The Peter Zeihan Podcast Series - Sweden's (Not So) Rare Earth Metals

Episode Date: January 16, 2023

A state-owned mining company in Sweden has just stumbled upon a million metric tons of rare earth metals...but what does that mean? Any addition to the rare-earths supply is great, but I don't see this moving the needle much.Full Newsletter: https://mailchi.mp/zeihan/swedens-not-so-rare-earth-metals

Hello from cloudy and soon to be snowy Colorado. The big news of late is that in Sweden, a state-owned mining company has announced that it's found a million metric tons of rare earth oxides. A lot of folks are saying, you know, oh, this is what's going to break China's stranglehold on that space. Rare earth metals are used in a lot of different technological applications. A little goes a long way. They're using everything from sunglasses to photo development to green tech to semiconductors. kind of a big space, and the Chinese do dominate at the moment about 90% of total supply. But I'm really not all excited about this Swedish announcement for three big reasons. Number one, this is Europe, and you don't have to find a lot in the ground for it to be Europe's largest deposit of anything. So a million tons of oxides sounds like a lot, but generally out of every ton or two of rock, you only get about an ounce of material. So while a little does go a long way, this really isn't all that much. Second, this is still Europe, and the Swedes themselves are saying 10 to 15 years before the first out of this stuff makes it to market.

The technologies involved in purifying rare earths requires several hundred vats of acid as you slowly dissolve and then tease out the materials from one another. They all have similar physical characteristics and atomic weights, so separating them is very difficult and honestly a little toxic. Third, but most importantly, it really doesn't matter because we really don't have a rare earth's problem. I mean, yes, yes, yes, 90% do come from the Chinese, but there's a few things about rare earths that most people just have forgotten. Number one, they're not rare at all. They are produced as a byproduct of almost every type of metal mining that is done, especially things like zinc and nickel and copper and silver, none of which are really in shortage. Second of all, the technology is involved in doing this date back to the 1920s, so they're not particularly, difficult, even though they are toxic and time-consuming, and they're not even really expensive.

And then there's number three. The Chinese dominate the space because they subsidize the industry, so they're doing us all a favor. Back in the 1980s, when rare earths were priced more normally, we were skimpy with them. But in the 1980s and moving into the 1990s, the Chinese started just hyper-subsidizing this entire sector, and they out-competed everyone on price, but they never stopped subsidizing, so we're still getting rare earth for less than a tenth of what we used to pay for them. So whenever there is a stress in terms of supply, like about a decade ago when the Chinese threatened the Japanese with a cutoff, we just dust off three decades worth of efficiency gains and figure out how to do with less. So the Japanese, in less than a year, we're using only

a quarter of what they had used before, showing that there's not nearly as much influence here as you might think. Finally, people have learned. After the Japanese threat, lots of countries and lots of companies did two things. First, they started building up a stockpile. So if the Chinese did threaten any sort of cutoff again, they'd have six months to a year of supplies in their back pocket. And second, a lot of countries started building out that processing capacity anyway. Now, they haven't turned it on because the Chinese are still subsidizing everything. But Australia, the United States, France, Malaysia, and some others have more than enough spare capacity for processing now

that if there was a cutoff tomorrow, in less than a year, most of the world would have most of the rare earths that they would need. So more power to the sweets. I hope this stuff comes online. More is merrier in this sort of environment. But this really just doesn't get me all that excited. All right. That's it for me. Until next time.