CHINA: Earth-Friendly Elements, Mined Destructively

Some of the greenest technologies of the age, from electric cars to efficient light bulbs to very large wind turbines,
are made possible by an unusual group of elements called rare earths.
The world's dependence on these substances is rising fast.

Just one problem: These elements come almost entirely from China,
from some of the most environmentally damaging mines in the country, in
an industry dominated by criminal gangs.

Western capitals have suddenly grown worried over China's near
monopoly, which gives it a potential stranglehold on technologies of
the future.

In Washington, Congress is fretting about the United States
military's dependence on Chinese rare earths, and has just ordered a
study of potential alternatives.

Here in Guyun Village, a small community in southeastern China
fringed by lush bamboo groves and banana trees, the environmental
damage can be seen in the red-brown scars of barren clay that run down
narrow valleys and the dead lands below, where emerald rice fields once
grew.

Miners scrape off the topsoil and shovel golden-flecked clay into
dirt pits, using acids to extract the rare earths. The acids ultimately
wash into streams and rivers, destroying rice paddies and fish farms
and tainting water supplies.

On a recent rainy afternoon, Zeng Guohui, a 41-year-old laborer,
walked to an abandoned mine where he used to shovel ore, and pointed
out still-barren expanses of dirt and mud. The mine exhausted the local
deposit of heavy rare earths in three years, but a decade after the
mine closed, no one has tried to revive the downstream rice fields.

Small mines producing heavy rare earths like dysprosium and terbium
still operate on nearby hills. "There are constant protests because it
damages the farmland - people are always demanding compensation," Mr.
Zeng said.

"In many places, the mining is abused," said Wang Caifeng, the top
rare-earths industry regulator at the Ministry of Industry and
Information Technology in China.

"This has caused great harm to the ecology and environment."

There are 17 rare-earth elements - some of which, despite the name,
are not particularly rare - but two heavy rare earths, dysprosium and
terbium, are in especially short supply, mainly because they have
emerged as the miracle ingredients of green energy products. Tiny
quantities of dysprosium can make magnets in electric motors lighter by
90 percent, while terbium can help cut the electricity usage of lights
by 80 percent. Dysprosium prices have climbed nearly sevenfold since
2003, to $53 a pound. Terbium prices quadrupled from 2003 to 2008,
peaking at $407 a pound, before slumping in the global economic crisis
to $205 a pound.

China mines more than 99 percent of the world's dysprosium and
terbium. Most of China's production comes from about 200 mines here in
northern Guangdong and in neighboring Jiangxi Province.

China is also the world's dominant producer of lighter rare earth
elements, valuable to a wide range of industries. But these are in less
short supply, and the mining is more regulated.

Half the heavy rare earth mines have licenses and the other half
are illegal, industry executives said. But even the legal mines, like
the one where Mr. Zeng worked, often pose environmental hazards.

A close-knit group of mainland Chinese gangs with a capacity for
murder dominates much of the mining and has ties to local officials,
said Stephen G. Vickers, the former head of criminal intelligence for
the Hong Kong police who is now the chief executive of International
Risk, a global security company.

Mr. Zeng defended the industry, saying that he had cousins who
owned rare-earth mines and were legitimate businessmen who paid
compensation to farmers.

The Ministry of Industry and Information Technology issued a draft
plan last April to halt all exports of heavy rare earths, partly on
environmental grounds and partly to force other countries to buy
manufactured products from China. When the plan was reported on Sept.
1, Western governments and companies strongly objected and Ms. Wang
announced on Sept. 3 that China would not halt exports and would revise
its overall plan. But the ministry subsequently cut the annual export
quota for all rare earths by 12 percent, the fourth steep cut in as
many years.

Congress responded to the Chinese moves by ordering the Defense
Department to conduct a comprehensive review, by April 1, of the
American military's dependence on imported rare earths for devices like
night-vision gear and rangefinders.

Western users of heavy rare earths say that they have no way of
figuring out what proportion of the minerals they buy from China comes
from responsibly operated mines. Licensed and illegal mines alike sell
to itinerant traders. They buy the valuable material with sacks of
cash, then sell it to processing centers in and around Guangzhou that
separate the rare earths from each other.

Companies that buy these rare earths, including a few in Japan and the West, turn them into refined metal powders.

"I don't know if part of that feed, internal in China, came from an
illegal mine and went in a legal separator," said David Kennedy, the
president of Great Western Technologies in Troy, Mich., which imports
Chinese rare earths and turns them into powders that are sold worldwide.

Smuggling is another issue. Mr. Kennedy said that he bought only
rare earths covered by Chinese export licenses. But up to half of
China's exports of heavy rare earths leave the country illegally, other
industry executives said.

Zhang Peichen, deputy director of the government-backed Baotou Rare
Earth Research Institute, said that smugglers mix rare earths with
steel and then export the steel composites, making the smuggling hard
to detect. The process is eventually reversed, frequently in Japan, and
the rare earths are recovered. Chinese customs officials have stepped
up their scrutiny of steel exports to try to stop this trick, one
trader said.

According to the Baotou institute, heavy rare-earth deposits in the
hills here will be exhausted in 15 years. Companies want to expand
production outside China, but most rare-earth deposits, unlike those in
southern China, are accompanied by radioactive uranium and thorium that
complicate mining.

Multinational corporations are starting to review their dependence on heavy rare earths. Toyota
said that it bought auto parts that include rare earths, but did not
participate in the purchases of materials by its suppliers. Osram, a
large lighting manufacturer that is part of Siemens of Germany, said it
used the lowest feasible amount of rare earths.

The biggest user of heavy rare earths in the years ahead could be
large wind turbines, which need much lighter magnets for the five-ton
generators at the top of ever-taller towers. Vestas, a Danish company
that has become the world's biggest wind turbine manufacturer, said
that prototypes for its next generation used dysprosium, and that the
company was studying the sustainability of the supply. Goldwind, the
biggest Chinese turbine maker, has switched from conventional magnets
to rare-earth magnets.

Executives in the $1.3 billion rare-earths mining industry say that
less environmentally damaging mining is needed, given the importance of
their product for green energy technologies. Developers hope to open
mines in Canada, South Africa and Australia, but all are years from
large-scale production and will produce sizable quantities of light
rare earths. Their output of heavy rare earths will most likely be
snapped up to meet rising demand from the wind turbine industry.

"This industry wants to save the world," said Nicholas Curtis, the
executive chairman of the Lynas Corporation of Australia, in a speech
to an industry gathering in Hong Kong in late November. "We can't do it
and leave a product that is glowing in the dark somewhere else, killing
people."

• 104 Globalization
• 107 Energy
• 116 Human Rights
• 182 Health
• 183 Environment
• 195 Chemicals