China’s Aladdin’s cave of rare metals

Press, 11 May 1981, Page 16

China’s Aladdin’s cave of rare metals

From “The Economist,” London

Businessmen at China’s annual export bazaar, the Canton fair, which runs until May 15, have been noticing something new in the. wares laid before them: an increasing array of the world’s rarest, most sought-after metals. China is emerging as a big exporter of strategic minerals of importance for such high-technology industries as defence, aerospace and advanced electronics The customers in the advanced capitalist countries could not be more pleased. They see China as an alternative supplier of strategic metals that are inconveniently concentrated in other politically awkward parts of the world, like the Soviet Union, South Africa and Zaire. China has known commercial deposits of all but 10 of the world’s 140 minerals. It probably leads the world in about 17 of them, including tungsten, titanium and molybdenum. China has long been the world’s largest producer and exporter of tungsten, an essential metal for making armourpiercing shells and drill bits used in prospecting for minerals. During the past year international metal traders have been intrigued, and excited, by the sudden emergence out of China of other exotic metals, remarkable not only for their quantity and quality, but also for their diversity — e.g., vanadium, previously almost the sole preserve of the Soviet Union and southern Africa, used in the production of titanium alloys. China exported some 1000

tonnes of vanadium last year, after exporting virtually none the year before. One of the biggest metal traders with China, Wogen Resources of London, expects Chinese exports of vanadium in its various forms to total as much as 4000 tonnes this year, equivalent to about 8 per cent of Western production. Another new Chinese export is germanium, a metal used in the manufacture of heat-seek-ing infrared night lenses. It sold none abroad last year, but in 1981 is expected to export up to seven tonnes: total Western consumption is about 110 tonnes a year. China has started exporting titanium sponge and metal (as well as titanium oxide). Users have breathed a huge sigh of relief. The Soviet Union has been reducing exports since 1978. The United States bought 500 tonnes of sponge from China in the first nine months of 1980. - Since the start of 1980. China has been the supplier of between 5 per cent and 10 per cent of the non-communist world’s total imports of molybdenum, strontium, cadmium and chromium. China’s Government is well aware of the strategic importance of what it is selling, but it has not (yet?) used the exports as a tool of foreign policy. Direct deals with end-users are becoming more common. The Chinese usually begin by selling lots through international traders who later act as intermediaries to bring the consumer company into direct contact with them. Cometals has brought Lockheed to China

for two shipments of titanium sponge. Tsuruga Kairku Unyu in Japan contracted last year to import 200 tonnes of titanium annually. The leading Japanese titanium dioxide producer, Ishihara Sangyo, has bought Chinese raw materials for many years, Textron, the American conglomerate, is a newcomer. Its Bell Helicopters subsidiary began negotiating a long-term deal for titanium supplies last year, in return for joint production of aircraft in China. . Most, of China’s strategic metal exports are still sold through international traders in markets where prices are highly volatile. For China the most important of these is tungsten, where it accounts for about 30 per cent of world production. It would like to see some form of price stabilisa-. tion under. United; Nations . auspices. As there isn’t one, China, has tried to act on its own to reduce price fluctuations, holding off when prices fall and increasing sales on upturns. Over the past three years it has succeeded in keeping tungsten ore prices in a range of roughly $135-$l5O a tonne unit, despite depressed Western demand.

In those “strategics” where China holds a much smaller proportion of world trade it has been a reliable, steady supplier. It has kept on offering its molybdenum for sale when prices were at $8 a pound in 1978, $25 in 1979-80 and back down to $6. Some of the newer metals have come on to the market as a result of recent improve-

ments in China's process technology. For example, the Chinese developed a method of separating titanium and vanadium slag from iron at the Panzhihua steelworks .in Sichuan province. The slag is now upgraded at the complex's new plant. The Chinese have also been able to perfect a process for making crystalline silicon used in the electronic chip. They now export 30 tonnes a year. China has also discovered some deposits rich in minerals that have only just started to be developed. The most important of these is the Bayan Obo mine in Inner Mongolia, which officials say contains up to 100 M tonnes of rare earth oxides (e.g. europium and yttrium). China’s commercial reserves of rare earths are believed to be up to five times greater than those of the rest of the world.

However, some deposits are so remote it could be many years before they can be exploited. A big chromite orebody has been discovered in the Qinghai-Tibet plateau, containing some rich veins of platinum, while another containing platinum at Dali in western Yunnan province has yet to be developed. China needs the help of outsiders (still known as “foreign devils”) to speed things up. But, so far, there has been little involvement by capitalist firms in helping China to mine and process its “strategics.” They are deterred by China’s go-stop expansion plans. And by its habit of making huge changes in political direction every 10 years or so.