Eco-money: Electronics firms face supply crisis for rare metals
Theglobal electronics industry is facing an ecological dilemma of its own making as China starts to radically reduce the supply of rare metals used in everything from iPhones to guided missiles.
Despite electronics manufacturers announcing their reduced carbon footprint and encouraging customers to recycle old products, there is growing alarm among green investors that electronics are devouring some of the world's rarest commodities at a faster rate than they are being produced.
The future sustainability of rare-metal production is now under threat. There is only a finite supply of rare metals to feed the world's growing electronics industry, and the UK's Royal Society of Chemistry (RSC) believes that today's level of consumption of rare metals is unsustainable.
"Global demand for rare metals is higher than the current rate of production and with the new developments undertaken in the electronics market, this demand is only due to continued growth," says Charlotte Beard, the physical sciences programme manager at RSC.
Electronics companies all over the world are increasingly reliant on certain rare metals, most of which are mined in China, which controls 97 per cent of the global supply.
The Chinese government has promised to slash export quotas to ensure future sustainability of the world's supply of rare metals. China will drop its quota by 35 per cent in the first half of this year as compared with the same time last year.
But despite its escalating consumption of rare metals and the need for future sustainability, the West's electronics industry is mistrustful of China's motives and claims that the move has more to do with the mainland's desire to dominate electronics manufacturing than ensuring the future sustainability of the world's supply of rare metals.
Some allege that China has already undercut other rare-metals producers as a result of its lax environmental controls, low wages and hazardous working conditions.
Nevertheless, the Chinese government's new quota restrictions leave western governments with little alternative but to try to avert a crisis in their electronics industries' component supply chain at a time when their national economies are at last slowly starting to pull out of a deep recession.
In the US, the Obama administration is trying to push through the reopening of a rare-metals mine in the Mojave Desert, thought to be the largest deposit of rare elements outside of China. The mine was closed in the face of competition from the mainland, but the owners have now been given permission to restart production.
The reopening of the mine comes in the wake of a US department of energy report, which warned on December 15 that without rare-metal mines of its own, the US could give China control of the production of a host of technologies such as smartphones, electric car batteries, wind turbines and weapons systems.
At the beginning of this year, Rainer Brüderle, Germany's economy minister, met with Li Keqiang, the vice premier of China, to ask the mainland to review its quota restrictions on rare metals.
One reason that the electronics industry's exploitation of rare metals has, until now, passed under the radar of most green investors is that few are familiar with the intricacies of the global electronics industry's supply chain. Even the names of the rare metals used in these products are far from familiar to most green investors. For instance, a metal called lanthanum is used for batteries for hybrid cars, neodymium for the permanent magnets for wind turbines and europium for energy-efficient lighting.
Smartphones require a whole range of rare metals. Their rechargeable batteries require lithium, and indium is typically used to produce their touch-screens. Solders, gallium or germanium can be found in their chips, tantalum in their capacitors, neodymium magnets in their disk drives and earphones, beryllium-copper in their connectors and zirconium ceramics in their audio circuits.
But the world's environmental focus is increasingly turning to the future sustainability of rare metals and is concerned about the electronics industry's growing addiction to some of the world's rarest commodities. Whatever the reasons behind China's decision to radically reduce rare-metal exports, the pressure exerted on the electronics industry to mine rare metals outside of China can only enhance the future environmental sustainability of companies ranging from Apple to major wind-turbine manufacturers such as the Denmark-based Vestas.
In the long term, increased awareness of the world's rare-metals crisis will benefit not only the electronics industry, but also green investors with long-term portfolios in the sector.
As a result of China's stranglehold on the world's supply of rare metals, electronics manufacturers will be increasingly forced to find new sources of rare metals needed to make their products. This will ensure increased future sustainability not only of the Earth's rare metals, but also of electronics manufacturing stocks.
Updated: January 29, 2011 04:00 AM