VIEW FROM NORTH AMERICA
Of Rare Earths, Morocco and Gallium Nitride
Dear Members,
Maybe spring is really here? I shall not go any further than “maybe.” But there are some encouraging signs: warm days, burgeoning trees, plants and flowers and the occasional cataclysmic thunderstorm to drench and light up everything. I shall report back on the weather once again at the end of June.
Where to start really. Now China’s National Development and Reform Commission is hinting that rare earths could become a “counter-weapon against the US’s unwarranted suppression.” To me, the big question is: “How?”
According to the US Geological Survey, in 2018 imports accounted for nearly all of the US’ consumption of REE metals and compounds, with 80% of those coming from China. (Some have, however, disputed these figures.) However, with China’s push to add value to the mineral resources it has, how is it going to “weaponise”, if at all, the REEs contained in finished and semi-finished goods? These I see as, now, being far more important strategically than either “raw” REE ores or compounds. This means that China, which sells these finished and semi-finished goods worldwide, will have to think very seriously about disrupting the relationships its exporters have built up with customers not only in the US, but also Europe and Japan.
Somewhat paradoxically, China would probably have had more leverage in current circumstances if it had not developed a successful trade in such goods. As Bob Latiff and I pointed out in our OpEd piece on REEs for Defense News back in November 2010, ex-China: “In many instances, an ability to manufacture domestically has been lost.”
Let’s now move to a geographical location between the US and China: Morocco. As readers will probably be aware, I nearly always try to avoid politics in any of my missives. However, perhaps I was amiss in doing so in my Letter from North America in early-February last year. In that particular missive, in addition to looking at REEs in Russia, I also looked at certain mineral resources in Morocco and Western Sahara. Now, as many of you are no doubt aware, the disputed territory of Western Sahara is considered by many to be under unlawful occupation by Morocco.
The rights and wrongs of the various parties’ claims aside, the dispute between them does have consequences, not least when it comes to natural resources. As the Financial Times reported in mid-May, the Polisario Front filed a case in the European Court of Justice on April 29 claiming that Brussels “is violating EU human rights law by allowing, even encouraging, the import of natural resources from the territory.” A single glance at the map accompanying my letter indicates a cluster of red triangles in the far south of Western Sahara showing ONHYM (L’Office Nationale des Hydrocarbures et des Mines) “precious metals projects” that also involve both REEs and various other minor metals.)
So, what happens if Polisario wins its case? It could lead it to take proceedings against Morocco’s “commercial and financial partners in other courts in Europe and elsewhere.” This could, in turn, lead Polisario to seek civil damages from people who have imported natural resources from the territory over the years. In addition, a very large question mark would hang over not only the commercial viability, but also the status, of current and prospective mining projects under Moroccan “auspices” in Western Sahara. Whilst any court decision still remains firmly in the future—six months to a year—the fact that Polisario has actually filed its case and has, in the past, been sympathetically heard by the European Court of Justice should be borne in mind by anyone having an eye on sourcing natural resources from the territory.
Finally, gallium nitride (GaN). Just the other day I saw another great piece in the FT, this time about gallium nitride. As some of you may know, in the dim, distant past, I remember writing with a great deal of enthusiasm that decade or so ago about GaN! I noted, then, that: “Compared with other technologies, GaN offers, amongst other things, durability, greater power added efficiency, greater electrostatic discharge resistance and greater power densities, i.e. greater wattage per square millimeter—up to 10x that of GaAs pHEMT. It also offers the advantages of: linearity, wide operating bandwidth, higher operating voltage (less current) and an inherently higher breakdown voltage and current capacity.” I also reported that some had described it as a semiconductor on steroids.
Well, it looks as if gallium nitride is now coming into it’s own—at least in the field of chargers (for laptops, ‘phones and tablets). But, most importantly, these really are wee chargers. It appears that a couple Chinese companies are now using it in the sub-size devices they are manufacturing and, very successfully, selling. Growing GaN, it seems, remains difficult, something I even noted back those years ago. But what I am learning now is that, as I wrote then: “GaN has, with its ability to promote energy savings in a number of different ways, the potential to become a favoured ‘green’ semiconductor.”
And on that somewhat upbeat note (I know, unusual for me) I should like to bid MMTA members everywhere a very good evening whilst I remain, as always
Yours, Tom Butcher
May 30th, 2019 ©2019 Tom Butcher
Tom Butcher is a Director at Van Eck Associates Corporation (“VanEck”). The views and opinions expressed herein are the personal views of Tom Butcher are not presented by or associated with VanEck or its affiliated entities.
1Financial Times: China’s state planner suggests using rare earths in US trade war, May 28, 2019
2Defense News: Strategic Materials and the West: Solve the Right Problem, November 15, 2010
3Financial Times: Polisario case reveals high stakes behind investors’ ESG enthusiasm, May 16, 2019
4Ibid.
5Financial Times: Demand grows for tiny phone chargers using ‘new silicon’, May 21, 2019
6 Ibid.
