Corporate Strategy Case Analysis Rare Earth Minerals

Date back to April 2009, the ministry of industry and information technology of China circulated its plan for an export ban on rare-earth minerals, and sent it to other Chinese ministries and also showed it to several western industry officials. Such proposed plan caused a frenzied international effort around the world, including the Defense Department of the United States was required to review the military’s almost complete dependence on Chinese supplies of rare earth minerals, and the United States, European Union and Japan joined forces to launch a WTO case against China’s ban of the global supply of rare earth minerals.

It is worldwide known that China controls about 95% of global rare earths production, and holds half the world's reserves of these metals. A lot of rare-earth minerals are actually key components of high-technology manufacturing, especially in military area. For years, China controlled the export of rare earths, and instituted export tariffs as a way to boost its own industry and prevent depletion of natural resources. In 2010, Beijing abruptly reduced its export quota, pushing prices sky high and creating supply disruptions around the globe.

Despite the criticism and actions from the rich world’s leading economic powers, it is reasonable for China to promulgate relevant export restriction on rare-earth minerals. If you view the situation from the entire global market’s angle, China which has very high storage of rare-earth minerals nearly does not have any discourse right and pricing right. The rare-earth minerals have been sold too cheaply in the past two decades. Such a development of mining rate without management or limitation would soon face down, strategic resources exhaustion position to China. However, during the period of banning on the export, some other countries became a freeloader and received benefit a lot. For example, India opened its rare-earth minerals to Japan to replace the market share of China.

Therefore, when...