Rare earth shortage poses strategic threat to UK IT

By Stewart Mitchell

Posted on 19 Jan 2011 at 11:58

The UK Government has warned that a global shortage of rare earth materials could hit the UK's tech business.

Rare earth materials feature widely in technology – particularly storage components - and such a shortage is likely to drive up prices.

According to a report by the Parliamentary Office of Science and Technology (POST), China currently produces 95-97% of the world’s rare earth metals, and prices continue to soar as the rising technology powerhouse cuts supply.

“A consistent supply is of future strategic as well as economic importance to the UK,” POST said in its report. “The average price of the rare earths for a non-Chinese purchaser has risen from 2009 to 2010, with some showing up to a ten-fold increase.”

A consistent supply is of future strategic as well as economic importance to the UK

According to the report, China cut exports of rare earth materials by 40% last year, and the Chinese Commerce Ministry predicts further supply cuts of 35% this year.

POST also said Chinese customs officials were delaying shipments at the ports and that China may have "a range of motivations for the export controls".

According to experts, China’s hard line on exports could encourage foreign companies to move production facilities to the country, with big US and Japanese storage manufacturers possibly affected.

“In the short term, this is a real issue,” said Paul Strange, professor of physics at the University of Kent. “There are sources of rare earth all over the world, but it takes a long time to set up facilities to extract and process them – it would take up to 10 years for other countries to get their supplies up and running.”

“In the meantime China might use it as a political bargaining chip.”