The Bayan Obo rare earth mine in the Inner Mongolia autonomous region, which holds the majority of China's rare earth reserves, has used up 65 percent of its 43 million tons of reserves. [Photo/China Daily]

China's rare earth resources call for prudent use

Before the break of dawn, a group of miners head toward two huge pits near a brown-colored plateau. Over the years, bulldozers have carved spirals down into the depths of the cavities where the workers tap their precious minerals. This is the famous Bayan Obo rare earth mine, 150 kilometers north of Baotou in the Inner Mongolia autonomous region. Baotou has a population of less than 2.5 million, but it recently found itself on the lips of many participants at top global policy meetings such as the G20 summit. Flights to the city are now packed and teams of foreigners can be spotted at the local airport and five-star hotel lobbies.

Baotou is about 650 km from Beijing. Its Bayan Obo mine contains about 28 percent of the world's rare earth reserves. Baotou Steel Rare Earth, which is listed on the Shanghai Stock Exchange, satisfies two-fifths of global demand for the resource. Containing 17 elements, rare earths are used in the manufacturing of products as varied as flat-screen monitors, electric car batteries, wind turbines, missiles and aerospace alloys.

Baotou's importance surged significantly after China's Ministry of Land and Resources, in early March, limited the country's annual total volume of rare earth production to 89,200 tons down by 25.7 percent compared with last year. The Ministry of Commerce in July confined rare earth exports to an annual limit of 30,000 tons, a drop of 40 percent compared to that of 2009.

A number of countries such as Japan have filed complaints and business groups have been lobbying to pressure China for more rare earth exports. US Secretary of State Hillary Clinton also raised the issue ahead of last month's G20 summit in Seoul, while countries such as Germany are turning to alternative supplies.

"I strongly disagree with some Western media claims that China's management of its rare earth resources is a power play," Peking University Professor Xu Guangxian says.

"China has been exporting separated rare earths products at very cheap prices without considering the resource and environmental costs, which is unsustainable and should by all means come to a halt."

Xu, who recently celebrated his 90th birthday in Beijing, is often referred to as "China's Father of Rare Earths". Xu, who has a doctorate from Columbia University in the US, returned to China with his wife in the 1950s.

He led a group of scientists at Peking University to research the extraction of rare earths and their methods outdid foreign competitors in the 1970s.

As early as 2006, Xu, together with 11 other scientists from the Chinese Academy of Sciences, sent to Chinese Premier Wen Jiabao a letter in which they strongly urged authorities to curb output and contamination of the country's rare resources.

Wen directed the proposal to the Ministry of Land and Resources and Xu was given a reply in person. China's rare earth production in 2007 shrunk to 80,000 tons.

Xu has been to Bayan Obo eight times and has expressed shock at the speed of how the site's rare earth reserves have been used up. Driven by profit, more than 100 refineries of different sizes, excluding illegal operators and smugglers, sprouted in the area in the 1990s. The annual rare earth output at that time reached 170,000 tons, well exceeding the global demand of 100,000 tons.

Xu blamed patent protection in China, which was not "adequately established" until 1984, as well as the failure to form a national rare earths trade association.

Statistics published in 2008 by the US Bureau of Mines and other geographic authorities show that the world's total rare earth reserves of industrial value were 112 million tons, of which China owned 46 percent at 52 million tons. The US held 13 million tons, while Russia and surrounding countries contained 17 million tons. But within two years, China's share of the resource dropped to 30 percent, Xu says.

The only rare earths mine in the US, the Molycorp complex at Mountain Pass in California, closed in 2002 in response to environmental restrictions and high production costs. But the Bayan Obo mine, which holds the majority of China's rare earths reserves, has used up 65 percent of its 43 million tons of rare earth reserves in the past three decades, with only 28 million tons left.

"At this rate, the remaining 28 million tons will be quickly depleted within the next 30 years," Xu says.

Xu says countries such as Japan and South Korea have been storing rare earth reserves that can satisfy their demand for the next 20 years. And these were managed at bargain prices.

earth products too cheaply. In fact, some rare earths oxide should be sold at 10 million yuan (1.09 million euros) per ton. When China uses up its rare earth resources, we will have to pay very high prices for rare earths products from countries like the US, Australia, Russia and India."

Yao Jian, spokesman for the Ministry of Commerce, said at a briefing meeting on Nov 16 that "China has exported 32,200 tons of rare earths from January to September in 2010, among which 49.8 percent goes to Japan, registering 16,000 tons, up by 167 percent compared to that of the same period last year."

Yao said that China's rare earths exports to the US have grown by 5.5 percent to 6,200 tons. Among China's 32 enterprises qualified to export rare earths, 10 are foreign-funded groups such as French-owned Rhodia Electronics & Catalysis Co Ltd. The annual export quota for foreign-funded enterprises in 2010 is 5,978 tons and the average export price for rare earths products is $14,800 (10,800 euros) per ton.

The rare earths industry is worth about just $2 billion annually worldwide, but it is extremely important for high-tech and military applications.

Rare earths are a collective name for 17 elements, including scandium and yttrium.

Rare earths are used widely in products from camera lenses and cell phones to nuclear batteries and lasers. Magnetic trains running up to 400 km per hour in Shanghai need the resource. They are also needed in MRI machines that doctors use to scan patients for traces of cancer.

As more countries replace oil with sustainable green energy such as wind power, rare earths are all the more precious because they make wind turbine generators stronger and lighter.

Rare earths can also save lives. In fact, the resource saved more than 10,000 lives during the 9/11 attacks on the World Trade Center in New York City in 2001 before the building collapsed.

Senior engineer Dou Xuehong, with the Research Institute of Rare Earths at the Baotou Iron and Steel Company, demonstrated how the miracle worked at the Rare Earths Exhibition Center in Baotou, where top Chinese leaders including Deng Xiaoping, Jiang Zemin and Hu Jintao had previously visited.

Dou says that power to the Twin Towers got cut off soon after the hijacked airplane struck the building. But the luminescent indicatory systems containing rare earths material continued to shine in the dark for more than one hour, helping thousands of people find their way through the exits to escape.

"Those luminescent indicatory systems were made in China by a factory in Dalian," Dou says.

Dou himself came to Baotou in his 20s and has seen enormous changes in the city over the past 40 years. Audi and Mercedes cars are now on the city's six-lane streets. The housing price in city center has soared to more than 7,000 yuan per square meter. The newly opened Wanda Shopping Center covers an area of 320,000 square meters, attracting global brands like Zara and Pizza Hut. Taxi drivers are already complaining that traffic jams have increased significantly since the shopping center opened.

A wetland of deep blue waters, covering an area of 16 square km and attracting more than 200 kinds of birds, also lies southeast of the city about 1 km from the airport. But southwest of the city, about 10 km from the city center, there is a 11-sq-km reservoir of brownish water that was built in 1956 to contain the tailings left by Baotou Steel's rare earths refineries. Both areas will take three hours to walk around, but the one containing the tailings is accompanied by a strong chemical smell.

About every other 10 meters along the 3-story-high reservoir, a thick black rusty metal pipe 1-meter in diameter zigzags among withered yellow grass, leaking black and brownish water onto the barren land. The resulting mud is tainted of white, red and yellow.

Liu Jianguo, the Rachel Carson chair in sustainability and director of the Center for Systems Integration and Sustainability at Michigan State University in the US, said in a New York Times online debate room that "processing and extracting rare earth elements is a dirty business. The environmental toll of rare earth mining in China is high."

Baotou Steel reportedly discharges about 20,000 tons of wastewater daily into the reservoir, with the total volume of rare earth residue hitting 170 million tons. The annual maintenance fee for the discharge has risen to 40 million yuan.

A 1995 publication by Baotou Steel specified the threat to the local environment in three respects. The rare earth residue contaminates the underground water system at an annual rate of 30 meters. Winds also spread the dust of dried rare earth residue to the vicinity and stain the soil with toxic and radioactive substances. Worst of all, if an earthquake occurs and the reservoir collapses, the debris flow will possibly drown the nearby railway system and the lower reaches of the Yellow River.

Up till now, the Baotou city government and Baotou Steel have jointly invested 500 million yuan to save the affected areas from pollution. By early 2009, about 4,000 residents of the five villages surrounding the reservoir have been moved to new residential areas near highway G110 on the northern outskirts of Baotou.

"Technically speaking, it is possible to reduce the environmental threat of the reservoir to the minimum," says the former chief engineer at Baotou Steel, Ma Pengqi.

According to Ma, the current coefficient of utilization for rare earth ore concentrates is only 10 percent, while that of Th ore - the major radioactive substances in the residue - is zero.

With more advanced mining technologies, wasted substances like Nd and Sm in the tailings can be extracted. The rest of the materials with no industrial value can serve as construction material for houses or roads.

The plan is to drain the water in the reservoir after purification and grow plants to prevent soil erosion, while eliminating the possibility of a debris flow.

"It is unfair to put all the pressure on China to satisfy the entire world's rare earth demand," Professor Xu Guangxian says.

"China has only 30 percent of the world's known reserves, but it is producing 97 percent of the world's annual rare earth products. China has suffered a lot of losses during this process."

Xu earnestly hopes that US Morlycorp will reopen the Mountain Pass rare earth mine and that French Rhodia recovers its rare earth extraction factory.

"The only difficulty is that the current price of rare earths should be raised several times higher to the marginal value of production cost," Xu says.

Yang Jin and Wang Di contributed to this story.