Today's Wall Street Journal has an article entitled: "China Starts New iron-Ore Talks." The article brings up the possibility that the Chinese market, the world's largest, by far, buyer of iron ore, may well be serviced with a "China price." This would be a price lower than that charged by the cartel of iron-ore miners, Anglo-Australia's BHP and Rio Tinto (RTP) and Brazil's VALE, which controls 70% of the world's iron-ore production, to its largest customers outside of China.

I am predicting that this "China pricing" will indeed come into being, and that China will reciprocate by bringing into being a two-tiered pricing for metals within its control, in the production of which it dominates the world, the first of which could well be the rare earth metals. I predict that metals in which China dominates world production will be sold for la lower price within China that they are sold in the rest-of-the-world market.

Outlook for the strategic and critical rare metals for technology

Summary

A “strategic metal” can be defined, economically, as one that is necessary to or important in the start up, operation, or completion of a long term plan (i.e., a strategic plan) to mass produce or manufacture items, collectively or individually, which require large amounts of metal. For example the plan by a private business to construct an office building must consider the cost and availability of structural steel as a strategic necessity; this seems trivial at first glance, but it becomes very important when the strategic metals are or include even one rare “critical metal”, defined as one for which there is no substitute (in performance or economics) so that without it the project cannot be implemented or continued without guaranteeing the security of the supply of the particular specific metal.

The Chinese economy is a "command" economy, not a free market economy. This means that the state sets, among other things, manufacturing goals and resource allocations. The Chinese central government decides what is important to the economy and makes certain that money and credit flow to those sectors of the economy it has chosen. At the beginning of each five-year economic planning cycle the central government adopts a "five-year plan" to be followed rigorously. Individual and business success in China means meeting the goals of the five year plan as it applies to your sector of the economy.

Thus it is, and can be, no surprise at all to any informed observer of the Chinese economy that various, official, industry-specific planning commissions are now submitting their ideas to the China State Council in Beijing, which will review those ideas and adopt or modify them for political as well as economic reasons and then discard or include them, as the China State Council wishes, in the official listing of goals of the next Five-Year Plan for the period 2010-15.

All this nonsense about the Chevrolet Volt's fuel use and performance is just hot air until the car is on the road and its actual performance under real driving conditions and with ordinary drivers is measured.

I propose a side-by-side test of the Prius and the Chevrolet Volt to settle which is the more practical and versatile car.

Bloomberg, on August 12, 2009, published the following report:

Sumitomo Corp. (SSUMY.PK) to Form Venture With Kazatomprom, Nikkei Says

The cart is dragging the horse as the economically and electrical engineering clueless are now debating where to put the infrastructure for recharging (fueling) electrified motor vehicles.

All we have to do, they say, is change the transportation fueling, the shopping habits, and the daily routines we have built up over the last 100 years as soon as possible.

Although you would think that Popular Mechanics' writers would be familiar with the various types of hybrid power trains now in actual use or in the planning stage, it is obvious from the PM article on the proposed Buick "hybrid' that the magazine's writers, fact checkers, and editors do not understand very much about such things at all. Or is it me?

PM has decided that a new model Buick "hybrid" is an extension of the Chevrolet Volt Plug-in Hybrid. Those of you with a memory for BS will remember that the Chevrolet Volt power train went from originally being called a plug-in hybrid, PHEV, whose description is supposed to be of a battery only powered electric vehicle that can only be recharged by being plugged in to (supposedly) an ordinary household outlet (110VAC, single phase) to finally being called an extended range PHEV. This would carry a small internal combustion engine the purpose of which is NOT to directly power the car through a coupling to the driveshaft or to generate electricity to directly power an electric motor coupled to (or being) the driveshaft, but only to maintain the level of charge in the onboard battery at a sufficient level to allow it to be driven to a charging point. Got that?

On Monday, August 3, 2009, Renault-Nissan's (NSANY) "head," Carlos Ghosn, who until recently was a naysayer to vehicle eletrification made his Japanese unit temporarily the center of the electrified-car-hype world. Ghosn sitting beside a former Japanese prime minister "took the wheel," whatever that means, of a new Nissan model, the "Leaf," at its press introduction in Yokohama.

I doubt whether anyone on Mr. Ghosn's payroll would today point out his 180 degree turnabout on the electrification of cars, but no one could have said it better than he, himself, who was quoted in Yokohama as saying "We don't see the electric car as a niche car," although he did indeed see it that way not so long ago. "We see it as a mass market car," he continued to the memory challenged reporters present who couldn't find it in their saki fueled hearts to ask him why he is now to be considered a prophet instead of the last time when he pooh-poohed the electric car, well the hybrid one anyway, as a niche product.

Laissez-faire capitalism is alive and well in the rare earth mining sector of the economies of the United States, Canada, Australia, and the Republic of South Africa. None of these top tier industrial economies issues or funds government mandates for the exploration for, production of, or production of end-use products of the rare earth elements and/or thorium. Thus the world’s most competent, experienced, and educationally qualified mining exploration and engineering groups, have only the “free” marketplace to look for funding for such endeavors. The governments of some other nations, particularly, China, but also now including Korea and Japan as well as, most recently, the central governmental regulatory bodies of the European Union take a more pro-active role in securing for themselves, for their domestic use, supplies of materials that they consider critical to their heavy and high tech industries and to their military-industrial complexes. The rare earth elements and thorium are at the top of everyone’s list in the pro-active countries. The same is true for the “reactive” countries, such as today’s USA, Canada, and Australia, but the strength of the reaction has not yet been effective in producing civilian or military sector funding for rare earths or thorium.

At this very moment Australia's parliament is grappling with reacting to a Chinese "private" company's offer to buy 51%, i.e., control, of Australia's largest and best rare earth mining development, ASX listed Lynas Corp (LYSCF.PK), the huge Mt. Weld ore body of which is said to be ready for production.

The Japanese press is reporting that Toyota (TM) is studying the idea of licensing its current (full) hybrid power train to collapsing General Motors (GM). I'm sure that this supposition is true, but would such a move be possible?

As the supply situation for the critical rare earth metals, lanthanum, neodymium, praseodymium, dysprosium, and terbium stands today, with all of them coming only from China, the answer is an emphatic "No!" The proven, durable, reliable, long lived nickel metal hydride (NiMH) batteries used by Toyota and manufactured in-house by Toyota depend critically for their operation on the above named metals as do the brushless DC electric drive motors also used by Toyota to construct the Prius hybrid and the Toyota and Lexus hybrids it makes today. There would be only one way for new supplies of the critical rare earth metals to be generated, but it would take a political act of courage by the Obama administration.

Toyota (NYSE:TM) has been working on the electrification of mass produced cars through the use of hybrid power trains and the in-house development and manufacturing of batteries for at least fifteen years. Toyota adopted the nickel-metal hydride [NiMH] battery and the hybrid power train using it in the late 1990s after the NiMH battery had been in development for a decade by its original inventor, Energy Conversion Devices, Inc., and by nearly all of the Japanese battery makers, such as Panasonic (PC) and Sanyo (SANYY.PK).

Toyota entered into a joint venture with Panasonic to manufacture and continue the development of the NiMH battery as it, Toyota, began to manufacture the Prius NiMH using hybrid and let the market beta test the power train. The Prius was so successful that Toyota bought out Panasonic's interest in the JV and took it in-house to preserve competitive advantage. GM rejected the hybrid concept and watched as Toyota swept the field to become the "green' car maker.

China's hunt for natural resources to feed its already substantial heavy industrial base and its growing consumer products industry is fueled by the huge reserves of capital accumulated by the Chinese state and driven by the single-minded goal of full employment for China. America's weak and increasingly isolated response to this drive by China for natural resources is to ignore it and assume that America and the Western world will be allowed by China to continue to follow the American model of myopic free market capitalism in which natural resources will always be miraculously made available to the highest bidder. American bankers like to say that the golden rule is that "Them thats got the gold makes the rules." They're wrong. The rule is "Them thats got the rare resources makes the rules." Its already the last few minutes of the first half of the new "Great Game," and it's not looking good for the home team.

China has no hidden agenda in its quest for natural resources. It recognizes that the world's natural resources are finite, and it recognizes its own strengths and weaknesses. China also recognizes that the best use of the capital it accumulated and the technologies it got in exchange for exporting cheap labor is the acquiring control of as much of the world's natural resources as possible.

Investors Beware of “Nothing but sophistry and illusion” with regard to Lithium in Bolivia and in the electrification of cars.

A Department Of Energy Short Sighted Subsidy Program To Benefit Chinese Natural Resource Production Is Approved!

On Sunday, January 11, 2009, the London Times published an essay by one of its most prominent regular economics columnists, the American Irwin Stelzer. He is a conservative on the value of public vs. private ownership and control of the means of production, and I generally agree with his analyses. I couldn’t possibly agree with him more with regard to one of his concluding paragraphs in the Times article entitled: "$1 trillion package has something for everyone."

Obama’s appointees to the energy and environmental regulatory agencies will work to prevent new coal plants from being built, and to arrange financial and regulatory subsidies for wind and solar power. Pressure on the car industry will be unrelenting and irresistible. In hock to the government, the big three Detroit automakers will have to respect the wishes of congressmen who have never sold a car, and produce green cars in which consumers have shown little interest. Change there will be, but whether it will contribute to economic recovery and long-term growth, or impede it, is an open question.