Last night 60 Minutes ran a segment on how American industry, and more importantly, the American defense industry, is prostrate before a Chinese monopoly of rare earths production. This is of course very worrying for all sorts of Very Serious People and something no doubt should be done. There is a slight problem with the analysis 60 Minutes presented though: that problem being that their analysis was wrong. And I say this as someone who works in that rare earth industry, someone who has, at times, been a near monopoly supplier of one of the rare earths and, even, a supplier to the US defense industry of non-Chinese rare earths.

Here are the most important lines in the 60 Minutes report:

But trouble is once again looming for the U.S. rare earth industry. Since restarting operations two years ago, Molycorp's mountain pass mine has yet to turn a profit, and so deeply in debt that just last week, its own auditor warned it may not be able to stay in business.

That part is, as far as anyone in the industry knows, true. Molycorp, which runs the only producing US domestic rare earths mine, is deep in the financial doo doo and may well go bust without a recapitalisation. As was true of the major Australian rare earths miner, Lynas Corporation, until a recapitalisation a few months back (Sept 2014). You do not have to be excessively cynical to note that shareholders might prefer to have some government support rather than having to put more of their own money into such companies. That call for support, unless there truly is some important defense interest, should be rejected of course. For making losses as these firms are doing is the universe’s way of telling you to stop doing what you are doing.

However, on to the detail of what 60 Minutes tries to tell us about rare earths.

What do cars, precision-guided missiles and the television you’re watching right now have in common? They all depend on something called rare earth elements, unusual metals that are sprinkled inside almost every piece of high-tech you can think of. Most people have never heard of them. But we have become so reliant on rare earths that a few years ago, an intense global power struggle broke out over their free flow. The reason is that one country has a virtual monopoly – roughly 90 percent — of the mining, refining and processing of rare earths — China. And in 2010, it used that power to disrupt the world’s supply. It’s especially troubling, because it was the United States that started the rare earth revolution in the first place.

Well, that’s not particularly true. It most certainly was true, some years back, but it isn’t now. And I’m able to point back to something I wrote for Foreign Policy back in 2010 to explain why it used to be true but is no longer.

If rare earths are so precious, why isn’t the United States working harder to collect them? The main reason is that, for these last 25 years, China has been supplying all we could eat at prices we were more than happy to pay. If Beijing wants to raise its prices and start using supplies as geopolitical bargaining chips, so what? The rest of the world will simply roll up its sleeves and ramp up production, and the monopoly will be broken.

And what did happen? China did try to exercise its monopoly, the world did roll up its sleeves and both Molycorp and Lynas went into production. Between the two of them they produce very much more than 10% of global consumption of rare earths (in fact, reasonable estimates are that they produce more than total non-China consumption of them) meaning that China simply doesn’t have that monopoly being talked of. As I said would happen and as a result Alex Tabarrok over at Marginal Revolution has said of my 2010 analysis:

Bonus points to Tim Worstall, economist blogger and rare earth dealer, who in 2010 at the height of the crisis pointed out that rare earths were neither rare nor earths and China’s monopoly had been won only by low prices that accrued to our benefit. …(…)… Nailed it.

I don’t, by the way, claim great prescience over this. It was obvious to anyone at all with even the most limited knowledge of the industry and of mining economics. The problem that 60 Minutes is talking about, the Chinese rare earth monopoly isn’t a problem because the monopoly has been broken.

60 Minutes has a couple more errors in their report:

Lesley Stahl: What I’m getting from you is that modern life depends on these elements.

Constantine Karayannopoulos: Absolutely.

Despite their name – rare earths are not rare. Small amounts can be found in your backyard. They’re trapped in what looks like ordinary rock.

But there are only a few places on earth with concentrations high enough to mine.

Constantine Karayannopoulos: Rare earths normally are found in very, very low concentrations. This is probably running something in the 25 percent grade.