November 15th, 2010
04:59 AM GMT
Share this on:

Hong Kong, China (CNN) – For the past decade, a small company in Estonia  has struggled to carve out a slice of the rare earth industry dominated by China. Now Silmet Rare Metals suddenly finds itself on the map as a result of recent trade disputes between China, the U.S. and Japan over rare earth minerals.

"We've been trying to get in the door for the past ten years, Suddenly, we're the prettiest girl at the dance," says CEO David O'Brock.

The story of Silmet Rare Metals is an interesting one. Its factory in the port town of Sillamäe, Estonia was originally a uranium enrichment plant for the Soviets during World War II. In the 1970's, the factory buildings were transformed into a rare earth metals and minerals production facility. Today, Silmet purchases raw materials from a Russian mine and then processes out rare earth elements that can be used in the auto, glass and electronics industries.

O'Brock is an American who has lived in Estonia for 12 years and runs the 500-employee company. He says Silmet produces 3,000 tons per year – just a fraction compared to China's 130-140,000 tons per year.

The recent political disputes and China's chokehold on the industry have made many international manufacturers very nervous about their future supplies of rare earth minerals. The situation has put Silmet in the enviable position of being the hottest ticket in town.

Unfortunately, says O'Brock, he can't take full advantage of the demand and has to turn away potential new customers. "We're a very small producer on a world scale. Our bottleneck has always been raw material. Because we don't source from China, we don't have enough capacity for what the world needs," he says.

Silmet is sticking with its longtime, if small, customer base of about 15 companies from the U.S., the EU and Japan. While Silmet cannot take on new accounts, it is taking advantage of surging market prices. O'Brock gives an example of the cheapest raw earth metal: Cerium which is used in the glass industry.

Last year, cerium sold for $3.50 per kilogram. Today Silmet sells it to his customers for $40 a kilogram – a 1000% price increase! Do his customers complain?

"They understand the political situation and the market forces," O'Brock says. In other words, they have no choice.  Silmet is a private company and will not release financial figures. After pressed for some perspective, the CEO acknowledged that Silmet has never made a profit until this year.

Sometimes, a little controversy can be good for business.



soundoff (16 Responses)
  1. GEORGE ARGIRIOU

    I DON'T THINK THAT THE COMMUNISM IN CHINA WILL LAST.IT WILL FALL UNTILL THIS SUMMER.

    November 15, 2010 at 9:03 am |
  2. GEORGE ARGIRIOU

    THIS IS JUST MY THEORY.I COULD B WRONG.

    November 15, 2010 at 9:07 am |
  3. mjs

    Chinese suppliers have been ripped off.
    Its a correction

    China suppliers do not have to sell cheaply anymore
    and the wokers can be paid more.

    November 15, 2010 at 11:31 am |
  4. ok

    It is great, good for it, for USA and Japan and China. A seller finds the market and the buyers finds the goods and China spare its rare earth.
    The buyers have goods.
    the seller has money,
    and China has the future.
    This is 3-Win.

    November 15, 2010 at 1:26 pm |
  5. robert

    @GEORGE ARGIRIOU, STOP SHOUTING!

    November 15, 2010 at 2:37 pm |
  6. EDDIE BOULOUS

    THANKS GEORGE FOR YOUR PREDICTION.WELL SEE WHAT HAPENS!

    November 15, 2010 at 5:25 pm |
  7. Abu

    You are out of date, George. There is already no more communism in China. It is already a capitalist country since Deng's time.

    November 15, 2010 at 8:04 pm |
  8. styx

    question is...will it be better or worse for the world trade, environment, exploitation of underaged children etc...

    November 15, 2010 at 10:00 pm |
  9. Jerry J. Danielsson

    Communism will not last? Hm!? My whole life I've heard that the chinese are first Chinese – then maybe communists. Its all about labeling – communism, socialism and capitalism. Whatever the label there are humans behind them, usually with the sole interesst to improve their own situation on the behalf of others... but I could be wrong as well ...

    November 15, 2010 at 11:16 pm |
  10. Jim Manning

    From the 1960's through the 1980's the US supplied the majority of the world's Rare Earth Elements (REE's) primarily from a single source in California – the Mountain Pass Mine. The mine formerly owned by a division of UNOCAL Corp, Molycorp, was closed in 2002 as a result of environmental issues, regulatory restrictions and low REE prices due to China's growing low-cost production.

    Now it is clear that China is exploiting its near-monopoly position for its own political ends. It is just this type of action that emphasizes the importance of maintaining a strong Minerals industry here in the US. Once this type of capacity is lost, it can take years to regenerate it. With strategically important resources like these, it is important not to become reliant on foreign sources – especially when domestic resources exist.

    JRM

    November 16, 2010 at 3:28 am |
  11. GEORGE ARGIRIOU

    MY THEORY HAS NOTHING 2 DO WITH THE REALITY.SO IT IS PROPABLY WRONG.I HAVE NO INFORMATION WHAT SO EVER.

    November 16, 2010 at 8:02 pm |
  12. Dozo

    It's the same goes for oil sand. If oil price is not going up, then it's not profitable to extract oil sand because the cost is too high.

    November 16, 2010 at 9:44 pm |
  13. Sumitomonet

    Chinese use all their advantages. It is good way to subordinate all the world and they are doing their business very well.

    November 18, 2010 at 11:33 am |
  14. vine

    Silmet's rare earth separation facility was completely closed for 2-3 years at the beginning of this century.
    I do not understand why Molycorp cannot re-commision their operations.
    The bastnesite ore is on the surface.

    November 18, 2010 at 7:41 pm |
  15. icon design

    P.S. Please review Unlocked database Icon from database-icons

    September 21, 2012 at 10:27 pm |
  16. icons archive

    Very amusing idea

    hpixel

    September 22, 2012 at 10:38 pm |

Post a comment


 

CNN welcomes a lively and courteous discussion as long as you follow the Rules of Conduct set forth in our Terms of Service. Comments are not pre-screened before they post. You agree that anything you post may be used, along with your name and profile picture, in accordance with our Privacy Policy and the license you have granted pursuant to our Terms of Service.

About Business 360

CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.

 
 
Powered by WordPress.com VIP