While hysteria surrounding the possible acquisition of Unocal by the Chinese has abated since Unocal's board vote against the bid, it's unclear whether Unocal's owners will follow management's advice. If not, they face a gauntlet of politically charged nonsense about the "strategic value" of the company they own, including the contention that Unocal owns super-rare mineral deposits crucial for military applications.
According to Rep. Duncan Hunter, chairman of the House Armed Services Committee, Unocal owns a mine where, as he said on CNN's Lou Dobbs show, "the precious metals chromium tantalum and titanium" are produced, and that those metals and others "are vital to the nation's weapons systems." Dobbs agreed: "Those rare earths come from only one mine in California. It should not be sold to China as part of some... libertarian free-market program."
But chromium and titanium are not precious, the earths in question are not rare, and that mine is one of many. Unfortunately, "strategic metals" are among those perennially misunderstood policy issues with strange lives of their own. The myth of shortage simply refuses to die.
The specter of Communism's denying America vital strategic minerals first hit the public radar screen in 1975, when it was a conservative article of faith that allowing the overthrow of apartheid would lead to a Marxist stranglehold not just on gold, but on cobalt from the Congo, uranium from Namibia, and South African chromium, vanadium, platinum, and diamonds – with disastrous impact on building jets, missiles, nuclear submarines, and tanks. The argument gained force since the Soviets had all of the above minerals and more.
But an odd thing happened on the way to the Reagan administration's second term: The poker game at the Periodic Table turned out to be penny ante. While the West lost its lock on South Africa's treasure chest and chaos descended on Zimbabwe and the Congo, metals supplies mostly rose and prices mostly fell.
What happened? Simple – where there is demand, supply shall follow, as long as the market is left alone to do its job. In this case, alternative metals were employed while new suppliers opened for business. The long-predicted minerals crisis failed to materialize.
Resource geopolitics is old as Victorian Dreadnaught naval strategy, but economic concerns over access have been shattered by the rise of modern-materials science and plate tectonics. We now know that "strategic minerals" occur by the ton on both sides of every ocean, wherever beach sands run black with rutile and monazite. You can mine titanium and rare earths (and a bit of uranium too) from Coney Island. The only thing special about the rich California lode that Unocal owns and China is said to covet is its low production costs.
If some minerals and metals retain strategic significance, it owes less to true rarity than to our national aversion to holes in the ground. The EPA's addiction to draconian regulation can make opening a new mine a nightmare. China, meanwhile, is the world's foremost exporter of "rare earths minerals," producing them copiously without need of mines by processing iron slag the Manchurian steel industry would otherwise throw away. The resulting glut has rendered the term "rare earth minerals" a misnomer – all thanks, ironically, to the Chinese. For instance, the "strategic" mineral neodymium, as abundant as it is magnetically attractive, is now used down market for toy motors, refrigerator door seals and those ubiquitous refrigerator magnets.
Some metals are indeed at the moment "rare" (that is, expensive) but are so physically abundant that they're not worth worrying about. One such metal is gadolinium, an element with such a brilliant response to neutrons and x- and gamma rays that it is ideal for bomb-finding technology. But a gadolinium boom based on anti-terrorism gadgetry would be a one shot affair because what geologists call the "Ground Truth": For every two pounds of lead in the earth's crust, there's a pound of gadolinium. For all the hype about high-tech lasers, there's a lot more lying around in lighter flints.
Some minerals, however, really are rarer than gold, and the inelastic supply of a few useful ones makes for volatile prices. Rhodium is one such mineral, which happens to be rarer than even platinum but is nevertheless used as a cracking catalyst in oil refineries. But there are only a handful of such minerals and cornering the market for "rare" metals only works if no one notices the operation. A Chinese rare-earth fire drill would collide with reality like the Hunt Brothers attempt to corner the silver market. Regardless, Unocal holds no such minerals.
Panic over national access to the Periodic Table is a residual fear out of whack with the economic and geological facts on the ground. It is a discredited vestige of the economic imperialism of the 19th century and shouldn't be used as a handy excuse to favor one of Unocal's corporate suitors over another.