interdependent industries
(often called an ecosystem) is adapting and
evolving in response to strategic, economic
and technological change is essential for
understanding the importance of Rare Earths
to any country and to the global economy.
Figure 1 provides an overview of the Rare
Elements and their positions in the Periodic
Table of Elements.
6 http://4.bp.blogspot.com/-ksg-e6_PkGI/TXTSvh1fPUI/AAAAAAAAAE0/CoRsBp9yfcw/s1600/periodic%2Btable.gif
Figure 1: Periodic Table of Elements. Rare Earth Elements are highlighted6
Why are rare earths important?
Rare earths are a critical component of
many high technology goods such as hybrid
vehicles, mobile telephones, computers,
televisions and energy efficient lights. Since
in many applications they are used in very
small quantities higher prices for RE need not
necessarily translate into higher prices for the
end products.
RE elements are increasingly perceived
to be of strategic importance not only because
of their use in critical defence equipment but
also because of their use in major high growth
electronic consumer products as well as in
products for creating a greener planet. Figure
2 provides an overview of Rare Earth use in

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Figure 2 Rare Earth Intermediate Outputs in Tonnes for the Year 2008
19780
7600
12098
12000
16444
26228
11503
7000
9002
7520 Catalyst refineries
Auto catalyc converters
Baeries
Glass
Glass Polishing
Nd Permanent Magnets
Metallurgy
Ceramics
Phosphors
Other Applicaons
Figure 3 Rare Earth Intermediate Market Shares for the Year 2008
15.3%
5.9%
9.4%
9.3%
12.7%
20.3%
8.9%
5.4%
7.0%
5.8% Catalyst refineries
Auto catalyc converters
Baeries
Glass
Glass Polishing
Nd Permanent Magnets
Metallurgy
Ceramics
Phosphors
Other Applicaons
different intermediate industries for the year
2008.7 Figure 3 provides the same information
in the form of RE market shares for the various
intermediate products. The total consumption
of RE in 2008 was about 130,000 tonnes. This
had increased to about 136000 tons in 2010.
Forecasts suggest that demand is likely to
be between 185000 to 210000 tons by 2015.8
7 Thomas G Goonan, “Rare Earth Elements – End Use and Recyclability”, US Department of the Interior, US Geologi-
cal Survey (USGS), Scientific Investigations Report 2011 – 5094, 2011 at http://pubs.usgs.gov/sir/2011/5094/
8 Marc Humphries, “Rare Earth Elements: The Global Supply Chain”, CRS report for Congress, Congressional Re-
search Service R41347, June 8 2012.

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China & the Global RaRe eaRths (Re) sCene – a Review
typiCal re usage
Table 1 shows typical quantities of RE used
in the different intermediate products.
Each intermediate product uses only some
of the many Rare Earths available. Lanthanum
and Cerium for e.g. are the two RE used in
the catalysts for petroleum refining. Other RE
elements are not used here.
In contrast permanent magnets, use
Praseodymium, Neodymium, Gadolinium,
Terbium, Dysprosium with Neodymium and
Praseodymium dominating.9
A simple example will illustrate the
importance of Rare Earths in today’s world. Table
2 shows how REEs are used in APPLE’s i phones.
Table 1: Use of Rare Earths by Application (Percentage)
Applicaon La Ce Pr Nd Sm Eu Gd Tb Dy Y Other
Magnets -- -- 23.4 69.4 -- -- 2 0.2 5 -- --
Baeries 50 33.4 3.3 10 3.3 -- -- -- -- -- --
Metal alloys 26 52 5.5 16.5 -- -- -- -- -- -- --
Catalyc Converters 5 90 2 3 -- -- -- -- -- -- --
Catalysts 90 10 -- -- -- -- -- -- -- -- --
Polishing
Compounds 31.5 65 3.5 -- -- -- -- -- -- -- --
Glass Addives 24 66 1 3 -- -- -- -- -- 2 4
Phosphors 8.5 11 -- -- -- 4.9 1.8 4.6 -- 69.2 --
Ceramics 17 12 6 12 -- -- -- -- -- 53 --
Other 19 39 4 15 2 -- 1 -- -- 19 --
9 Source: The Principal Rare Earth Elements Deposits of the United States—A Summary of Domestic Deposits and
a Global Perspective, USGS Scientific Investigations Report 2010–5220)
A brief overview of the use of RE in each
of the key intermediate industries is provided
in Annexure 1. This has been the basis for
generating an input output matrix and a
network diagram that describes the current
RE Industrial Ecosystem of an advanced
economy. The information contained in this
Annexure also provides us with the basic
data on how the global RE industry has
evolved and changed over time to reach its
current status. However before we review
this and examine the current dynamics of
the competition between different players
we need to understand the current global RE
industrial ecosystem in more detail.
Table 2: Use of Rare Earth Elements in i phones
Component Y La Ce Pr Nd Eu Gd Tb Dy
Colour Screen ** * ****
Glass Polishing ***
Phone Circuitry * * * * *
Speakers ** ***
Vibraon Unit * * *
(Adapted from http://i.i.com.com/cnwk.1d/i/ne/pdfs/Elemental-table.pdf)

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the global re inDustrial eCosystem
netWork
As we can see from our review so far
RE Materials though small in terms of their
contribution to the Gross Domestic Product
(GDP) are vital to the well-being of any advanced
economy. They often provide the primary input
into a long chain of value adding products
and industries. Supply disruptions in their
availability or price increases could therefore
have implications that go beyond the immediate
industry affected by the shortage of raw material.
Rare Earth Materials are critical for many
products that are used in the economic and
military domains.
Using the available information on how
Rare Earths are currently used we created a 92
by 92 Input Output matrix. Using this matrix
we created a network diagram that linked the
various RE elements with major intermediate
products and then linked these intermediates
to the downstream product.10 This network
diagram represents the typical Industrial
Ecosystem of an advanced economy that uses
RE. Annexure 2 provides the network diagram
for the RE industrial ecosystem for any advanced
economy and Annexure 3 provides the ranking
of each of the nodes in terms of its connectivity
to other nodes in the network.
The advantage with using this approach is
rare earth value aDDition Chains, global
DemanD & global supply
10 For a more details on the networks of connections between REE and intermediate products refer to Chandrashekar,
Does India need a national Strategy for rare earths?, NIAS Report, R18-2013.
that all the complex linkages that exist between
critical input materials and their use in final
products can be captured. Specific Paths linking
any node in the network to any other node
can also be traced. If one is interested in the
connection between permanent magnets with
various end products and the materials used
in their production this can be easily extracted
from the overall network and studied in detail.
The most critical nodes in the network
are those that are connected to many other
nodes. We can therefore use a combination of
the network diagram and the matrix to rank the
various nodes in the rare earth value network.
The higher ranking nodes are the most likely
products and industries that will be affected by
supply side shortages. Annexure 3 provides a
ranking of the 92 nodes in the network based
upon the total number of connections that each
node has with other nodes in the network. This
could be the basis for more detailed studies on
how Rare Earth shortages or higher prices would
affect the industrial economy of any country.
Table 3 below provides details of the top
27 ranked nodes from the RE Economic Network.
From the network diagram and the matrix we
can see clearly that RE materials are used in a large
number of products and industries. Many of these
represent the use of cutting edge technologies for
both consumer and defence products.

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Table 3: Ranking of the Top 27 Nodes in
the RE Economic Network
Node Input into
Node
Output
from Node
Total
Links Rank
Glass 8 16 24 1
Cerium 0 15 15 2
Lanthanum 0 14 14 3
Permanent
Magnets 6 8 14 3
BaTio3 MLCC
Capacitors 7 6 13 5
RE Phosphors 6 6 12 6
Neodymium 0 11 11 7
Praesodymium 0 11 11 7
Yrium 0 11 11 7
Zirconia / YSZ 1 8 9 10
Catalyst 3 4 7 11
Fuel cells 6 1 7 11
Automobile 7 0 7 11
Communicaons 7 0 7 11
Baeries 5 1 6 15
Nd YAG Lasers 3 3 6 15
Microwave lters 3 3 6 15
Cathodes 1 5 6 15
Radar 6 0 6 15
Speakers 1 5 6 15
Catalyc
Converters 4 1 5 21
Polishing agents 3 2 5 21
Opcal elements 1 4 5 21
Fiber opcs 5 0 5 21
Microwave
components 2 3 5 21
Motors 1 4 5 21
Samarium 0 4 4 27
Gadolinium 0 4 4 27
Terfenol D 2 2 4 27
Other RE 0 4 4 27
Reneries 2 2 4 27
Hard Drives 2 2 4 27
Flint 4 0 4 27
Jewelry 4 0 4 27
TWT 2 2 4 27
Magnetron 2 2 4 27
Klystron 2 2 4 27
Cell phones 4 0 4 27
Some of the major intermediate industries
that are significant users of RE include Glass,
Permanent Magnets, Phosphors, Catalysts for Oil
refining, Oxygen sensors, Batteries and Catalytic
Converters. Industries that are linked to these
intermediates include Consumer electronics,
Oil refineries, Automobiles, Windmills, Electric
Motors, Fuel Cells, Optical Equipment, Fibre
Optics and the emerging industries of efficient
lighting that includes CFL Lighting as well as
LED Lighting.
The review suggests that RE materials are
critical for many applications related to building
a greener and more environmentally friendly
economy. We can also see that RE materials are
also critical for many defence applications.
Apart from Permanent Magnets which
are used in many defence applications too,
Neodymium doped Yttrium Aluminum Garnet
(Nd YAG) lasers are used in many range finding
applications that are part of advanced weaponry.
They have now moved from defence applications
into the civilian sector and are used in surgery
as well as in the jewelry industry. Yttrium Iron
Garnets as well as Yttrium Gadolinium Garnets
are needed for building microwave components
that go into advanced Communications and
Radar systems.
Rare Earth Cathode elements are also
needed for building the high power tubes used
in many radar and communication systems.
They are also used in the ion thrusters that are
required by advanced satellites.
Terfenol D – an alloy of Terbium, Iron
and Dysprosium has unique magnetostriction11
properties that are used in sonar and other
acoustic applications.
11 The material expands and contracts in response to changes in the magnetic field giving it its special properties.

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RaRe eaRth Value addition Chains, Global demand & Global supply
Among the materials themselves Cerium,
Lanthanum, Praseodymium, Neodymium,
Yttrium and YSZ Zirconia are clearly some of
the more important nodes in the network. Our
review also show that in the future the other
RE like Dysprosium, Terbium, Erbium and
Gadolinium may become important too. Special
structural forms of RE materials like garnets,
Perskovesite and Metal hydride structures
would continue to be important areas of future
development as would RE materials in the
nanoform.
We can see from the above that RE materials
are closely linked to many hi-tech sectors of
an advanced economy that are vulnerable to
supply chain disruptions. Whoever controls the
supply side therefore has the power to disrupt
the economies of advanced countries.
global re supply
Table 4 below provides data on global supply of
RE materials normalized to RE oxide base.
According to an US Government
Accountability Office Report12 as of
Table 4: Global Supply of Rare Earths (Normalized to Oxides)
Country Mine Producon % of Total Reserves % of Total
United States None 13 Million Tonnes 13%
China 130,000 Tonnes 97.3 % 55 Million Tonnes 50%
Russia Former USSR 19 Million Tonnes 17%
Australia 1.6 Million Tonnes 1.5%
India 2700 Tonnes 2% 3.1 Million Tonnes 2.8%
Brazil 550 Tonnes 0.42% Small
Malaysia 350 Tonnes 0.27% Small
Other NA 22 Million Tonnes 20%
Total 133,600 Tonnes 110 Million Tonnes
April 2010 China controlled:
97 % of the RE ore;
97% of the RE oxides;
89% of the RE alloys;
75% of the Neodymium Iron Boron
Magnets industry;
60% of the Samarium Cobalt Magnets
industry.
There is enough evidence to suggest that in
other intermediate RE industries China is trying
to build dominant positions so that it can leverage
its strength in RE materials as a component of its
Grand Strategy. This makes the more advanced
economies of the world especially the US
particularly vulnerable to Chinese actions.
Before addressing issues related to
national strategies and national vulnerabilities
in the global RE industry, it may be worthwhile
to understand in some detail the historical
evolution of the global RE industry. Only
through such an understanding can we try and
fathom the motives of the different players that
have led to the current state of affairs in the
global RE industry.
12 U.S. Government Accountability Office (GAO), Rare Earth Materials in the Defense Supply Chain, GAO – 10 – 617
R, April 14 2010, p19 available at http://www.gao.gov./news.items/d10617t.pdf

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historiCal setting & evolution of the
re inDustrial eCosystem13
Rare Earths were first discovered in 1787
at a place called Ytterby near Stockholm in
Sweden. Since their physical and chemical
properties were very similar they were difficult
to separate. Because of this in the early years
after their discovery Rare Earths remained
largely in laboratories. It took a little more
than ninety years from their discovery before
they were used in commercial products. In
1884 Rare Earths were first used commercially
to make the incandescent mantles for the gas
lighting industry. The second commercial use
of Rare Earths took place in 1903 when Misch
metal an alloy of unseparated Rare Earth metals
was used to make the flints that go into lighters.
In 1911 Rare Earths were added to glass to
provide colour to the glass.
Major discoveries in the understanding of
the atom took place in the early part of the 20th
century. The ordered placing of the electrons
in various orbits around the central nucleus as
the atomic number increases and their role in
determining the physical and chemical properties
of the various elements became a major area of
study. This knowledge was incorporated into the
periodic table of elements in the early years of
the 20th century. The special position of the Rare
Earth elements in the periodic table opened up
the evolution of the global re inDustry &
Current Competitive DynamiCs
the world of Rare Earths to new investigations
and new applications. In 1934 Kodak used such
knowledge for making glass doped with Rare
Earth elements to increase the refractive index
for glass. This reduced the curvature required
for making various optical elements like lenses
and also created some additional demand for
Rare Earths.
The Second World War led to the creation
of the Manhattan project by the US for making
the Bomb. The project led to new methods for
the separation of various isotopes and closely
related elements. The Ion exchange process
became a major method of separation of closely
related elements and was used to separate the
various RE elements. Commercial quantities of
RE became available both to industry as well as
to the research community.
In 1948 Misch Metal was added to
improve the properties of nodular cast iron.
The Mountain Pass Mine in California was
discovered in 1949. In the early 1950’s Cerium
Oxide became a preferred material for polishing
glass. Lanthanum Hexaboride discovered in
1951 became the cathode material for ion
thrusters used in space by the Soviet Union.
The Solvent Extraction Process became
commercial in 1953. This reduced the cost of
material extraction even more and also made RE
available in larger quantities for commercial use.
13 This account is compiled using various publicly available materials including the specific articles and websites
cited in this report.

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The 1960’s saw the movement of RE from
niche applications in selected markets into
more mainstream commercial products and
industries.14 In 1964 the addition of Lanthanum
and Cerium to Zeolite catalysts used for cracking
petroleum crude into various lighter fractions
became a major user of RE. The addition of RE
to these catalysts raise the temperature and
significantly increase the yield of the desired
products. RE additions to catalysts continue
to be an important market especially in the
US. In 2007 China exploited this vulnerability
by cutting off RE supplies to a leading US
manufacturer of catalysts – WR Grace.
1965 saw the emergence of another
consumer product that went on to become a
major market. Large quantities of Europium
that were available from the operation of the
Mountain Pass Mine in the US were used in
the phosphors for the screens of the cathode
ray colour television sets that were becoming
widespread in the US market. Phosphors have
continued to be an important market for RE
especially in various consumer electronic
products. Their use in the emerging energy
efficient lighting industry that includes both CFL
and LED lighting will continue to be important
for some time to come.
Between 1964 to 1970 another major
application of RE was the development and
commercialization of Neodymium doped
Yttrium Aluminium Garnet Lasers (NdYAG)
lasers. They were originally used for range
finding applications in the defence sector but
have now moved into surgery as well as general
manufacturing applications.
The 1970’s saw the emergence of a number
of new applications for RE.
The Naval Ordnance Laboratory discovered
a major magnetostriction effect15 in Terbium
based alloys. Terfenol D an alloy of Terbium,
Iron and Dysprosium was developed and
commercialized by the Ames Research Centre
which was at that time one of the leading
Laboratories in Rare Earth Research. This led to
the use of these alloys in sonar and other noise
suppression applications in the defence sector.
They are also used in speakers as well as fuel
injection systems of diesel engines.
In 1970 the Air Force Materials Laboratory
(AFML) discovered Samarium Cobalt
Magnets. These soon replaced the AlNiCo and
Ferrite magnets in many applications where
performance mattered.
The period 1970 to 1975 also saw two major
developments of significance to the automobile
industry. The discovery of the hydrogen
absorbing properties of Lanthanum Nickel alloys
led to the patenting of the Lanthanum Nickel
Hydride Battery in 1975. Catalytic converters
using RE coatings for controlling pollutants in
the exhaust gases of cars also became a major
commercial product with the advent of tighter
pollution laws in the US and went on to become
a global requirement.
Rare Earth additions to glass created
new forms of glass with special properties.
ZABLAN Glass exhibiting special properties in
the infrared became commercial in the form
of optical equipment as well as fibre optics in
1975.
Work on specialty ceramics involving RE
14 In terms of the life cycle model this marks the shift from the incubation phase of the industry into its diversity
phase.
15 A magnetic field applied to the material causes it vibrate or move mechanically.

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The evoluTion of The Global Re indusTRy & CuRRenT CompeTiTive dynamiCs
such as Yttrium Iron Garnets (YIG) and Yttrium
Gadolinium Garnets (YGG) that had been going
on from the late 1950’s began to be used in
various radar and communications applications
with one of the earliest patents being taken out
in 1975.
The 1970’s also saw the development of
semiconductor LED products for lighting and
other applications. The addition of RE phosphors
to these as well as Compact Fluorescent Lamps
(CFL) would become important much later
when some of the technical bottlenecks related
to commercial use of LED had been resolved.
From about 2005 onwards as LED and CFL
products enter mainstream markets and hence
the RE requirements though small are likely to
increase.
In the 1980’s the pace of new discoveries
and applications seem to be slowing down.
However the early years of this decade
saw a shortage of Cobalt supplies arising from
the pursuit of cold war strategies by the two
superpowers. This affected the production
of Samarium Cobalt magnets. This shortage
directly led to the discovery of the Neodymium
Iron Boron (NdFeB) magnets by General Motors
in the US and Hitachi in Japan. These entered
commercial use in 1986. Today these permanent
magnets have become an industry with both
strategic and commercial importance. Along
with RE based batteries their use in the electric
motors of hybrid and electric cars provide a
potential growth market for RE as countries
move towards a more environment friendly
green future.
RE materials added as dopants for the
production of Multi-Layer Chip Capacitors
become commercial by about 1986.
Yttrium additions to various candidate
materials with high temperature super
conducting properties become important
with the discovery of high temperature
superconductivity. Though a subject of active
research there have been no major spinoffs
from this research as yet.
In 1987 Erbium doped fibre optic amplifiers
become commercial and added significantly
to the performance of long distance optical
communications networks.
The decade of the nineties and the first
decade of the 21st century have not seen major
technology breakthroughs. The demand for RE
has also stabilized. However work is still going on
in exploring new possibilities for improvements
in performance of RE alloys and compounds.
There is also the fairly real possibility that some
new alloy or compound that uses RE and which
has some unique properties is still awaiting
discovery.
The last two decades have also seen the
action shift from breakthrough technologies and
products towards incremental technology and
product improvement. During this period China
initiated a set of actions that was directed at not
only catching with the advanced countries in
RE technologies, products and markets but also
move it into a position of dominant leadership
of the global RE industry
In 1995 China in order to catch up on RE
permanent magnet technology tried to acquire
Magnequench a General Motors subsidiary
that was making permanent magnets. After a
lot of debate and discussion the US allowed
the acquisition to go through but with certain
conditions imposed on the takeover. In 2002
as soon as the curbs on the company were
removed all the assets of Magnequench were
moved to China.
In 1998 the US closed the Mountain Pass
Mine for environmental reasons.

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In 2005 once again a Chinese consortium
tried to acquire the US Oil giant UNOCAL. Since
UNOCAL owned the Mountain Pass Mine the
deal was not really about oil but seemed to be
linked with the Chinese desire to establish a near
monopoly position in the global RE industry.
Though the deal with the US did not fructify
China has continued on its strategic quest of RE
acquisitions for achieving global dominance.
In 2007 as a part of flexing its muscles
China cut of RE supplies to W R Grace a large
US producer of catalysts for the petroleum
refining industry. In the same year it set in
place a rationing policy for RE that favoured
domestic producers. This was a message to
various global companies that if they wanted
access to RE material they needed to set up
shop in China to get preferred treatment. Since
W R Grace eventually did set up shop in China
this policy seems to be working as far as China
is concerned.
Though China’s attempts at buying a
controlling stake in two Australian RE mining
companies Lynas and Arafura Resources have
not been successful they have bought minority
stakes in them in 2008 and 2009 respectively.
In 2010 China cut off RE supplies to Japan
after a fishing trawler incident demonstrating
once again that it controls the global supply
chain for RE and that it will use this power in
pursuit of its grand strategy.
This account of the evolution of the RE
industry makes it clear that though the origins
of the industry were in 18th and 19th century
Europe most of the significant developments
in technology and in products took place in the
US. The RE industry really took off in the 1960’s
and 1970’s when a number of breakthrough
technologies were developed and commercialized
in the US. In the early part of the 1980’s the US
was the undoubted leader of the RE industry with
a dominant position in the entire value chain from
mine to product. It also had significant research
capabilities both in its government sponsored
laboratories as well as in industry.
However by the turn of the century this
situation had fundamentally changed. Entire
value chains for RE had moved away from
the US and other western countries to China
which now controlled the global supply of RE
materials and key intermediates.
Annexure 4 provides a detailed time line of
the evolution of the RE industry on which this
section is based.
the DynamiCs of Competition in the
global re inDustry
Figure 4 provides an overview of the
evolution of the Global RE industry that links the
various technology breakthroughs for product
development to the growth of the industry via
the products that they are used in.
Though conceptual the various timelines
and the phases of the evolution of the industry
are based on our study of the various technology
breakthroughs, as well as the intermediate and
final products that resulted from them.
As we can see from the above Figure the
Global RE industry is in the mature phase of
its life cycle. Our review shows that the pace
of new discoveries and the emergence of new
breakthrough products based on RE has been
slowing down. Most of the research work
going on seems to be related to improvements
to existing products. Though this is so, the
possibility of new radical breakthroughs cannot
be ruled out.
The future growth of the industry will
depend on the growth of existing products that
use RE in the new emerging economies like

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The evoluTion of The Global Re indusTRy & CuRRenT CompeTiTive dynamiCs
India and China. It is also possible that if the
more advanced countries accelerate the pace of
change towards realizing an environmentally
friendly green economy the demand for RE
could grow significantly. In the mature phase of
the life cycle cost, scale and scope of operation
are drivers of competitive advantage.
Figure 5 shows the relative positions of
China and the US in the early 1990’s when the
global RE industry was in the early stages of
reaching maturity.
The US not only created most of the
technology breakthroughs using RE but also
pioneered the commercialization of these
breakthroughs. It was the world leader in RE
with a complete well connected RE Industrial
Ecosystem.
Figure 6 shows how the relative competitive
position between China and the US had shifted
by about 2005. From being a laggard in the early
1990’s China has moved to hold a dominant
position in the global RE industry. This has
been accompanied by significant erosion in the
capabilities of the US, Europe and Japan whose
industrial capabilities in critical RE value chains
had declined alarmingly.
What did China do to move from a
laggard position in the early 1990’s to
a dominant position by about 2005?
This is the question that we will try to
answer in the next few sections.
Figure 4: The Rare Earth Product / Industry Life Cycle

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Figure 5 Relative Competitive Position of Rare Earth Industry in the US and China
(Early 1990s)
Figure 6 Relative Competitive Position of Rare Earth Industry in the US and China
(Post 2005)

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If we look at the developments that have
taken place in China since the first discovery of
the rare earth mines, it is clear that successive
Chinese governments have planned the
trajectory to reach this dominating position. It
has been crafted by a number of persons who
wielded power and were well aware of the
value of this commodity.
initial foCus on mapping re
resourCes anD on mining
The Iron deposits at Bayan Obo in Inner
Mongolia along with which RE are also mined
was discovered in 1927. In the early 1950’s
the Bautou Iron and Steel Company started
production of steel. In 1957 the first Rare Earth
Concentrates from the Bautou mines were
produced.
Though production was the obvious initial
focus China soon set up R&D facilities. The
first dedicated R&D facility for RE, the Bautou
Research Institute was set up in 1963. It remains
one of the largest R&D facilities devoted to RE
to date.
Evidence suggests that between 1960 and
1980 China took on a systematic exploration
programme for all commercially and
strategically important minerals including RE.
By about 1980 the Chinese knew the location
and reserves of RE materials quite well. They
China’s strategy in rare earths
also must have realized that they had one of the
largest stockpiles of RE in the world and that
if this were used wisely it could be a source of
competitive and strategic advantage. Annexure
5 provides an overview of RE mineral resources
of China.
In 1972 Xu Guangxian, after being a
victim of the Cultural Revolution moves out of
working on the extraction of nuclear materials
into RE materials. He develops the approach of
Countercurrent Extraction for RE materials.16
These methods introduced by him reduce the
costs of producing RE concentrates significantly.
He becomes the effective spokesman for the
development of the RE industry in China.
With the winding down of the Cultural
Revolution and the coming to power of Deng
Xiao Ping there is a renewed focus on using
China’s resources to advance economic growth.
The mining and export of RE materials as a
part of this development becomes important.
Simultaneously there is also a realization
that value addition to the raw material could
confer significant economic as well as strategic
benefits and should be pursued as a long term
strategy. For this value addition to take place
both indigenous capabilities in integrating R&D
with products and processes as well as selective
imports of technology were identified as being
critical.
16 This could be the same as Counter Current Decantation used in many Uranium milling and RE facilities and is a
standard process used in the mineral processing industry.

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Under the guidance of the Ministry of
Land Resources and Planning China expanded
its mining operations between 1978 and 1989.
At this time the US was the globally
dominant player in the global RE industry.
It occupied dominant positions in all parts of
the value chain from R&D17 through mining to
intermediate and final products. China was only
a lower cost alternative supplier of raw material
to the global RE industry.
Deng xiaoping anD neW orientation
China’s thrust for achieving world
leadership in the RE industry can be linked
directly to Deng Xiaoping. In 1986 he approved
Program 863 – a Program promoted by three
key scientists from the strategic Nuclear
Programme.
The objectives set forth for this programme
were for China to:
• Gain a foothold in the world arena;
• Strive to achieve breakthroughs in key
technical fields that concern the national
economic lifeline and national security;
• The areas identified as thrust areas
included biotechnology, space technology,
information technology, laser technology,
automation, energy, and new materials.
Many of these areas need RE materials.
In 1987 China set up the State Key
laboratory of RE Chemistry and Physics. This
was affiliated to the Changchun Institute of
Applied Chemistry under the direct supervision
and control of the Chinese Academy of Sciences.
This was followed by the setting up of another
Laboratory - the State Key Laboratory of RE
Materials Chemistry and Applications in 1991.
This was affiliated to the College of Molecular
Engineering in Peking University. Along with
the Bautou Research Institute these provide
China with three strong research institutes
working on fundamental, applied and process
research in RE.18
There is also a shift away from just
export of raw materials towards the setting
up of indigenous industry for the production
and export of key RE intermediates especially
magnets. Coordination between the various
arms of government become more complex as
apart from the mining and environment related
ministries the Ministries of Industry19 as well
as Trade become involved in the national RE
strategy.20
By 1992 awareness of the importance of
RE in China’s grand strategy had become well-
known amongst top Chinese decision-makers.
This led Deng Xiao Ping to make the famous
statement “The Middle East has oil, China
has Rare Earths”. A special RE industrial zone
is set up in Bautou in 1992 to attract foreign
investment in RE related facilities as a part of
China’s efforts to bridge the technology gap.
17 Many of the major discoveries leading to new applications for RE were made in the US with some contributions
from Japan and Europe.
18 This seems to be unique to China with no other similar parallels anywhere else in the world. There are other facili-
ties related to Non-ferrous research that may also work on Rare Earths.
19 The RE Manufacturing industry in China comes under the jurisdiction of the Ministry of Information Technology
and Industry.
20 The setting up of indigenous RE industry as well as Trade in RE products would or should also involve the Ministry
of Foreign Affairs especially in matters related to acquiring companies and properties in foreign countries.

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China’s strategy in rare earths
the push for global DominanCe
In 1995 China made a major move that
would help achieve a dominant position in the
RE Permanent Magnets industry. Two Chinese
companies China National Non Ferrous Metal
Export Corporation and San Huan along with a
US Investment Firm Sextant MQI Holdings make
a bid to acquire Magnaquench the Permanent
Magnet production facility owned by the US
automobile giant General Motors (GM). The US
imposed certain conditions for this takeover.21
In spite of these conditions China was able to
set up a powder facility in China by 1998 and
to finally transfer all Magnaquench operations
to China by 2002 when the time limit on the
conditions imposed by the US expired.
In 1997 another major boost to RE based
technology development efforts is provided
through Programme 973. In the same year
Jiang Zemin makes the statement, “Improve the
developments and applications of Rare Earths
and change resource advantage to economic
superiority”.
In 1998 a big boost to Chinese efforts to
establish a dominant position in the global
RE Industry is given when the US closes
the Mountain Pass Rare Earths Mine for
environmental reasons.22
In 1999 a RE Functional Materials
Engineering Technical Research Centre is
set up at Xiyuan in Inner Mongolia. In 2000
Neodymium powder production begins in the new
Magnequench production facility at Tianjin. The
Bautou Research Institute sets up another research
centre for RE Metallurgy and Materials in 2001.
After moving all Magnequench operations
out of the US in 2002, China expands
Magnequench operations to Singapore in
2004 and to Thailand in 2006. Magnequench
acquired, AMR Technologies Inc. another RE
company in Canada in 2005. In the same year
China tried to acquire the US Oil giant UNOCAL.
Though ostensibly this purchase was about oil
the real intent behind this Chinese move was to
acquire the Mountain Pass RE mine owned by
Molycorp a subsidiary of UNOCAL. If the deal
had gone through it would have substantially
improved an already dominant Chinese holding
of RE reserves.23
In 2007 China introduces a rationing
system for RE materials that favours domestic
companies over exports. In the same year it cuts
off RE supplies to a major US catalyst producer
W R Grace forcing the company to set up shop
in China a couple of years later.
China also tried to buy a majority stake
in the Australian RE mining Company Lynas in
2008. Though it did not get a majority stake as
originally envisaged it does have stakes in Lynas
as well as in another Australian RE mining
company Arafura Resources Ltd.
In 2010 by cutting of RE supplies to Japan
following a fishing trawler incident China has
clearly sent a message to all its neighbours of
using economic levers of power and control as a
part of its grand array of strategic instruments.
Annexure 6 provides the time line for the
various Chinese actions.
21 There were apparently restrictions on transfer of operations for a period of five years.
22 China hastened this closure via its systematic policy of price undercutting for various RE raw materials making US
supply unviable. While there is no hard evidence in the public domain one cannot rule out Chinese support for
environmental lobbies wanting a stop to RE mining.
23 In the mature phase of the life cycle consolidation often involves mergers and acquisitions.

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China’s granD strategy in re
Though China started work on Rare Earths
in the early 1950’s internal developments and
other pressing priorities prevented China from
making significant investments. In spite of such
constraints they did go ahead and created the
minimum infrastructure that would stand them
in good stead much later. A lot of effort also
seems to have into survey and mapping of the
various mineral resources including Rare Earths.
Chinese researchers as well as decision-makers
did get to know fairly early that China had a big
share of the world’s Rare Earth resources. With
the advent of Deng Xiaoping a new thrust is
given for China’s development in the economic
sphere first followed closely by increased focus
on the strategic sector too. In the case of RE
this also saw a shift in focus from the export of
Raw Materials towards an increased emphasis
on Value Added products. The Chinese seemed
to realize fairly early on that they were
significantly behind on the technology front
in Rare Earths too. The 863 Plan also revealed
major gaps in technology that could be bridged
only with creating strong institutions within
China for both basic as well as applied research.
The setting up of two new R&D facilities24 for
Rare Earths to address these needs is a clear
indication that the Chinese had understood the
importance of bridging the technology gap and
that it could not be achieved only by importing
technology. As we can see from Figure 5 in the
early 1990’s China was far behind an advanced
economy like the US in its development of
industrial RE ecosystem.
In order to catch up such a laggard country
has to simultaneously advance on several
fronts. An advanced economy like the US
had already reached the mature phase in the
evolution of its RE industrial ecosystem. This
means that it has successfully gone through
the incubation phase, the diversity phase and
the growth phase before reaching the maturity
phase in the RE industry life cycle.25Apart from
closing gaps in technology a laggard country
like China also has to master the links between
technology and products and markets that are
necessary to catch up with a country that has
gone through the growth phase and is now in
the mature phase. In addition to compete with
a country in the mature phase of the life cycle
it requires low cost arising from both scale and
scope economies in production.26 While this is
easy to conceptualize it is difficult to execute
especially for a country that does a lot of
central planning and strategizing. A significant
degree of co-ordination amongst the different
departments of a typical government has to take
place not only for the formulation of a strategy
but also for executing the strategy. Since an
industry is also created and is involved, a new
dimension is added to the already complex
problem of division and co-ordination of work.
This co-ordination and control is possibly the
24 The first R&D unit for RE was set up under the Bautou RE operations in 1963.
25 To understand the link between the industry life cycle and strategy in greater detail see S. Chandrashekar,
‘Technology and Business: The Missing Link”, Management Review, April – June 1996, pp 41-51. While technology,
products, markets, production and costs are all important during all the phases the focus of major effort shifts
from technology in the incubation phase to products and markets in the growth phase to production and costs in
the maturity phase with technology once again becoming more dominant in the decline phase.
26 The current actions in the Chinese RE industry of consolidation with fewer and larger companies indicates that
the Chinese are well aware of size, scale and scope as the drivers of low cost needed for competing in the mature
or decline phases of an industry life cycle.

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China’s strategy in rare earths
most difficult part that sets apart an emerging
economy from an advanced economy.27 How
successful has China been in this task? Does it
have in place the internal mechanisms for co-
ordination, control and re-orientation that are
so necessary to compete globally in the mature
phase of the life cycle? This is what we will
address in the next section.
27 In an advanced market driven economy this is achieved by allowing market forces to operate with minimal
intervention by the government. While China does have some market driven mechanisms government’s active
intervention to promote national strategy and national interests is still very much the norm.

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the Chinese re inDustrial eCosystem
The Rare Earth (RE) industry in China
consists of three broad inter-related sets of
activities. These are:
• Mining and processing
• Manufacturing and Applications
• Research and Development
In addition to these direct domestic value
chain activities, competing globally brings in
additional activities like trade, global mergers
and acquisitions and increasingly foreign
policy. These are particularly important as
global industries reach the maturity phase and
countries like China use these dynamics to push
national strategies.
the Division of Work
For the utilization of RE in national
development tasks specific Ministries are
involved in the development of each of these
sectors. These include the Ministry of Land and
Resources (MLR), the Ministry of Environment
Protection (MOEP) who are mainly involved in
the mining part of the value chain, the Ministry
of Industry and Information Technology (MIIT)
which is concerned with the development of
the RE intermediate and final products and
the Ministry of Commerce (MOFCOM) which
is involved with domestic and global trade.
The Ministry of Foreign Affairs should also
be involved since in the maturity phase of
the lifecycle acquisitions of global companies
for both technology and markets becomes
China’s strategy implementation – Division &
CoorDination of Work, CommanD & Control
important. The driver for all these components
in the value addition chain is of course R&D.
Some part of this R&D is carried out within
companies engaged in both mining as well as
product development. However capabilities in
the development of innovative new products
and technologies can come about only if basic
and applied research is funded as public good
activities. Of course these have to be linked to
products, industries and markets for a viable
ecosystem to function. In China this critical
input into the RE ecosystem development comes
under the ambit of the Ministry of Science and
Technology (MOST).
mining
The Ministry of Land and Resources and the
Ministry of Environment Protection regulate and
control all mining and ore processing activities
and exercise oversight over companies engaged
in these activities. The main responsibilities of
the MLR include land and resource survey and
evaluation, planning, administration, protection
and rational utilization and standardizing
mineral resource exploration.
In China, there are two sets of quotas that
affect the rare-earth industry. One concerns
the extent of mining and the other concerns
the separation and smelting of rare earth
products. The Chinese Ministry of Land and
Resources (MLR) controls the quota concerning
mining. The mining quotas are usually the more
prominent, and each year, usually sometime in

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March, the MLR publishes a list of the mining
quotas that have been allocated to each province
or region in China. Rare earth stockpiling that
began in 2010 in China’s primary mining region
of Baotou in Inner Mongolia is also overseen
by this Ministry. Over ten storage facilities are
being built and managed by the government-
controlled Baotou Steel Rare-Earth (Group) Hi-
Tech Company.
The Ministry of Environment Protection
(MEP) develops and organizes the
implementation of national policies and plans
for environmental protection, drafts laws and
regulations, and formulates administrative
rules and regulations for environmental
protection. It is also in charge of overall
coordination, supervision and management
of key environmental issues. Since 2009 the
Ministry has been in coordination with MLR
in regulating and consolidating the rare earth
mining and smelting companies. Presently,
the Ministries of Environmental Protection,
Land and Resources, Industry and Information
Technology, and Commerce together implement
a coordinated series of regulations to enforce
policies aimed at preserving the resources and
protecting the environment.
re intermeDiates manufaCturing
The second stage of processing
and manufacturing of Rare Earth (RE)
intermediates is more critical and a number
of state organizations are directly and
indirectly involved in this sector along with
the companies. The Ministry of Commerce
(MOFCOM) and the Ministry of Industry and
Information Technology (MIIT) and to a lesser
extent the Ministry of Environment Protection
(MOEP) are mainly responsible for policy
formulation and implementation in this sector.
MOFCOM formulates the strategies, guidelines
and policies of developing domestic and foreign
trade and international economic cooperation,
sets the quota levels for exports, drafts the laws
and regulations governing domestic and foreign
trade, foreign investment in China and devises
relevant departmental rules and regulations.
However the quota concerning the separation
and smelting of rare-earth products inside
China, is controlled by MIIT.
Over time the MIIT has become the
architect of China’s industrial policy on RE and
a champion of consolidation. Not only does
MIIT have control over rare-earths policy, it has
also been tasked with shaping the development
of emerging technologies, which will drive
demand for rare earths. As a general rule, the
Ministry of Industry and Information Technology
is responsible for the manufacturing part, the
Ministry of Land and Resources is responsible
for mineral mining and exploitation part and
MOFCOM is responsible for trade both in raw
materials as well as intermediate RE products.
teChnology, r&D & innovation
The activities of these operating entities
have to be integrated with the development
and use of new knowledge via basic and applied
research in RE. The Ministry of Science and
Technology (MOST) takes the lead in drawing
up S&T development plans and policies, drafting
related laws, regulations and department rules,
and guaranteeing the implementation. MOST
is responsible for drafting the National Basic
Research Program, the National High-tech R&D
Program and the S&T Enabling Program. MOST
also outlines the technologies it hopes to pursue
in the short term through the megaprojects. The
megaprojects encourage industry R&D labs,
universities and research institutes to work

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China’s strategy implementation – Division & CoorDination of Work, CommanD & Control
together, augmenting each other’s strengths
and pooling their resources on technological
challenges.
In addition to MOST direct support, the
National Natural Science Foundation of China
(NSFC) is an organization directly affiliated
to the State Council for the Management of
the National Natural Science Fund (NSFC).
NSFC supports basic research and some
applied research, identifies and fosters
talented researchers in the realm of science
and technology, NSFC cooperates with
the Ministry of Science and Technology to
formulate the principles, policies and plans for
the development of basic research in China.
NSFC undertakes other tasks entrusted by the
State Council and the State Leading Group for
Science and Technology and Education.
More details on how research related to
research in RE is organized and managed in
China is provided in Annexure 7.One measure
of relative performance in any given area
relates to the publication of relevant technical
papers. Annexure7 also provides an analysis of
technical papers on RE published in China and
compares it with papers published in the US.
meDium & long terms strategiC
plans
The 2006 National Medium to Long-
term Plan for the Development of Science and
Technology (2005-2020) serves as the PRC’s
guiding document on innovation policy28 and
represents an important milestone in China’s
scientific modernization. It involves substantial
government investments and incentives for
key technology and engineering projects with
commercial applications. The State Council
in turn extends support for industries in
seven emerging sectors. The sectors those are
related to REEs include energy conservation
and environmental conservation, clean energy,
new materials, including the development of
rare earth materials, special glass, functional
ceramics, metal alloys and alloy steels.
Since 1980s all the major science and
technology programmes of the government
had a vital component related to material
developments particularly rare earth materials.
China’s efforts draw significantly on the
resources and planning role of the state,
whose national science programs have long
made targeted investments in research and
development (R&D) efforts in areas deemed
critical to China’s economic and military needs.
China’s industrial bureaucracies have also
supported high technology industries through
subsidies for industry, procurement policies;
financial support for enterprises’ international
expansion, and large-scale investments.
China’s Creation of national
Capabilities in rare earths
Figure 7 captures the complex coordination
within the Chinese politico-bureaucratic system
that must be taking place for China to have
achieved a dominant position in the global RE
industry between the early 1990’s and 2005.
28 What is happening in the RE industrial ecosystem of China can at best be termed incremental innovation which is
the case with a follower company or industry playing catch up. While the pace of new breakthrough discoveries
in Rare Earths is slowing down there are still possibilities of such discoveries. The Chinese ecosystem is currently
well poised to take advantage of such breakthroughs whether they take place within China or elsewhere in the
world.

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Personal ties between top officials in the
Politburo with the scientists and technologists
are the key to many of the successes that
China has achieved in the high technology
front. They provide the crucial link between
the lower and higher levels of decision making
within the Chinese decision-making system.
Two specific case studies involving important
actions that China took in the RE domain are
presented below to provide much needed
micro detail to the macro picture presented
by this figure.
Figure 7 Coordination between the Politico – Bureaucratic System in China

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NatioNal iNstitute of advaNced studies
China’s rare earth strategy Case 1 -
the aCquisition of magnequenCh
As a part of its grand strategy on RE in
order to bridge gaps in technology as well as
to acquire a strong dominant position in the
global RE based permanent magnet industry
China targeted and acquired the US based
Magnequench company. This acquisition
received substantial media attention. The details
available help us to piece together Chinese
intentions behind this strategic acquisition.
Magnequench was set up by General
Motors in 1986 as a Rare Earth permanent
magnet manufacturing unit. This unit was set
up in Anderson, Indiana and the first magnets
appeared in the market in 1987.
General Motors put up Magnequench for
sale in the early 1990s. The Sextant Group,
a financial advisory and private equity firm
headed by Archibald Cox Jr29 with two Chinese
state-owned metals firms, San Huan New
Material and China National Nonferrous Metals
Import and Export Company (CNNMIEC)
bought the company. Interestingly the Sextant
Group was formed on 4th October 1993 with Cox
as its Chairman presumably to make this deal.
Probably Cox was used as a front by the Chinese
Case stuDies on China’s strategy in re
company. In the deal, the two Chinese firms
held at least 62 percent of Magnequench shares.
According to Web Memo No.191330 published
by The Heritage Foundation on May 2, 2008,
there were reports that the Chinese government
pressured GM into selling Magnequench to
Chinese interests as a condition for approving
GM’s bid to open an automotive production line
in Shanghai.
The purchase was reviewed by the U.S.
government and finally went through after
China agreed to keep Magnequench in the
United States for at least five years. Shortly
after the Chinese took over, Magnequench’s
Neodymium-Iron-Boron magnet production
line was duplicated in China at a facility built by
the PRC Company. The day after China’s deal to
keep Magnaquench in the United States expired
in 2002, the entire operation, lock, stock and
barrel was moved to China.
In 1997, the Magnequench shares held
by the two Chinese firms were transferred
to Onfem Holdings, a Chinese state-owned
holding company based in Hong Kong. Mr. Wu
Jianchang was heading the company at that
time. Archibald Cox, in the meantime, became
the titular Magnequench President and CEO,
29 He is the son of the famous Watergate prosecutor, Archibald Cox. From 1995 until 2006 he was President and CEO
of Magnequench International, Inc., Anderson, Indiana and Singapore, a manufacturer of rare earth magnetic
materials and magnets. In 1977 he launched Morgan Stanley International in London and served as its Chief
Executive Officer until he resigned in 1988.
30 See http://www.heritage.org/research/reports/2008/05/magnequench-cfius-and-chinas-thirst-for-us-defense-
technology; accessed on 27/12/2012

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Dominating the WorlD China anD the rare earth inDustry
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and the Chinese firm held at least 62 percent
of Magnequench’s stock. Onfem was under the
control of China Minmetals Corporation, one
of the largest State-owned conglomerates that
operate globally with core businesses in ferrous
metals, non-ferrous metals, real estate, finance
and logistics. Subsequently Onfem restructured
its business and completely moved to real estate
hospitality and insurance businesses while
integrating the mineral business with the parent
company renaming it as Minmetals Land. In
2003, with the approval of the State Council of
the PRC, China Minmetals Corporation officially
took the controlling interests in Minmetals
Land.
Figure 8 shows the linkages between
important persons and their various company
affiliations.
If we carefully look at the strategy employed
by China in acquiring critical technologies, we
will note the involvement of CPC members
in all the decision making process. In fact we
noted that in one of our earlier assessment
of China’s missile development, that a large
number of politburo members are highly
educated engineers. What we note in the case
of Rare Earth decision making is that many
of the CPC members are chemists, geologists,
geophysicists and petroleum engineers. In
addition connections to influential people
matter significantly. More importantly the
decision making process is not a simple top
down or bottom up approach. What works in
China is very different.
For example, the chairman of San Huan,
Zhang Hong, was the son-in-law of former
Chinese leader Deng Xiaoping31 and took over
as Chairman of Magnequench while retaining
Cox as the Chief Executive Officer (CEO).
Zhang Hong is married to Deng Nan,
the daughter of Deng Xiaoping. He was the
Deputy Director of the Technology Sciences and
31 Zhang Hong now heads the Research and Development Bureau of the Chinese Academy of Sciences
Figure 8: Personal & Organisational Networks in the Magnequench Acquisition

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NatioNal iNstitute of advaNced studies
Case studies on China’s strategy in re
Chairman of San Huan since 1985 and served
as Chairman of Magnequench International, Inc.
and the chairman of the Board and Director of
Neo Material Technologies Inc. from 1995. After
earning a bachelor’s degree in physics from Beijing
University in 1970, Zhang joined the Chinese
Academy of Sciences (CAS) in 1973. His research
activities include application of superconducting
magnets. He was a visiting scientist in the Max
Planck Institute in West Germany from 1978-
81. Zhang participated in the development of
the first installation for fusion research of China.
He was awarded the National Science Congress
Award and the Significant Achievement Award
of the Chinese Academy of Sciences in 1978.
Zhang’s wife Deng Nan was the Vice-
Minister at State Science and Technology
Commission during the negotiation period.
She is currently Vice Chairman and First
Secretary of the China Association for Science
and Technology and a member of the 17th CPC
Central Committee.
The other Chinese investor in Magnequench,
CNNMIEC was at the time run by yet another
son-in-law of Deng Xiao-ping, Wu Jianchang. He
is a trained metallurgist. He is the secretary of
the Party Committee in the National Association
of the Iron and Steel Industry and is the
Independent Non-Executive Director in Jiangxi
Copper Company Limited since June 6, 2008.
He was Deputy General Manager and General
Manager in China National Nonferrous Metals
Industry Corporation. Jiangxi Copper Company
is a subsidiary of China Minmetals Corporation.
The evidence suggests that the acquisition
of Magnequench was a carefully crafted
move by the Chinese Government. Detailed
knowledge coupled with personal equations
and connections with the powers that be help
strategic acquisitions.
China’s rare earth strategy Case 2 - the
attempteD aCquisition of molyCorp
anD the mountain pass re mine
On 23 June 2005 CNOOC Group a state-
owned Chinese oil company made an offer to
purchase the American company Unocal for a
cash consideration of US$18.5 billion. This offer
was finally withdrawn on 2 August. CNOOC Ltd
is a majority-owned subsidiary of CNOOC — one
of the three large state-owned Chinese petroleum
companies. The company comes under the
administrative control of State-Owned Assets
Supervision and Administration Commission of
the State Council (SASAC). SASAC takes care
of the rights and obligations of shareholders on
behalf of the Chinese Government.
Unocal is a relatively small U.S. petroleum
company (gross revenues of $8.2 billion in
2004) with assets primarily in the Gulf of Mexico
and Southeast Asia. Unocal was the 9th largest
oil company in the US. It controls significant
natural gas reserves in Southeast Asia. But
what drove China to make a bid for Unocal was
not oil. Unocal also owned Molycorp, which in
turn owned the Mountain Pass RE mine, the
largest producer of Rare Earths in the US. If
the acquisition had gone through China would
have acquired control of a significant reserve
of RE outside of China. This would have given
it almost monopoly control over current and
future global RE materials supply.
Molycorp purchased Mountain Pass in
1951. In 1978, Unocal purchased Molycorp. In
1982, Mountain Pass Mine began processing
Samarium Oxide and in 1989, it began
processing Neodymium Oxide. These are
critical materials for the production of two most
important types of permanent magnets that
dominate this industry today.
Xiao Zongwei, director of investor relations

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for CNOOC, mentioned at the time of the bid
that “an acquisition of Unocal would not pose
any threat to America’s energy security. Unocal’s
oil and natural gas output in the United States
would continue to be sold in the U.S. market
-- output that represents less than 1% of the
total U.S. consumption of oil and natural gas.”
This gave a clear indication that CNOOC was
actually interested in something other than the
gas and oil assets of Unocal in America.
The US government intervened and the
deal was not allowed to go through.
Figure 9 shows the major stake holders in
the CNOOC bidding process, the people as well
as the organisations involved in decision making.
The profile of each individual reveals how well
networked they are, enabling them to make quick
and coordinated decisions of strategic importance.
According to Long Guoqiang, an expert
with the Development and Research Center of
the State Council, the whole operation was code-
named “Treasure Hunting Ship” targeting a major
piece of U.S. energy real estate and had been
discussed several times in the State Council.32
Though the CNOOC Chairman Fu Chengyu said
that the bid is simply a normal business activity
based on the principles of the free market, the
acquisition bid was largely funded by state organs
and enterprises. The parent company (also called
CNOOC), offered loans worth $7 billion, $6
billion came from a major Chinese government-
owned bank (Industrial and Commercial Bank of
China), and only $3 billion came from its financial
advisers (JP Morgan and Goldman Sachs).
32 Jiang Wenran (2209), “The Unocal Bid: China’s Treasure Hunt of the Century”, China Brief Volume: 5 Issue: 16,
December 31, 2009. http://www.jamestown.org/single/?no_cache=1&tx_ttnews%5Btt_news%5D=3878
Figure 9 Major Stake Holders in Chinese Strategic Decision Making

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Case studies on China’s strategy in re
The bid could not have been made
without the approval from the State Council
and the State-Owned Assets Supervision
and Administration Commission of the State
Council (SASAC) which owns 70 percent owner
of the CNOOC. SASAC is a Special Commission
of the People’s Republic of China, directly
under the State Council. SASAC was created
in March 2003 through the merger of offices
from several other government organizations.
SASAC consolidates the management of nearly
200 central-level, large state-owned enterprises
(SOEs) previously spread among the State
Economic and Trade Commission (SETC), the
State Development Planning Commission, the
Ministry of Finance, the Ministry of Labor and
Social Security, and the Central Enterprise Work
Committee. SASAC absorbed the bulk of the
former SETC offices, and a former SETC director
Li Rongrong was appointed SASAC director.
SASAC is responsible for managing China’s
state-owned enterprises, including appointing
top executives and approving any mergers or
sales of stock or assets, as well as drafting laws
related to state-owned enterprises.
Li Rongrong, is a powerful member of the
CPC with a chemical engineering degree from
Tianjin University, majoring in electro-chemistry.
From 1986, he had served as Vice Director
of Economics Commission of Wuxi, Jiangsu
Province, Director of Light Manufacturing
Bureau, Director of Planning Commission of the
city, and Vice Director of Economics Planning
Commission of Jiangsu. Since August 1992, he
had served in various posts in the State Economic
and Trade Commission (SETC). He served as
the Chairman and Party Secretary of State-
owned Assets Supervision and Administration
Commission of the State Council (SASAC) from
2003-2010. Li was a member of 16th Central
Committee of Communist Party of China, and
is a current member of 17th Central Committee
of CPC. Forbes magazine listed him in the 61th
position as World’s Most Powerful People in 2009.
Apart from managing the state owned
enterprises, there are a number of associations
affiliated to SASAC. Some of these affiliated
organisations are directly linked to the
country’s Rare Earth industry such as China
Enterprise Confederation, China General
Chamber of Commerce, China Iron and Steel
Association, China Petroleum and Chemical
Industry Association and China Nonferrous
Metals Industry Association. Also CNOOC has
memberships in some of these organisations
such as China Enterprise Confederation, China
General Chamber of Commerce and China
Petroleum and Chemical Industry Association.
It is unlikely that Li Rongrong or
SASAC directly knew about the importance
of Molycorp, the Mountain Pass Mine for
China’s strategy in Rare Earths. Most probably
the homework related to the acquisition of
UNOCAL was done elsewhere possibly within
the Chinese RE ecosystem33 that may or
may not have an immediate link with either
SASAC or CNOOC. Irrespective of where the
idea of acquisition of UNOCAL came from,
the Chinese strategic decision-making system
seems to be able to assimilate it and then work
all the levers necessary to make sure that the
appropriate entity within the bureaucracy takes
33 The idea could have come from any one of the numerous ministries and organisations involved with RE
development and management. For it to be operationalized this has to be moved through the system to higher
levels before active action can take place elsewhere. Informal networks do this more efficiently than formal
procedures and routines that is the staple diet for all bureaucracies.

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the necessary actions for implementing the
strategy. In all likelihood SASAC and CNOOC
were told what to do and how to go about
doing it. It is likely that either Politburo or CPC
members linked to Li Rongrong familiar with
the RE industry persuaded SASAC to act.
The most important person in translating the
decision into action would have been the then CEO
of CNOOC, Fu Chengyu. Fu is a geologist from
the Northeast Petroleum Institute in China and
has a Master’s degree in petroleum engineering
from the University of Southern California in the
United States. He also serves as the Chairman of
the Board of Directors of CNOOC China Limited
and CNOOC International Limited, both being
subsidiaries of the Company. He is also a Chairman
of the Presidium of China Federation of Industrial
Economics and the Vice chairman of China Chamber
of International Commerce; which are affiliated
to SASAC. Though he might not have planned
the acquisition of Molycorp through Unocal, his
education in geology and petroleum engineering
from the University of Southern California where
the Molycorp mine is located would have given
him enough back ground information.34
In this instance as in the Magnequench case,
connections with the CPC members, knowledge
in the technological field, awareness of the global
trade scenario, were important in making a bid.
the role of informal netWorks
in strategy formulation &
implementation in China
The two case studies provide a fairly good
idea of how the Chinese strategy in Rare Earths
is crafted. By looking at key individuals and
organisations within the Chinese system that
have been involved in these acquisition bids
we can make certain inferences on how the
Chinese system worked. The Magnequench
case shows clear evidence of connections
between the RE ecosystem and the Politburo.
Family ties reinforce positions of power and
influence within the Chinese RE ecosystem. In
the case of UNOCAL the connections to sources
of power and influence are more indirect but
are nevertheless there. From these we can infer
that there are closely knit informal networks
of people that span the political, military,
technology and academic domains that are
the key to many important decisions. These
networks enable the decision-making system
to bridge many gaps that come about from the
standard division of work and coordination
of work within the organisation structures
and routines that are typical of complex high
technology industrial ecosystems like the
RE ecosystem.35 These divisions of work and
coordination of work capabilities are difficult
to acquire formally. Only some of the western
advanced countries have been able to achieve
this through formal methods of coordination
and control. However China seems to have
become fairly adept at creating viable complex
ecosystems via an alternative method of using
informal networks for achieving the same
organizational functions of coordination and
control. This seems to be a common thread
running through the several cases that we have
studied at NIAS in other domains as well.
34 It is possible that SASAC and CNOOC wanted to acquire UNOCAL as a part of China’s Oil strategy rather than as
a part of their RE strategy. This however appears highly unlikely given our understanding of Chinese motivations
and behavior as well as some public statements.
35 Some of these organizational structure and networks in the Chinese system particularly with reference to missile
technology has been studied elaborately in a ISSSP-NIAS report in 2007 on “An Assessment of China’s Ballistic
and Cruise Missiles”, R4-07 .

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The RAND Corporation carried out an
interesting study trying to assess technology
diffusion and acceptance in 200636. The report
tried to predict where each country would
be in 2020 given the barriers and drivers
prevailing in each of the countries studied. The
report also stated that the ability to acquire
a technology application does not equal the
ability to implement it. Importing or acquiring
technology does not guarantee diffusion into
Society. Clearly there has to be some amount
of preparedness on the part of the country
acquiring a new technology to absorb and
use the technology. It is in this context that
China has clearly demonstrated its purpose
in acquiring technology related to rare earth
product manufacture.
Even before China acquired Magnequench
and later transferred the entire manufacturing
unit to China, considerable preparatory R
& D work was in place in the country. If we
look at the important events in China starting
from 1950, (See Section and Annexure 6),
mining, processing and separation of REE was
already in the advanced stage. We also saw
that several institutes and laboratories were
working in these areas. China was actually
going up the supply chain, specifically in the
manufacture of permanent magnets as well as
the future of the global re inDustrial
eCosystem
in other intermediates that use Rare Earths.
Support through the 863 and 973 programs
were also in place. In fact, special thrust to
materials sciences and particularly RE materials
properties was given in the 973 programme.
The 1992 clarion call given by the Chinese
patriarch that China has rare earths was actually
an indication of what was coming. Obviously all
the developments indicated that China saw RE
as a strategic material and that it was not too
wrong in this assessment. What is noteworthy is
that an advanced powerful and rich country like
the US missed the events unfolding in China
with respect to this material.
Thus, by 2005, Magnequench became
a proprietor of several important rare-earths
magnet patents and production processes.
Magnequench merged with a Canadian rare-
earths firm, AMR in 2005. AMR is now known
as NEO Materials Technologies with two
divisions called Magnequench and Performance
Materials. The merger resulted in Magnequench
holding 62% of shares of AMR and AMR would
hold 38% shares. Cox was named the chairman
of AMR.37
In less than a decade, the permanent
magnet market experienced a complete shift
in leadership. By September 2007 China
had 130-odd sintered NdFeB large magnet
36 Richard Silberglitt, Philip S. Antón, David R. Howell, Anny Wong, The Global technology revolution 2020,
RAND Report MG-475, 2006
37 Cox has since joined Barclays as Chairman of Americas in May 2008.

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Dominating the WorlD China anD the rare earth inDustry
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manufacturing enterprises with an average
annual growth of over 30 percent.38 NEO and its
Magnequench affiliate report that 85 percent of
their manufacturing facilities are in China (the
other 15 percent is in Thailand); that 95 percent
of their personnel are located in China; and that
all of their China manufacturing facilities are in
the form of “joint ventures” with Chinese state-
owned enterprises.
Though the US had a dominant position
in the permanent magnets market in the late
1980’s and the early 1990’s its position today
has weakened considerably. After the discovery
of the new class of RE magnets (Samarium-
Cobalt magnets) in the sixties by researchers at
Wright Patterson Air Force Base, the US magnet
industry reached its peak in the eighties. The
industry was dominated by the Americans
for another decade. At that time roughly
6000 people were employed by the American
magnet industry which dwindled to 100 in
the nineties. Today the U.S. magnet industry
employs roughly 600 people39. There are now
three Alnico producers, one independent hard
ferrite producer, two Sm-Co producers. Nd-Fe-B
magnets are not produced in the US today40.
A major issue for REE development in the
United States is the lack of refining, alloying,
and fabricating capacity that could process
any future rare earth production. One US
company, Electron Energy Corporation (EEC)
in Landisville, PA, produces Samarium Cobalt
(SmCo) permanent magnets. EEC, in its
production of its SmCo permanent magnet, uses
small amounts of Gadolinium—an REE of which
there is no U.S. production. In addition small
amounts of Dysprosium and Terbium, required
for these magnets are currently available only
in China. EEC imports magnet alloys used for its
magnet production from China.
The U.S.-based Molycorp Rare Earth
mine has restarted mining operations in the
US. The Mountain Pass mine however, does
not have substantial amounts of heavy rare
earth elements, such as Dysprosium, which
provide much of the heat-resistant qualities
of permanent magnets used in many industry
and defense applications. Newer mines
would typically take 12 years from initial
exploration to mining.41 The steps involved are
– Initial exploration, Advanced Exploration,
Environmental Studies, Pre-feasibility Studies,
Feasibility studies, Permissions, Financing and
Construction. In the US, even if all the required
permissions are granted, it will still take at least
five years to start mining operations.
It would also take at least 5 years to
develop a pilot plant that could refine oxides to
metal using new technologies, and companies
with existing infrastructure in the US cannot
start metal production without a consistent
source of oxides, which has to come from
China. More recently Molycorp Inc. (MCP)
acquired Neo Material Technologies Inc. (NEM)
in March 2012. China has 62% shares in NEM.
This tie up between Molycorp and NEO actually
38 Hurst Cindy, (2010), China’s Rare Earth Elements Industry: What Can the West Learn? Institute for the Analysis
of Global Security (IAGS), March 2010, P.13
39 P. C. Dent, Adv. Mater. Process. 167(8), (2009), HIGH PERFORMANCE MAGNET MATERIALS: Risky supply Chain
40 A review of Rare Earth Permanent magnet and their characteristics is available in - Rare earth elements and
permanent magnets by P.C.Dent, Jl of Appl. Physics, 2012.
41 Rare Earth Elements: A Review of Production, Processing, Recycling, and Associated Environmental Issues,
EPA/600/R-12/5721August 2012, www.epa.gov/ord. See Page 3-12

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The FuTure oF The Global re IndusTrIal ecosysTem
has proved even more advantageous to China.
The United States has the expertise but lacks
the manufacturing assets and facilities to refine
oxides to metals. Molycorp will be shipping
all its rare earth elements mined in the U.S to
factories based in China. What China could not
achieve thorough its bid for UNOCAL in 2005
to acquire Molycorp and its assets, is achieved
now with a zero cost and very little political
ramifications. The U.S. is completely dependent
on China for rare-earth-magnet materials, and
now the export of U.S. rare earth assets into
China will only intensify this dependence at
least, for some more years.
While the Chinese were investing on the
human resource development, the US has
been left with a much depleted workforce in
this area. As pointed out by K.A. Gschneidner
Jr of the Ames Laboratory in 2010, there are
not enough technically trained personnel with
the appropriate expertise in the US to take
care of the value chain from raw materials to
major RE intermediates. In fact many of the
experts in the field moved away from Rare
Earths due to lack of opportunities. As already
mentioned publications from Iowa State
University, dwindled in the nineties and Masters
Programmes on rare earth engineering were
shut down.
This underinvestment in the U.S. supply
chain capacity (including processing, workforce
development, R&D) has left the United States
nearly 100% import dependent on all aspects of
the RE product supply chain.
China has abundant reserves of rare earth
metals but what worries it is its inefficient use
and environmental damages caused by current
mining and refining process. Efficiency in rare
earth refining is the major research question
that is bothering the Chinese scientists. China’s
State Key Laboratory of Rare Earth Materials
Chemistry and Applications based at Peking
University recently launched an 85-million-
yuan research project titled “Research on
high-efficiency use of rare earth resources
and rare earth green separation”. This project
will be funded under China’s national S&T
programme “National Program on Key Basic
Research Project (973 Program). Partners in
this project include Peking University, Tsinghua
University in Beijing, and two CAS institutes,
the Shanghai Institute of Organic Chemistry
and the Changchun Institute of Applied
Chemistry as well as Northeastern University
in Shenyang42. Such efforts and support by the
Chinese government clearly indicate that China
is serious in retaining its dominant status in this
area.
Patents for manufacturing neodymium
iron boron magnets are currently held by Japan
and China. Some of these patents do not expire
until 2014. As a result, companies preparing
to enter the neodymium iron boron magnet
market in the United States must wait for the
patents to expire. It would be interesting to
watch the developments in 2014, when the
Magenquench’s patent for neodymium-iron-
boron magnets expire.
Though we have only covered the RE
permanent magnet industry in this part China
is assiduously building up dominant positions
in other value chains that span the global RE
industrial ecosystem. It is also clear from the
available evidence that they will use this RE
economic lever as an element of larger Grand
Strategy to advance Chinese interests in the
42 China’s New Basic Research Project on Rare Earth. http://news.nost.org.cn/tag/973/ Posted on May 25, 2012

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Dominating the WorlD China anD the rare earth inDustry
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arena of global geo-politics. This is of course
based on the assumption that RE would
continue to be materials of importance for
emerging hi-tech industries especially those
providing a greener and more environment
friendly footprint. It is of course possible
that new materials that are currently being
researched could substitute or replace RE
materials in many critical areas of use. Even if
this were so such transitions in technology and
product life cycles will take some time. In the
short to medium term the Chinese do have a
considerable degree of control over the global
RE Industrial ecosystem. It also appears that
they will use this dominant position in pursuit
of their overall grand strategy.

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The available evidence suggests that China’s
current domination of the global Rare Earths (RE)
Industrial Ecosystem is the result of a well-thought
out carefully crafted dynamic long term strategy.
China has cleverly used the dynamics of the
transition of the RE industry from the growth
into the maturity phase of the lifecycle to build
a dominant presence in most value chains of the
RE ecosystem.
China controls not only the raw materials
but also the production of key intermediates that
go into many hi-tech growth industries.
In contrast the US which actually pioneered
many of the breakthrough discoveries in RE
materials has allowed its once dominant
position in RE to erode. It is now dependent
on Chinese largesse to make sure enough RE
materials and intermediates are available for its
use. The US today has no industrial capacity in
RE allowing global market dynamics to move
all of them to China.
RE shortages and price increases will affect
many sectors of an advanced economy. These
include not only large economic value adding
industries but also many defence products and
industries.
Though the RE industry is currently in the
maturity phase where a slowdown in growth
is indicated, the use of RE in critical green
products like hybrid cars, wind mills, lighting,
fuel cells and many other advanced consumer
and industrial products suggests that the
industry may grow considerably.
New demand from emerging markets like
ConClusions
China and India is also likely to fuel the growth
of the RE industry.
China is well positioned to use its
dominant position in RE as a part of its larger
global strategic aims. Its cutting off of RE
supplies to Japan as a consequence of a minor
spat provides fairly hard evidence that it will
use economic levers for furthering its global
strategic positions and interests.
Through the tracing of the evolution of the
RE industry in China the study also sheds light
on how strategy is formulated and implemented
in China.
There is always a long term national
interest in the evolution of the specifics of a
medium terms strategy via the five year plans.
The strategies seem to be formulated keeping in
mind both constraints and opportunities and they
are adaptable to changing global conditions. The
grand top down view seems to be seeded with
lower level ideas on how to further Chinese global
and national interests. Well-connected eminent
technocrats seem to be able to access top level
officials within the CPC and the Politburo and
they seem to provide the micro detail for making
sure the top down strategies are grounded in the
realities of the dynamic global environment. In
the case of Rare Earths there seem to have been
close links between XuGuangxian, the father
of the Rare Earth Industry in China and Deng
Xiaoping the Chairman of the CPC and the head
of the Politburo.
The other thing that emerges clearly
from our study on RE in China is that strategy

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Dominating the WorlD China anD the rare earth inDustry
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implementation is closely linked to strategy
formulation. China seems to have in place
methods and processes to ensure that the
various arms of the government associated with
the implementation of strategy, function in an
integrated way to ensure that Chinese interests
are well protected. The insights that we obtained
from our two case studies on how this integration
of thought and action take place suggest that
informal networks to major power centres
within the Chinese establishment play a key role.
Irrespective of how the integration happens the
Chinese RE industrial ecosystem has dynamic
capabilities that can seamlessly connect strategy
formulation with strategy implementation. Apart
from the more advanced countries in the west
such capabilities do not exist in many of the newly
emerging economies. China appears to be well on
its way to becoming an advanced economic and
industrial power that seems to manage continuity
with change in an adaptive dynamic way.
Though informal networks also play a role
in the more advanced economies of the west most
of the division and coordination of work within
the government industry ecosystem are governed
by more formal rules and procedures. By contrast
the Chinese industry ecosystem is still largely
government dominated and informal networks
seem to provide the integration mechanisms for
implementation of complex strategies.
Though the pace of radical breakthroughs
in the discovery of new RE materials with
unusual properties is slowing down there are
still possibilities that such breakthroughs can
happen. In case such discoveries take place they
could well take place in China. Even if it were to
happen elsewhere the Chinese RE ecosystem is
well placed to exploit it in a major way.
China’s success with its strategy on RE is
of course dependent on the continued use of RE
intermediates in many key industries especially
those dealing with a greener future. Current and
future research can throw up new discoveries
and approaches that could substitute for Rare
Earths in many key applications like motors and
batteries. In the mature phase of an industry
such possibilities increase. However because of
their special position in the Periodic Table Rare
Earths have unusual properties that confer on
them special advantages that may not be easily
substitutable in all applications.
While eventual substitution of old
technologies with new technologies will take place
the crucial aspect that will determine the success
of China’s longer term strategy on Rare Earths is
the timing of such breakthrough discoveries in
key application segments. The limited insights
obtained from our study indicate that in the short
to medium term China is well-poised to take
advantage of its dominant position in the global
RE industrial ecosystem. If this were to be so it
would be a vindication of the forward looking
long term strategic thinking that seems to govern
much of the Chinese behavior.
In the case of Rare Earths, China has
successfully caught up and even overtaken major
global players. However an advanced economic
and industrial country is typically characterized
by its ability to create new industries through
radical innovations. Playing catch-up is of course
important and China has demonstrated that in RE
as well as in several other domains it can do so
quite well. In the existing RE industry China should
be able to exploit any major breakthroughs if they
happen. However this is still not quite the same as
creating a new industry of the future via radical
breakthroughs within the Chinese ecosystem. This
is the kind of advanced economic and industrial
power that China aspires to become. Whether it
will do so and whether its internal dynamics will
allow such things to happen is an open question
and a subject for future investigations.

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Catalysts
Most of the rare earths used as catalysts
go into the refineries where they are used to
break up the heavier fractions into lighter
chain molecules. Lanthanum and cerium are
the major rare earths that go into the fluid
catalytic crackers. The catalyst uses a zeolite
– Aluminium silicate core structure - to which
rare earths have been added to provide superior
catalytic action. The Zeolite structure with the
rare earth addition acts not only to enhance its
activities as a molecular sieve but prevents the
dealuminization of the Zeolite and allows an
increase in operating temperature and the yield.
Most catalysts are proprietary or protected by
patents. The heavier the crude the greater is the
quantity of catalysts that are required.
The Rare Earth usage in Zeolite catalysts
goes back to the early 1960’s. The industry is
more than 50 years old and is a mature industry.
In the early days the rare earths were added to
the zeolite as Misch Metal. Today Lanthanum
and Cerium are used and the catalysts have
become more specialized.
Yttrium is also used to polymerise ethylene
in the petrochemical industry.
These catalysts could also find use in other
ion exchange systems, water treatment and
nuclear waste processing.
Catalysts account for about 15% of
the total market for Rare Earths as of 2008.
Demand is directly linked to the growth in the
lighter fraction such as gasoline and petrol. It is
annexure 1: use of rare earth intermeDiates by
the global re eCosystem
expected to be stable. Because of RE shortages
some of the major companies in the US such
as WR Grace seem to working on new catalysts
that do not require RE.
auto CatalytiC Converters
They have been in use from the early
1970’s in the US. Today all automobiles across
the world use them. They have shifted from two
way to three way converters where CO, unburnt
Hydrocarbons as well as oxides of nitrogen are
taken care of.
They generally use a cordierite substrate
and a wash coat that contains the catalyst. The
catalyst is generally a precious metal to which
often a rare earth addition is included. The RE
in maximum use currently is Cerium. Cerium
oxide can convert CO to CO2 if CO rich and
converts back to Cerium oxide if Oxygen rich.
An Oxygen sensor is therefore a necessary part
of emission control system for automobile.
There are a number of companies that
supply Catalytic Converters including Chinese
companies. It can be considered to be a separate
industry that links to the automobile industry.
Catalytic converters are also used in
smaller vehicles including two-wheelers.
Electric bikes in China are a major market
where such converters are reported to be used
in large scale.
Use of RE in Catalytic Converters accounted
for 6% of the market in 2008. The major RE
used for this is Cerium though Lanthanum,

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Praseodymium and Neodymium are also used.
The specific formulations are proprietary and
maybe protected by patents.
Though the industry is over thirty years
old – with growth in emerging markets like
China and India – makes it potentially at least
a medium growth industry.
batteries
Nickel Metal Hydride (NMH) batteries
are becoming increasingly important for use in
hybrid cars.
The batteries use an Alloy of generic
composition La Ni5 as anode material. Specific
compositions could vary around the general
structure described by the LaNi5 architecture.
The use of a rare earth anode facilitates the
storage of large quantities of hydrogen needed
for the operation of the battery.
Rare Earth Metals either individually or
as Misch metal (a combination of Lanthanum
Cerium Neodymium Praseodymium) is used
though Lanthanum and Cerium are dominant.
Many large Japanese and US companies
dominate the market.
Apparently US automobile companies are
looking to Lithium batteries as the solution for
the hybrid cars. Japanese companies including
Honda and Toyota see Rare earth Nickel
Hydride Batteries as a better interim solution
at least till all the technical problems associated
with Lithium batteries are resolved.
Though these RE batteries have been
around for quite some time the potential
increase in the growth of hybrid cars may fuel
a major demand for them which will in turn
increase the demand for rare earths.
China’s electric Bike industry is also a
major demand driver for batteries and for Rare
Earths.
Batteries accounted for 9% of the market
for Rare Earths in 2008.
fuel Cells / hyDrogen storage
Solid Electrolyte Fuel Cells (SEFC) are
becoming increasingly important as possible
sources for producing green power. Rare Earths
are likely to be used as anodes, cathodes,
electrolytes and inter-connects between cells to
form the power source.
Lanthanum, Cerium, Yttrium, Gadolinium,
and Scandium are all potential candidates for
various elements that go into a fuel cell. Many of
them seem to be under technical investigation.
Hydrogen storage and discharge properties,
similar to what makes Rare Earths attractive in
Batteries,-seems to be important in fuel cells.
From our review most fuel cell work seems to
be oriented towards the production of power
and not so much into automobiles.
Demand right now appears to be fairly
small. The technology appears to be still in its
early incubation phase. The same properties
that make Rare Earths especially Lanthanum
attractive for batteries and fuel cells also make
these RE materials attractive for storage of
Hydrogen.
glass
The major REs used in glass are Cerium and
Lanthanum. Smaller quantities of Neodymium,
Praseodymium Yttrium and Erbium are also
used.
The addition of Lanthanum (actually a
mixture of rare earth oxides) to glass goes
back a long time and was used in the early gas
mantles used to provide lighting in the 1880’s.
The addition of Lanthanum and other rare
earths increases the refractive index of glass,
making it easier to build better lenses without

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Annexure 1
much chromatic aberration. Their addition to
glass also provides it with resistance to alkalis
that is useful in many industrial applications.
Some special compositions of glass that
contain Lanthanum like ZABLAN exhibit
superior properties in the infrared. They are
used in night vision equipment as well as in
fibre optics for superior infrared transmission.
These are emerging as new areas of importance
with new glass formulations using Lanthanum.
In other compositions Lanthanum also absorbs
infrared making it suitable for lenses and optical
components.
Cerium is used both as a de-colourizer as
well as a colour additive. Along with Ti it also
adds yellow colour to glass. Cerium addition to
some glass compositions enables it to absorb UV
Light and is used in solar cell cover glasses.
Neodymium is used as a colourant. It cuts
out yellow light and therefore glasses made
out of it change colour under different lighting
conditions. Due to its yellow light filtering
properties it is used in the rear view mirrors
of automobiles and in goggles for welding
applications.
Praseodymium is also used as a yellow
colourant for glass. Along with Nd it is used in
goggles. It is also used as a dopant in fibre optic
amplifiers. Yttrium is used to provide improved
heat and shock resistance to glass.
Erbium is used in fibre optic amplifiers
to regenerate the optical signal for onward
transmission. This is critical for all new
generation fibre optic cables for transmitting
signals over longer distances.
Glass accounted for 9% of the market for
rare earths in 2008.
glass / substrate polishing agents
One of the earliest uses of RE oxides was
for polishing glass. Though Cerium was the
main ingredient the polishing was done through
the use of Misch Metal – a combination of La,
Ce, Nd and Pr.
This accounted for 13% of the total Market
for Rare Earths in 2008.
Cerium based polish is also used to polish
the discs of Computer hard drives.
This is a very mature industry and not
likely to witness any major growth. However
demand for RE polishing agents likely to be
stable and substantial.
metallurgy
Metallurgy applications accounted for
about 9% of the consumption of Rare Earths for
2008.
Misch Metal , a combination of un-
separated Rare Earths has been traditionally
used in combination with iron for producing
flints. Cerium is the main constituent for the
spark generation.
Cerium has the largest use in Metallurgy
applications followed by Lanthanum and then
by Neodymium. Praseodymium is consumed to
a much lesser extent than either Lanthanum or
Neodymium.
Lanthanum is added to steel to improve
malleability and to Molybdenum to reduce
hardness and improve material properties with
temperature.
Cerium is added to Cast Iron used in auto
engines to improve machineability. It is also
added to Magnesium castings for producing
sounder casts and for improving its temperature
related properties. It is added to steel to
degasify it and to eliminate sulphur dioxide.
Cerium is used as a precipitation hardener in
the production of stainless Steel. It also finds
some use in the production of Aluminium alloys

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and as an additive for chromium electroplating.
Both Lanthanum and Cerium – maybe
as Misch metal substitute for Thorium in the
production of TIG Electrodes.
Praseodymium in combination with
Neodymium – earlier termed Didymium –
is used as an alloying agent in Magnesium
castings. These are used in the production of
aircraft engines.
phosphors
Phosphors absorb light energy in one wave
length and emit it in another.
RE phosphors are used in all kinds of end
products to provide the right kind of light.
Early Gaslights used rare earth mixtures
in the 1880’s. Carbon arc lamps which are now
largely phased out also used Lanthanum
Regular Glass products for use in TV
monitors, Plasma TV as well as LCD displays
use these phosphors.
Europium Phosphors were one of the
earliest RE to be used in lighting applications
– goes back to 1965 when colour TV became a
dominant product in the US.
RE phosphors have been used in
backlighting applications for various instrument
panels.
In Compact Fluorescent Lights these
phosphors are used to provide different kind of
light outputs from the basic fluorescent process.
Terbium based phosphors provide Green
light, Europium provides red light and Yttrium
based phosphors emit blue light. In varying
combinations they can provide any required
combination of lighting.
The emissions of light from fluorescent
lamps can be converted to any form of required
lighting by coating the lamps with a suitable
combination of phosphor coatings.
LED produce colour either by having
three semiconductor devices located suitably
providing the three colours or by using one
high efficiency blue LED – whose output is
converted to white light via a Cerium doped
YAG phosphor coating. This phosphor approach
is seen currently as being preferred to the three
diode three colour option.
Phosphors accounted for 7% of the Rare
Earths market in 2008
CeramiCs
The ceramics that use Rare Earths can be
grouped into two broad categories – Structural
ceramics and Technical Ceramics. Yttrium
is the RE that is used maximally followed
by Lanthanum. Cerium, Neodymium and
Praseodymium are also used to a smaller extent.
Yttrium addition to Zirconia stabilizes it
and provides it with superior properties. It is
used both in structural forms as well as coatings
in many applications such as dentistry, jet
engines, gas turbines, sensors, jewelry, knives,
crucible ceramics for reactive materials as
well as in Oxygen sensors used in auto engine
systems.
Neodymium, Praseodymium and Erbium
provide unique colours to tiles used in the
construction industry.
In high tech applications cerium is added
to the zirconia tiles used for the space shuttle.
One major application of Rare Earths in
electronics is their use as dopants in the Barium
Titanate Dielectric material that is the basis of
both single layer and multilayer ceramic chip
capacitors. These are increasingly an important
part of advanced electronic packaging systems.
In the garnet structural form Yttrium
Aluminium Garnet (YAG), grown as a crystal
and doped with Neodymium, is an essential

43
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Annexure 1
part of solid state lasers which find applications
in surgery as well as in general manufacturing.
In defence these lasers are used in various range
finding and target determination applications.
Such lasers are also used to locate targets under
water.
The same garnet structural form is used
via Yttrium Iron Garnets (YIG) and Yttrium
Gadolinium Garnets (YGG) for various
microwave components such as circulators
and resonators. Some high frequency wireless
communication systems may need microwave
filters made out of ceric oxide doped with
Neodymium and Samarium.
Many garnet structures with RE additions
also find applications in jewelry as stones.
Ceramics accounted for 5% of the total
market for Rare Earths in 2008.
permanent magnets
Prior to the advent of Rare Earth Permanent
Magnets Al Ni Co (Aluminium Nickel Cobalt)
and ferrite magnets were dominant for most
applications.
These were replaced by Samarium Cobalt
magnets first introduced into the market in
1970. This was one of the earliest applications
to use Samarium.
Due to problems with the supply of
Cobalt in the early 1980s Hitachi and General
Motors discovered and developed Nd Fe B or
Neodymium Iron Boron permanent magnets
which became commercial around 1986.
These magnets have become the mainstay
technology route for all permanent magnet
applications in industry. They have largely
replaced the earlier generation Samarium
Cobalt magnets.
These permanent magnets are needed in
the production of electric motors of all sizes.
Major industries that need them are hybrid car
engines and the growing wind power turbine
industry. They may also be needed in regular
power plants.
Permanent magnets from rare earths
are critical components in the fabrication of
high power tubes such as TWT, Klystrons,
Magnetrons and Power Amplifiers. These tubes
are vital components that go into Radar as well
as all kinds of communication systems.
Permanent magnets are also used in the
hard drives associated with PC’s and other disc
devices like disc players. They are also essential
constituents of speakers of all kinds that go into
many consumer electronics products. Permanent
magnets are also used in actuators used for
missile, satellite and aircraft control systems.
One of the largest uses of Permanent
magnets in electric motors may be the use of
electric powered bicycles in China.
China’s foray into using its rare earth
position and capabilities as a part of its grand
strategy has been anchored on its position
both on rare earth material supply and its
dominant position in the manufacture of Rare
Earth Magnets. Neodymium is the largest Rare
earth input that goes into permanent magnets
followed by Praseodymium and Dysprosium.
Small amounts of Gadolinium and Terbium are
also used.
Magnets accounted for about 20% of the
total market for Rare Earth Materials in 2008.
other uses
A number of other uses accounted for
about 6% of the market in 2008.

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annexure 2: the rare earth eConomiC
netWork

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Node Input into Node Output from Node Total Links Rank
Glass 8 16 24 1
Cerium 0 15 15 2
Lanthanum 0 14 14 3
Permanent Magnets 6 8 14 3
BaTio3 MLCC Capacitors 7 6 13 5
RE Phosphors 6 6 12 6
Neodymium 0 11 11 7
Praesodymium 0 11 11 7
Yrium 0 11 11 7
Zirconia / YSZ 1 8 9 10
Catalyst 3 4 7 11
Fuel cells 6 1 7 11
Automobile 7 0 7 11
Communicaons 7 0 7 11
Baeries 5 1 6 15
Nd YAG Lasers 3 3 6 15
Microwave lters 3 3 6 15
Cathodes 1 5 6 15
Radar 6 0 6 15
Speakers 1 5 6 15
Catalyc Converters 4 1 5 21
Polishing agents 3 2 5 21
Opcal elements 1 4 5 21
Fiber opcs 5 0 5 21
Microwave components 2 3 5 21
Motors 1 4 5 21
Samarium 0 4 4 27
Gadolinium 0 4 4 27
Terfenol D 2 2 4 27
Other RE 0 4 4 27
Reneries 2 2 4 27
Hard Drives 2 2 4 27
Flint 4 0 4 27
Jewelry 4 0 4 27
TWT 2 2 4 27
Magnetron 2 2 4 27
Klystron 2 2 4 27
Cell phones 4 0 4 27
Dysprosium 0 3 3 38
Terbium 0 3 3 38
Petro chem 3 0 3 38
Steel 3 0 3 38
annexure 3: rare earth eConomiC netWork
rankings

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Dominating the WorlD China anD the rare earth inDustry
NatioNal iNstitute of advaNced studies
Node Input into Node Output from Node Total Links Rank
Ceramic les 3 0 3 38
YIGS Garnet 1 2 3 38
YGGS Garnet 1 2 3 38
Laptops 3 0 3 38
Fuel addive 1 1 2 46
Power Systems 2 0 2 46
Opcal products 2 0 2 46
Night vision 2 0 2 46
Hi Power Lasers 2 0 2 46
Cast Iron 1 1 2 46
Magnesium 1 1 2 46
TIG electrodes 2 0 2 46
Jet engine 2 0 2 46
O2 sensor 1 1 2 46
CRT 2 0 2 46
LED Lights 2 0 2 46
CFL 2 0 2 46
Plasma TV 2 0 2 46
LCD 2 0 2 46
TV 2 0 2 46
Music Systems 2 0 2 46
Toys 2 0 2 46
Europium 0 1 1 64
Ion Exchange 1 0 1 64
Solar Cells 1 0 1 64
Incandescent Lamps 1 0 1 64
Goggles 1 0 1 64
TV monitors 1 0 1 64
Molybdenum 1 0 1 64
Aluminum 1 0 1 64
Shule Tiles 1 0 1 64
Denstry 1 0 1 64
Gas Turbines 1 0 1 64
Knives 1 0 1 64
Refractory Crucibles nozzles 1 0 1 64
Electron Microscopes 1 0 1 64
Ion Thrusters 1 0 1 64
Electronics 0 1 1 64
Water Treatment 1 0 1 64
Pharma -renal 1 0 1 64
Missiles / Aircra 1 0 1 64
MRI scanners 1 0 1 64
Disc players 1 0 1 64
Wind mills 1 0 1 64
Range nder 1 0 1 64
Surgery 1 0 1 64
Manufacturing 1 0 1 64
Noise control 1 0 1 64
Acousc transducer 1 0 1 64
HT Superconductors 1 0 1 64

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Time Key Event In Rare Earth Industry
Late 18th& 19th Century Discovery and measurement of properes of various Rare Earths (RE)
1884 to early 1900’s First commercial applicaon – incandescent gas mantles
1903 to 1908 Commercializaon of the Flint industry – Spark ignion connues to date
1912 Rare earths added to glass for providing colour - connues to date
1930 Sub orbitals – Hund’s Rule links electronic structure to the Periodic Table
1934 Lanthanum Crowns a higher refracve index glass commercialized by Kodak
Manhaan Project New Ion Exchange Technology for Metal Extracon gives RE boost.
1948 Misch Metal addion to nodular Cast Iron – Metallurgy applicaon
1949 Mountain Pass Mine discovered in California
1950’s Cerium oxide Misch Metal used for the polishing of glass
1953 Solvent extracon Process becomes important – used for RE separaon
1964 RE addions to Zeolite catalysts – Petroleum cracking – becomes commercial
1965 Europium used as a phosphor for Cathode Ray Tubes in the US – major market
1970 Lanthanum Nickel Hydride discovered – rst patent for La Ni5 Baery 1975
1970 Misch Metal addion to steel – declining use in 1980’s - cheaper substutes
1970 RE phosphors improve safety in X-ray machines
1980 PrNi5 Rare Earth Nickel Hydride used in a ultra-low temperature refrigerator
1981 Cold war problems with cobalt supply lead to Nd Fe B magnet discovery
1986 Nd Fe B magnets go commercial – General Motors sets up Magnaquench
1983 to 1986 RE used as dopants for Barium Titanate MLCC Capacitors
1987 Erbium doped ber amplier – big push to ber opcs
1995 A consorum of companies from China aempt to buy Magna Quench
1998 Mountain Pass Mine closed for environmental reasons
2002 All assets of Magnaquench moved to China
2005 China tries to buy Unocal US Oil Company owner Mountain Pass RE Mine
2007 China cuts o rare earth supply to W R Grace major catalyst producer in US
2007 China begins Raoning RE supply - favours domesc companies
2008 China tries to buy controlling stake in Lynas – Australian Rare Earth Mine
2009 China buys stake in another RE mine Arafura Resources Ltd in Australia
2010 China cuts o Rare Earth supply to Japan following a shing trawler incident
annexure 4: major events in the evolution of
the rare earth inDustry

51
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The principal rare-earth ores are bastnäsite,
monazite, xenotime, loparite, and lateritic ion-
adsorption clays. However, production can come
from a variety of minerals, such as xenotime,
apatite, yttrofluorite, cerite, and gadolinite. Due
to their strong affinity for oxygen, Rare Earth
Elements (REE) are primarily present as oxides,
and resources are often expressed in terms of
equivalent Rare Earth Oxides (REO). Processing
REOs into usable products is a very complex
process and often varies significantly between
deposits. Table 4 of the main report provides
an overview of current Rare Earth Reserves and
the production from current RE mines.
Most rare earth elements throughout the
world are found in deposits of the minerals
bastnaesite and monazite. Bastnaesite deposits
in the United States and China account for the
largest concentrations of REEs, while monazite
deposits found in Australia, South Africa,
China, Brazil, Malaysia, and India account for
the second largest concentration of REEs. As
per Table 4 China holds about 50 % of
the world’s reserves while the United
States holds about 13%. Bastnaesite occurs
as a primary mineral, while monazite is found
in primary deposits of other ores and typically
recovered as a byproduct. Over 90 percent of
the world’s economically recoverable rare earth
elements are found in primary mineral deposits
i.e., in bastnäsite ores43. Bastnäsite, the principal
source of most of the world’s REE, is dominated
by LREE.
Monazite, a rare earth-thorium phosphate
mineral, is quite similar to bastnäsite as a
LREE ore. However, it contains slightly more
of the HREE, especially, Yttrium, Dysprosium,
and Gadolinium. Monazite has a high content
of thorium, a naturally occurring radioactive
element which makes it environmentally less
attractive to mine.
Loparite, a lesser known LREE ore mined
from Russia’s Kola Peninsula, is an oxide
mineral. It has a small HREE content that is
similar to monazite’s, but with a more balanced
REE mix.
Xenotime, a HREE ore, is mined as a
byproduct of tin mining and to a lesser extent,
as a byproduct of heavy-mineral sands mining.
The ion adsorption lateritic clays are
HREE ores. The lateritic ion adsorption clay
from Xunwu, Jingxi Province, China, is mostly
LREE. However it still has a much higher HREE
content compared to the other LREE ores such as
bastnäsite, monazite, and loparite. This ore is a
significant source of the world’s yttrium supply.44
annexure 5: global rare earth reserves anD
proDuCtion
43 Humphries Marc, (2010), “Rare Earth Elements: The Global Supply Chain”, Congressional Research Service (28
July, 2010). Viewed on 5 February 2011 http://www.fas.org/sgp/CRS/natsec/R41347.pdf
44 Rare earths in selected U.S. defense applications, James B. Hedrick, 40th Forum on the Geology of Industrial
Minerals, 2004

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In the mid-twentieth century, almost all
rare earth mining was done at Mountain Pass,
California. This was largest rare earth minerals
mine in the United States and is currently
owned by Molycorp a subsidiary company of
the oil company UNOCAL. The Mountain Pass
rare earth mine occupies 2,222 acres of land
in San Bernardino County, California. The
mine started operation in 1952, operating as
an open pit lanthanide mining, beneficiation,
and processing facility. The period of greatest
ore production was from 1965 to 1995. Mining
activities were suspended in 2002, but minor
milling activity continues to process stockpiled
ore. Overburden materials were held on site,
tailings, and product storage ponds were also
operated.
Rare Earth resources are dispersed
widely in China. Eighty three percent of the
resources are located in Baiyunebo (Baotou,
Inner Mongolia), eight percent in Shandong
province, three percent in Sichuan province
(light rare earth deposits of La, Ce, Pr, Nd, Sm,
Eu). Another three percent of the deposits are
located in Jiangxi province. These contain more
of the middle and heavy rare earth deposits
(Middle: Gd, Tb, Dy, Ho, Heavy: Er, Tm, Yb, Lu,
Sc, Y). In comparison, while most of the global
supply of heavy REs (e.g. Yttrium) originates
in the “ion adsorption clay” ores of Southern
China, the proven reserves of heavy REs in
the seven Southern Chinese provinces are not
significant.
In the late 1970s, China started increasing
production of REEs, rapidly became the world’s
dominant producer. With the shutdown of
the Mountain Pass Mine in 2002 and little
development in other countries, China became
the world’s leading producer of REEs.
Even before this, China had spent
considerable effort to mine rare earths from its
different mines. Separation techniques were
well developed in China and the labour being
cheap, China began to be the major supplier
of REE and REOs. As mentioned earlier over
80% of the RE mining was a byproduct from
its iron ore mines at Bayan Obo. This had
specific advantage to China because it lowered
the recovery cost and provided a competitive
advantage over other global producers, many
of which mine deposits exclusively for REE.
It is important to note that USA dominated
the production till early nineties – so long as the
Mountain Pass mine was operational. In 1989
the rest of the world production figures overtook
the production in USA. The rest of the world
includes mainly Brazil, China, India, Malaysia,
Australia and to a small extent Sri Lanka and
Thailand. All these countries excepting China
produce rare earth concentrates from Monazite
excepting China where the production is from
Bastenesite ores.
Rare earth production data on China
is not available for the early years. Figure 10
compares the production in China and USA. The
data is taken from the USGS45 and the British
Geological Survey46. The figure should be read
carefully. Rather than looking at the actual
values that are shown, we need to look at the
trend. This is because the data on RE production
are available in different forms. Some sources
give the production in terms of REOs and some
others in terms of the concentrates. The data
here pertain to rare earth concentrates.
45 See http://minerals.usgs.gov/minerals/pubs/commodity/rare_earths/; for data on rare earths.
46 World Mineral Statistics, British Geological Survey, 1984-88, 1985-89.

53
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Annexure 5
Clearly from the year 1995 China is the
major producer of rare earths.
China has not particularly given attention
to environmental hazards in the mining of rare
earths until recently. This has helped China to
cut costs of processing. It is generally believed
that one of the reasons for the closing down of
the Mountain pass mines is the environmental
damage it caused. But another overriding
reason was also the cheap labour available at
China that enabled it to dump its material into
US.
The details of the number of mines
operating in various provinces are provided in
Table 5.
Figure 10 Production of Rare Earths in the US, China and the rest of the
World (1985-2010)
0
20000
40000
60000
80000
100000
120000
140000
1984 1988 1992 1996 2000 2004 2008
USA China
Production in Mtonnes
Year
Table 5
Location of Rare Earth Mines in China47
Province No. of
Mines Province No. of
Mines
Fujian 3Jiangxi 8
Gansu 1 Jilin 1
Guangdong 17 Liaoning 2
Guangxi 7Shandong 2
Guizhou 3Shanxi 1
Hainan 6Sichuan 4
Hebei 3Xinjiang 1
Hubei 3 Yunan 3
Hunan 12 Not Known 2
Inner Mongolia 5Total 84
Inner Mongolia Baotou Steel Rare Earth
Hi-Tech Co. is China’s single largest producer
of the metals. China, which once focused on
47 Table is prepared from G J Orris and R I Grauch (2002), “Rare Earth Element Mines, Deposits, and Occurrences”,
Report 02-189 2002. Available on http://pubs.usgs.gov/of/2002/of02-189/of02-189.pdf

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exporting rare earths in their raw forms, has
moved up the supply chain very gradually.
In the 1970s, China exported rare earth
mineral concentrates. By the 1990s, it began
producing magnets, phosphors and polishing
powders. Now, China makes finished products
like electric motors, batteries, LCDs, mobile
phones etc. Most of the rare earth enterprises
are located around the large rare earth mines,
such as Baotou city, Sichuan province and
Ganzhou city. There are about 24 enterprises
for rare earth concentrate production, and 100
rare earth enterprises for smelting, separation
and production in China.

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Year Salient Events related to Rare earths
1927 Iron deposits discovered in Bayan Obo Inner Mongolia
Early 1950’s Baotou Iron and Steel Company set up and commences producon
1952 General Instute for Research in Non-Ferrous Materials (GRINM) set up
1957 RE concentrate producon begins in Bayan Obo mines
1963 Baotou Research Instute of RE set up in Inner Mongolia
1960 to 1980 Exploratory Work on Mineral Resources leads to the discovery of a large number of RE deposits all over
China. Chinese decision makers know that China has large deposits of RE and that it could be used to
achieve strategic advantage.
1972 Xu Guangxian the father of the RE industry in China moves from the nuclear material area into the Rare
Earth Area. Develops the theory of Countercurrent Extracon for separang out the Rare Earths. This
reduces the costs of extracon signicantly.
1983 Journal of the Chinese Society of Rare Earths started in both Chinese and English.
1986 The 863 programme iniated in China aimed at improving Chinese Technological capabilies in key
areas. Though RE not explicitly idened most of the areas including the area idened as materials
would have a signicant component of RE research
1987 CAS Key Laboratory of RE Chemistry and Physics set up – Aliated to Changchun Instute of Applied
Chemistry
1978 to 1989 Ministry of Land Resources and Planning expands RE mining Operaons
1990 Journal of Rare Earth started in Chinese and English.
1991 State Key Laboratory of RE Materials chemistry and Applicaons – Aliated with the College of
Molecular Engineering in Peking University set up.
1992 Deng Xiaoping declares “ The Middle East has oil, China has Rare Earths”
1992 Bautou RE Industrial Development Zone set up. Encourages Foreign companies to set up shop in China.
Technology transfer and assimilaon become key naonal objecves.
1995 China Naonal Non Ferrous Metals Import Corp., San Huan and Sextant MQI Holdings acquire
Magnequench
1997 Boost to basic research in RE Materials through program 973
1997 Jiang Zemin – “Improve the developments and applicaons of Rare Earths and change resource
advantage to economic superiority “
1998 Magnequench Powder facility set up in Tianjin, China
1998 Mountain Pass RE Mine in the US is closed
1999 Inner Mongolia Xiyuan RE Funconal Materials Engineering Technical Research Centre set up
2000 Neo powder Producon begins in Magnequech, Tianjin
annexure 6: important events traCing
Developments in China on rare earths

56
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Year Salient Events related to Rare earths
2001 Naonal Engineering Research Centre of RE Metallurgy and Materials CO. Ltd. Set up (Ruike Centre)- a
technology enterprise of Baotou Research Instute.
2002 All Magnequench Operaons moved out of the US into China.
2004 Magnequench expands operaon in Singapore.
2005 Magnequench merges with AMR Technologies Inc., Canada
2005 China’s aempt to acquire Molycorp’s Mountain Pass Mine via purchase of Oil giant UNOCAL fails.
2006 Producon facility set up in Korat, Thailand by Magnequench.
2007 China cuts o rare earth supply to W R Grace – major catalyst producer in US – forces Company to
move to China.
2007 China begins Raoning RE supply – favours domesc companies.
2007 Producon begins in Korat, Thailand.
2008 China tries to buy controlling stake in Lynas – Australian Rare Earth Mine. Only succeeds in geng a
minority stake.
2009 China buys stake in another RE mine Arafura Resources Ltd in Australia
2010 China cuts o rare earth supply to Japan following a shing trawler incident

57
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State-run labs in China have consistently
been involved in research and development
of REEs for over fifty years. Two state key
laboratories were established by Guangxian Xu
in the eighties to carry out extensive work on
rare earths in China. These are the State Key
Laboratory of Rare Earth Materials Chemistry
and Applications and The State Key Laboratory
of Rare Earth Resource Utilization.
Additional labs concentrating on rare
earth elements include the Baotou Research
Institute of Rare Earths, the largest rare earth
research institution in the world, established
in 1963, and the General Research Institute for
Nonferrous Metals established in 1952.
The State Key Laboratory of Rare Earth
Resource Utilization known as the Open
Laboratory of Rare Earth Chemistry and Physics
affiliated with the Changchun Institute of
Applied Chemistry, under the Chinese Academy
of Sciences is located in Changchun. Research
primarily focuses on Rare earth solid state
chemistry and physics, bio-inorganic chemistry
and the chemical biology of rare earth and related
elements. Rare earth separation chemistry
including clean techniques for rare earth
separation, chemical and environmental issues
of rare earth separation and the integration of
annexure 7: r&D on rare earths in China
the separation and the preparation of rare earth
form core research interests here.48
The State Key Laboratory of Rare
Earth Materials Chemistry and Applications
is affiliated with Peking University. The
Laboratory made significant progress in the
1980s in the separation of rare earth elements.
Guangxian Xu, Member of CAS, is the honorary
chairman of the Academic Committee. The Lab
has so far undertaken a variety of national key
projects of basic research on rare earth science,
including “973” Project (The State Key Project
of Fundamental Research), “863” Program,
NSFC Fund for Innovative Research Group
and many projects involving Major Program
and Key Program from the National Science
Foundation of China. The laboratory carries out
fundamental research on rare earth material
chemistry, the exploration of novel rare earth
functional materials as well as the correlative
theoretical methods and materials design.49
The Baotou Research Institute of Rare
Earths, the largest rare earth research institution
in the world, was established in 1963. It
focuses on the comprehensive exploitation and
utilization of rare earth elements and on the
research of rare earth metallurgy, environmental
protection, new rare earth functional materials,
48 CAS Key Laboratory of Rare Earth Chemistry and Physics, Chang Chun Institute of Applied Chemistry, available
from http://english.ciac.cas.cn
49 Peking University, College of Chemistry and Molecular Engineering: The State Key Laboratory of Rare Earth
Materials Chemistry and Applications: History and Development, available from http://www.chem.pku.edu.cn/
page/relab/english/history.htm.

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Dominating the WorlD China anD the rare earth inDustry
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and rare earth applications in traditional
industry.50
The General Research Institute for
Nonferrous Metals (GRINM) was established
in 1952. This is the largest research and
development institution in the field of
nonferrous metals in China. GRINM focuses
on R&D of rare earth metallurgy and materials
in China and also hosts National Engineering
Research Center for Rare Earth Materials.
Grirem Advanced Materials Company Ltd
established in December 2001, carries out R&D
on earth mineral separation and purification,
high purity rare earth compound rare earth
metals and alloys, luminescent materials,
magnetic materials, and rare earth materials for
agricultural applications.51
Each of the four laboratories and institutes
mentioned above complement each other. The
State Key Laboratory of Rare Earth Resource
Utilization focuses on applied research. The
State Key Laboratory of Rare Earth Materials
Chemistry and Applications focuses on basic
research. Baotou Research Institute of Rare
Earths and GRINM both focus on industrial
applied research of rare earth elements.
The State Key Laboratory of Magnetism
– Institute of Physics (CAS),52 in Beijing has
been in existence since 1928. Its primary area
of research has been fundamental and applied
research in magnetism and magnetic materials.
More recently structure and magnetic properties
of rare earth intermetallic compounds is
being studied vigorously. The Institute has
collaborations with universities in the U.S,
Europe and Japan.
In addition to having state run laboratories
dedicated to researching and developing Rare
Earth Elements (REE), China also has two
publications dedicated to the topic. They are
the Journal of Rare Earth and the China Rare
Earth Information (CREI) Journal, both put out
by the Chinese Society of Rare Earths. These
are the only two publications, globally, that
focus almost exclusively on rare earth elements
and they are both Chinese run. This long term
outlook and investment has yielded significant
results for China’s rare earth industry.
The Chinese Society of Rare Earths
(CSRE) founded in 1980, is a scientific and
technological researchers’ organization. There
are more than 100,000 registered experts
in CSRE, which is the biggest academic
community on rare earth in the world. Besides
serving for the government and researchers
on science and technology of rare earth,
CSRE provide a stage for rare earth scientists
to exchange their research ideas, propose the
scientific and technical plans on fundamental
and applied fields on rare earth, as well as rare
earth R&D plans for industry. CSRE is therefore
the most important social force in developing
the rare earth science and technology in China.
It organizes the International Conference on
Rare Earth Development and Application once
every four years, and Annual Meetings once
every two years periodically. There are 15 sub-
committees in CSRE, which almost cover every
50 Baotou National Rare-Earth Hi-Tech Industry Development Zone: Rare Earth-An Introduction, available from
http://www.rev.cn/en/int.htm.
51 See http://en.grinm.com/channel.do?cmd=show&id=5&&nid=1349The General Research Institute for
Nonferrous Metals
52 See the website of the institute for more details. http://maglab.iphy.ac.cn/web-english/e-2.introduction.
htm

59
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Annexure 7
R&D field on rare earth. The names of sub-
committees are (1) Rare Earth Geochemistry
and Ore Dressing (2) Rare Earth Chemistry
and hydrometallurgy (3) Rare Earth Magnetic
Materials and Magnetism (4) Rare Earth New
Materials (5) Rare Earth Catalytic Materials (6)
Application of Rare Earths in Iron and Steel (7)
Application of Rare Earth in Casting (8) Rare
Earth Analytical Chemistry (9) Application of
Rare Earth in Ceramic and Glass(10) Rare Earth
Refining (11) Environmental Protection of Rare
Earth Industry (12) Rare Earth Phosphor and
luminescence (13) Application of Rare Earths
in Agriculture (14) Rare Earth Information
(15) Technique and Economy of Rare Earth
Enterprises.
Over all the Chinese science and
technology system works on a model of top-
down, state directed science and technology
programs to spur developments in strategically
important areas. The main characteristic of
the Chinese model is its tradition of centrally-
planned R&D initiatives and the national
mobilization of human and material resources
to support their implementation. This kind of
centrally planned system in China has favoured
applied research directly related to economic
and strategic importance over curiosity-
driven discoveries and basic research. The
PRC government has become a leader in a
technology commercialization drive. Enterprises
promote links between research institutes and
commercial firms. China’s conglomerates are
continuously directed from the government
side to set up their own research and technology
development centres and take over public
research institutes.
publiCations on rare earths – the
us anD China – a Comparison
As we have mentioned, over the last 30
years China has put in a lot of resources to
develop its RE industry and make it a dominant
player in the global arena. This is reflected in
Figure 11 Trend in the Publications on Rare Earths (China and USA)
0
2000
4000
6000
8000
10000
12000
1955 1965 1975 1985 1995 2005 2015
Total USA China
YEAR
CUMULATIVE NO. OF PUBLICATIONS

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Dominating the WorlD China anD the rare earth inDustry
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the number of publications from China. The
Keyword “Rare Earths” threw up thousands
of papers from China as well as the US from
the SCOPUS data base. We did not refine the
key word because the idea is to get a fix on the
trend rather than the actual papers themselves.
Figure 11 provides an overview of the
trends in Rare Earth related papers by China
and the USA.
By about 1965 US publications were close
to 400 on the subject while the total number of
publications in the world was close to 600. In
fact at this point of time there were no papers
from China. We must however, note that though
the Journal of Chinese Society of Rare Earth
was already being published the SCOPUS does
not include this journal in its list. Because of
this the first papers from China appear only
in 1995. In spite of this under reporting what
is interesting to note here is that by about
2003, China had already overtaken the US in
published papers. While the number of papers
from the US have more or less remained at the
same figure, Chinese papers continue to show
an increasing trend.
We also noted from the SCOPUS database
that the number of institutions working in this
field is more or less the same for both the US
and China. More than 150 institutes in China
were involved in Rare Earths research. Amongst
these Changchun Institute of Applied Chemistry,
Chinese Academy of Sciences, University of
Science and Technology at Beijing, Northeastern
University, General Research Institute for
Non-ferrous Metals China, Harbin Institute of
Technology, Zhejiang University, University
of Science and Technology of China, Central
South University China, Shandong University,
Tsinghua University, Jilin University, Tianjin
University have at least 100 papers. In the US
too 150 institutes published papers on the topic.
Iowa State University is the only institute that
had more than 100 papers. Argonne National
Laboratory and Oak Ridge National Laboratory
had a significant number of papers. This is just
to indicate that China has been carrying out
research and development work on rare earths
at least since 1995. A significant boost was
also provided to the RE industry via the 973
programme of China.
While China brings out two journals
concerning rare earths, two important
publications on rare earths which were brought
out by the Ames Laboratory, USA stopped
publications in 2002.
The Rare Earth Information Center
(RIC) data base was also established at the
Ames Laboratory by the U.S. Atomic Energy
Commission’s Division of Technical Information
in January of 1966 to service the scientific
and technological communities by collecting,
storing, evaluating, and disseminating rare-
earth information from various sources. In
1968, the support of RIC was transferred to
Iowa State University’s Institute for Physical
Research and Technology through grants from
the worldwide rare earth industry.
The Ames Centre also brought out two
newsletters.
The RIC News was a quarterly newsletter
containing items of current interest concerning
the science and technology of rare earths. RIC
News was free.
The RIC Insight a monthly newsletter,
contained more editorial comments, provocative
opinions on the future directions of rare earths,
later breaking news than the RIC News, and
was slanted toward the technological and
commercial aspects of the rare earth field. RIC
Insight was available only to supporters of the

61
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Annexure 7
center as a membership benefit.
All the publications were stopped from
2002. This move by USA clearly indicates that
the R&D priorities had changed and moved
away from Rare Earths in the US. China of
course took full advantage of this situation to
establish a dominant position in R&D on RE.
Whether this is the right strategy to adopt at
the mature phase of a life cycle or whether
new non RE technologies will dominate the
future is still an open question. China believes
that the drivers of future growth especially in
areas related to green products will continue to
depend in a big way on Rare Earths. If this is so
and there is reason to believe that this will be
so, its grand strategy in RE will be vindicated.