02 February 2012 15:47 [Source: ICIS news]
By Joe Kamalick
WASHINGTON (ICIS)--China is increasingly restricting foreign access to its strategic raw materials, and Beijing is moving to control critical resources elsewhere in a way that poses serious concerns for US industry and national defence, according to testimony before a special congressional panel.
In a hearing before the congressionally chartered US-China Economic and Security Review Commission (USCC), witnesses said that ?xml:namespace>
That testimony came as the World Trade Organisation (WTO) ruled this week that in violation of its WTO obligations,
In addition, the US Department of Justice has filed charges against a
Members of the US Congress and the US intelligence community have labelled Beijing as the top industrial espionage threat.
In his testimony before the USCC, David Menzie, chief of global minerals analysis at the US Geological Survey (USGS), noted that for many of the more than 80 critical materials tracked by USGS,
“In a number of cases,
“In addition, China produces between 50% and 80% of bismuth, germanium, indium, pig iron, mercury, silicon, fused alumina, barite, cement, fluorspar, natural graphite, lime, magnesium compounds, wollastonite and natural zeolites,” he noted.
In order to assure its own access to supplies of critical materials, said
In these foreign acquisitions, Menzie said, Beijing, through its state-owned enterprises (SOEs), has chiefly sought majority controlling interests in projects and companies or has taken minority positions with options to purchase additional shares and/or future production.
“It would be reasonable to suggest that
Jeffrey Green, president of J A Green & Company, a consulting firm on industrial and defence issues, noted that from the end of Second World War until the 1980s, the
“They produce roughly 94% of all rare earth oxides consumed worldwide, nearly 100% of commercial rare earth metal, and the vast majority of rare earth alloy and magnets,” he noted.
With that dominant control of the global REE market, Green told the commission, “
“These policies have resulted in a growing supply-chain dominance that has often led to relocation of industrial players to
“While the global market has responded by attempting to bring new sources of supply online,” he said, “to date we have seen no new production in the rare earth oxide market, and our dependence on Chinese sources has grown.”
That complete role-reversal in rare earth elements and materials began, said Green, when
“Then, during the 1990s,
“Within 20 years
Green warned that
Fluorspar, according to USGS, is the primary feedstock for manufacture of virtually all fluorine-bearing chemicals and also is a key ingredient in aluminium production.
That citation to resource protection and environmental concerns is one of the few exceptions under WTO rules against restricting production.
Green also cited graphite as an at-risk critical commodity, noting that it has broad application in the steel industry, lithium-ion battery production, electric motors, and is used as an ablative material in missiles and bombs and is a lubricant for small arms ammunition and in the production of body armour.
Graphite also has the potential for much wider industrial use, he said, as the basis for graphene, a new material discovered in 2004 and said to be a likely replacement for silicon-based electronics and in other high-tech applications.
Green said that
“Similarly, when considering those strategic and critical materials not predominantly concentrated in China, Chinese SOEs, sometimes with financial guarantees from the Chinese state, are working toward gaining a similar foothold in a variety of niche commodities” elsewhere in the world.
Green contends that if these trends continue, “basic availability of certain strategic and critical materials will be significantly reduced in the near future”.
“This does not necessarily mean that these strategic and critical materials will be completely unobtainable, but US companies would be fiercely competing against the rest of the world’s manufacturers for raw materials at artificially high prices,” he said.
“Those countries with direct, cheaper access would necessarily have a competitive advantage that does not bode well for US companies,” Green added.
He warned that in the absence of a comprehensive strategic approach on critical materials by US policymakers, “inactivity has become our plan, and domestic industries and the ability to manage our supply chain are fading”.
In earlier hearings and reports, the USCC has charged that China has broadly flouted its WTO obligations and has pursued commercial, military and diplomatic practices that "diverge significantly from Beijing's official policy of peaceful development".
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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