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Rare Earth Metals

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  • 1. •  What are Rare Earth Metals?•  Where are they Mined and Produced?•  Why are they Important?•  Rare earth metals supply chain•  VRIO Analysis•  China’s Monopoly•  Global and Policy Implications–  Trade disputes–  National defense–  Human rights atrocities & black markets–  Clean energy technologies•  Q & AGMAN 513 managing global competition – Craig Morgan & Jessica Cooper 2Agenda
  • 2. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 3What are Rare Earth Metals?Rare Earth Metals (REMs) are a group of elements with specialmagnetic, electronic, and catalytic properties that are widely usedin the production of complex engineered systems.–  Enabling devices that weigh less, are smaller, and more powerful–  Technically, not “rare” however, it is hard to find them in concentrationsthat are commercially viable to exploit* There are 17 rare earth elements – 15 within the chemical group called the lanthanides plus yttrium andscandium
  • 3. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 4Where are they Mined and Produced?Source: European Commission http://ec.europa.eu/commission_2010-2014/tajani/hot-topics/raw-materials/Production concentration of critical raw mineral materials
  • 4. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 5Why are they Important?Source: peak resources limited http://www.peakresources.com.au/rare-earths/uses/clean-energy
  • 5. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 6Oh yeah…•  also used in the production of; batteries, cell phones, iPods, computers,bicycles, cars, night-vision goggles, cameras, dental appliances,fluorescent lamps, wind turbines, x-ray, aircraft parts & jet engines,fiber optic cable…even toothpaste & hairbrushes!Why are they Important?
  • 6. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 7Developing a new mine, including prospecting, siting, permitting and construction, can take a decade or more!Supply Chain
  • 7. •  Value–  Extremely valuable, as main ingredients in highly profitable industries,such as petroleum and technology.•  Rare–  Only found in a few countries in commercially viable quantities for mining.Cannot be synthetically produced.•  Imitability–  No inorganic substitutes, and there are many factors that limit thedevelopment and production of REMs.•  Organization–  Mining is mainly performed in poor countries, which have limitedregulations and environmental protections. Exploitation and othernegative externalities are present.GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 8VRIO analysis
  • 8. •  Supplies 95-97% of Global Demand•  Largest REM Consumer•  Manufacturing is Growing in China•  Consolidating•  Establishing Stockpiles (reduce volatility)•  Power to Control PriceGMAN 513 managing global competition – Craig Morgan & Jessica Cooper 9China’s Monopoly
  • 9. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 10Trade Disputes
  • 10. •  Senkaku Islands–  The islands are located near rich fishing grounds and potentially huge oiland gas reserves–  In 2010, china cut off exports of REMs to Japan for 2 months, cripplingJapan’s high-tech manufacturingGMAN 513 managing global competition – Craig Morgan & Jessica Cooper 11Trade Disputes
  • 11. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 12National Defense•  National Security–  REMs are critical in the production of weapons & aircraft•  Foreign Dependency–  There is both economic and national security concerns overdependence on foreign sources•  Home Industry Argument–  The united states was once self-reliant in domestically producedREMs, but over past 15 years has become 100% reliant on imports,primarily from china, because of lower-cost operations•  EPA & lawsuits have also hindered domestic production
  • 12. •  Poor countries and their citizens are exploited by the mining ofREMs–  No reinvestment in local communities–  Poor health, living conditions, wages–  Safely concerns over mining practices–  Destruction of environment – strip mining employed to extractoxides–  Contamination of ground water supplies–  Black market operations that funnel money to militant groupsGMAN 513 managing global competition – Craig Morgan & Jessica Cooper 13Human Rights Atrocities & Black Markets
  • 13. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 14Human Rights Atrocities & Black Markets
  • 14. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 15Children Soldiers•  Democratic republic of Congo (Zaire)–  Mines the majority of the world’s coltan, which when processed isthe main ingredient in electronics equipment–  Substantial value and easily mined by hand. Also exploited byRwandan and Ugandan militia groups.–  UN estimates 15-30% of armed forces are children
  • 15. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 16Clean Energy Technology
  • 16. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 17REMs used in Clean Energy Technology
  • 17. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 18But, how clean?•  Significant environmental damage caused by mining andproduction of REMs used in production of alternative energysources–  Open pit mining–  Toxic ponds (tailings)–  Byproducts pollution – air, water & ground–  Very limited recycling of REMs in products•  Many applications of REMs result in very low concentrations inscrap, making recycling difficult & expensive•  The truth is, clean technologies are not necessary clean andcome at a huge expense
  • 18. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 19Recycling of REMs
  • 19. •  REMs directly affect the competitiveness and national securityinterests of the united states–  The slightest shift in exportation can cause severe economic andsecurity concerns•  Prices will remain controlled by china’s monopoly–  Not only do they control price and distribution, but they haveexercised this power for political gains•  REMs are the next crucial resource–  REMs are a critical element in the refining process of crude oil, aswell as, critical in electronics & military industriesGMAN 513 managing global competition – Craig Morgan & Jessica Cooper 20The bottom line
  • 20. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 21
  • 21. GMAN 513 managing global competition – Craig Morgan & Jessica Cooper 22Questions?

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