How Forward Integration Along the Rare Earth Value Chain Threatens the Global Economy

At the moment the first steps of the REE value chain are already dominated by a monopolistic power. Current developments, however, show a tendency of a monopolistic takeover of the subsequent steps of the value chain with finally having control over the whole chain. Such tendency, in our view, represents a serious threat to the key industries in the ROW and, therefore, to the global economy.

The takeover of subsequent steps is induced by the price differences between domestic prices and the world market price, which is dominated by the monopolist’s FOB (free on board) price, and executed by so created market forces. The rebuilding of the first steps in ROW (rest of world) like REE mining, processing and soon separation is demotivated by the de facto monopoly on the subsequent steps controlling the products markets and, possibly, by a well chosen price policy. The strategic dominance of the monopolist creates enormous price risks scaring off independent investment into the ROW value chain. Likewise, it generates a default risk scaring off strategic investors. Investment in ROW enterprises and JVs (joint ventures) are other important tools of the monopolist to gain control over the value chain with respect to technological know-how, business relations, and production capacity. This takeover seems to be a part of a well-planned long-term strategy of a major state actor and requires cooperative actions of industry and state in ROW in order to stop this dangerous trend.