Saturday, 20 November 2010

Finding An Alternative

The Senkaku Islands, as they are known in Japan – in China they are known as the Diaoyu Islands, are a group of unproductive volcanic rocks lying in the East China Sea. They are only remarkable because both China and Japan – and Taiwan too, for that matter – claim ownership of the rocks. If there weren’t deposits of oil shale in the island chain, then it is quite likely that their ownership would not be disputed.
At present, Japan controls the islands and recently asserted its control by seizing a Chinese trawler, allegedly fishing illegally in the disputed waters. China responded by cutting off the supply of Rare Earth Elements to Japan. The price of REEs has risen considerably in recent weeks as Japan seeks alternative sources (China controls 97% of the global production of REEs). This is very much a scarcity story.
What is interesting is the Japanese response to scarcity. The rising price of REEs has led to greater economy in their use. There has been a boost to the technologies of resource economies so that less REEs are used per unit of output (an increase in ‘resource productivity’). There has also been a race to diversify supply away from China to other areas where REEs could be found. A rising price makes more marginal deposits commercially viable. There has, finally, been a boost to the mineral salvage industry to recover REEs from discarded electrical equipment.
In many ways, this is the response that we would expect to any incipient scarcity. Perhaps this is the answer to Peak Oil?
© The European Futures Observatory 2010

1 comment:

Hervé Musseau said...

I wouldn't call rare earth elements a scarcity: they are in fact common. It's an artificial scarcity, stemming from the fact that nobody deemed it cautious to increase their REE production but China, even though demand increased, to the point that China has almost a monopoly.