COMPASS MAGAZINE #11
COMPASS MAGAZINE #11

RARE EARTH ELEMENTS As China tightens supply, manufacturers and producers plan and worry

The world once depended on the United States for the rare earth elements required in advanced applications. Over the past 15 years, however, dependence has shifted to China, leaving some manufacturers feeling vulnerable. From developing competing sources of supply to finding alternative materials, governments and businesses are working to broaden the supply of rare earth elements.

The group of 17 rare earth elements, or “rare earths” (RE), are critical to a variety of new and emerging technologies, including automobile and petroleum-refining catalysts; flat-panel displays; rechargeable batteries for hybrid and electric vehicles; wind turbines; and permanent magnets used in a multitude of medical devices.

Despite their name, RE are relatively plentiful. Some, including neodymium, lanthanum and cerium, occur within the earth’s crust in greater quantities than lead or gold. What makes RE rare are the difficulties associated with mining and processing them. Deposits of RE generally are mixed into other geological materials, making it costly to mine the individual elements and creating the need for significant, expensive processing. These factors have led to the bulk of the world’s supply being controlled by just one country: China.

With demand for many RE on the rise, manufacturers are heavily reliant on their suppliers. A June 2012 study, “Rare Earth Elements: The Global Supply Chain” by the US Congressional Research Service (USCRS), authored by energy policy specialist Marc Humphries, states that world demand for RE is expected to rise from 136,000 tons per year in 2010 to 185,000 tons annually by 2015 as a result of rapidly growing applications, including those designed to reduce dependence on fossil fuels.

“There were almost no applications for RE 25-30 years ago,” said Dr. Gareth Hatch, founding principal of Technology Metals Research, Chicago, Illinois (USA). “However, demand grew through the adoption of new and emerging technologies, a number of these in response to climate change and increasing environmental awareness.” Two decades ago, Hatch said, “Europium and terbium were a novelty – weird chemical elements at the bottom of the periodic table that you just ignore.” Today, both are used in television screens and energy-efficient lighting.

A HOT COMMODITY

Fifteen years ago, the USA led the world in the production of RE, but stepped out of the market as a result of price pressure from China, aggravated by profound differences in the two countries’ environmental regulations.

“Before the late 1980s, Mountain Pass in California was the largest-producing RE mine in the world,” Hatch said. “But China discovered it had RE and, as part of its national industrial policy, had planned for quite some time to develop and exploit its deposits. China was able to implement a low-cost operation strategy for two reasons: availability and disregard for pollution mitigation. Its main source of RE – Inner Mongolia’s Byan Obo mine – is a by-product site that primarily produces iron ore, giving China the cost advantage of shared multiple commodities.

“Stereotypically – but unfortunately true – the methods and approach used to produce these materials in China, until very recently, had little regard for the environment,” Hatch said. “So money didn’t need to be spent on pollution mitigation, filtering or proper control of the waste products. That gives you a natural price advantage.”

The Academic Department of the Chinese Society of Rare Earths in Beijing is part of a state-funded organization that provides recommendations to China’s national government on both the science and technology of RE. Dr. Chen Zhanheng, the department’s director, said China is merely reaping the benefits of its investment.

“The Chinese government focused on RE exploration, exploitation, separation and smelting,” Chen said. “It provided huge financial support for RE, from the initial research to applications they are used in. Abundant deposits and low operating costs meant China’s mining enterprises were able to compete abroad.”

Chen emphasizes that China never had a low-cost strategy. “Cheaper production came from low labor costs and little investment in environmental protection,” he said. “This was obviously unsustainable, and China’s operation costs have increased since the implementation of the new pollutant emission standard in October 2011.”

SOLE SUPPLIER

China currently controls 98% of the world’s RE production, according to the April 2012 study “Evaluating Rare Earth Element Availability: A Case with Revolutionary Demand from Clean Technologies,” published in Environmental Science and Technology from Massachusetts Institute of Technology (MIT), which states that even significantly lower levels of market concentration have historically been harmful to global manufacturing firms. “This is not an issue of scarcity, but criticality,” said Dr. Frank Field, an MIT senior research associate and one of the study’s authors. “Sole-source supply is a mistake. We are not going to run out of RE, but we can see what’s coming.”

Hatch agrees. “When China allegedly cut off supply of RE to Japan for a few weeks in September 2010, these materials suddenly became a geopolitical weapon. Then came a surge in prices of the underlying raw materials – triggered by announcements from China of export quotas and restrictions – with hikes as high as 3,000%. This scared a lot of end users and big OEMs. While the probability of supply disruption – not having access to material – may be low, the consequences are high.”

185,000 tons

World demand for rare earths is expected to rise from 136,000 tons per year in 2010 to 185,000 tons by 2015, according to the

US Congressional Research Service.

Don Bubar is president and CEO of Avalon Rare Metals, which owns one of the world’s largest undeveloped deposits of RE, located in the Northwest Territories of Canada. Bubar believes that industry concerns about China’s dominance in RE are understandable.

“China has consolidated ownership and processing in its RE industry, reduced the number of active companies, and established minimum requirements for production,” Bubar said. “This is in addition to their earlier efforts of imposing export taxes, eliminating VAT rebates on exports, imposing export quotas and enforcing stricter environmental standards, among other things. China is in a better position to restrict exports and control prices than they were in 2010. Consumers outside China should beware.”

China isn’t the only nation that enjoys sole-supplier status for raw materials. Russia, for example, controls most of the world’s supply of titanium, a monopoly that has generated less concern … so far.

“China may not be able to meet worldwide demand for rare earth products. So it is better that other countries develop their rare earths production to establish a multi-supply system.”

Dr. Chen Zhanheng Director of the Academic Department of the Chinese Society of Rare Earths, Beijing

“Some people are worried – mostly policy makers, some governments and some enlightened industry people,” Hatch said. “If the titanium supply chain had been rocked by a price hike similar to that which affected the RE, this may have caused the same level of alarm. But while people can call their procurement person and place an order that shows up six weeks later, it isn’t a problem.”
 
Chen argues that China’s actions have been reasonable and responsible. Total control over production helps protect the environment by reducing both pollution and ecological damage, he said. The Chinese government also has cracked down on illegal mining, which caused supplies to drop. “Japan and other developed countries had a right to be concerned about RE supply due to China’s total production control,” Chen said. “But these countries were also aided in their access to RE through illegal mining and smuggling, which meant that total production control and export quotas were largely ineffective.”

Tim Harper, founder of UK-based Cientifica, advises the World Economic Forum on emerging technologies and is a former engineer with the European Space Agency. He points out that the West’s failure to plan for adequate supplies of RE is as much to blame for the situation as anything China has done.

“The commercial and the political-strategic aspects mean it’s not really a level playing field,” Harper said. “If it were purely commercial, people would just buy RE from China. In the West, however, from a policy perspective, politicians have a habit of waiting until something happens and then trying to pluck a technology solution from thin air. That is beginning to fail us because, although there are technologies to get around a lot of issues, it takes time to develop them.”

NEW SOURCES OF PRODUCTION

Since RE are found worldwide, countries that fear China’s monopoly could address manufacturers’ concerns by developing alternate sources of supply. The USCRS study highlights that companies such as Avalon Rare Metals and Great Western Minerals Group in Canada, along with US-based Molycorp, have long-term potential to supply RE, including lanthanum, cerium, praseodymium, neodymium and samarium. Lynas Corporation’s Mount Weld site in Australia also came online in 2013. Although newer mines may take ten years to reach full production, the USCRS study states that “in the long run, global reserves and undiscovered resources are large enough to meet demand.”

Molycorp and Lynas offer the potential to ease supply concerns for light RE, such as highly sought-after neodymium, but projects concentrating on heavy RE such as dysprosium are needed to compete with China. “Ultimately, further work is required to encourage collaboration among industry and academia to develop full supply-chain solutions,” Bubar said. “Public-policy makers need to foster cooperation between governments in producing and consuming nations to develop coordinated strategies to help the industry outside China establish the full RE supply chain.”

Funding remains the biggest challenge. “We have plenty of RE deposits around the world, with most work carried out by small – or junior – mining companies,” Bubar said. “It’s ‘high-risk, high-reward’ activity, so the big mining companies tend to be more interested in copper and iron, the more straightforward materials, leaving the small companies scrambling for money. RE are unique, and each deposit has its own mineral signature. It’s not like gold mining or copper mining, where a similar method is used whether it’s in Peru or Nevada. You have to devise a custom engineering approach to get the minerals out, and that can take a few years. Bringing these things to market could be a US$1 billion investment for a mine that might produce 5,000 tons of heavy RE a year – that’s quite a lot of money.”

Expensive or not, Chen points out that China can’t meet the global demand for RE forever. “China may not be able to meet worldwide demand for RE products,” he said. “So it is better that other countries develop their RE production to establish a multi-supply system, alleviate any shortage concerns and ensure a stable supply in accordance with the globalized economy and politics.”

SEEKING SUBSTITUTES

While suppliers work to bring new mines online, price volatility and supply uncertainty have motivated some end users to search for substitutes. Ford Motor Company, for example, has cut its use of dysprosium in its new Fusion and C-MAX hybrid automobile models in half by adopting lithium-ion batteries and eliminating the need for neodymium, which was used in earlier nickel-metal-hydride versions.

But Ford’s success has not yet translated across other industries and applications. “Significant advances are being touted in the material science community, such as technologies that would be less dependent on RE magnets,” Bubar said. “However, many of these advances are still in the laboratory or demonstration testing stages and not in production.”

Research into both substitutes and recycling measures continues, with numerous programs and working group projects running worldwide. In the USA, for example, the Critical Materials Institute is a multidisciplinary effort led by Ames Labs to address processing, manufacturing, substitution, efficient use and end-of-life recycling. The Canadian RE Research Network, meanwhile, seeks to minimize the duplication of RE research and maximize innovation in RE recovery. First convened by the Korean Institute of Industrial Technology in South Korea in 2011, the primary goal of this international group is to develop collaboration among the major research groups around the world.

While the rush to find substitutes is understandable, Hatch offers a cautionary note. “If you switch to a design that doesn’t have the advantages of permanent magnets and the prices come back down, as they have done, or we get new sources of neodymium or dysprosium, you’re then at a disadvantage because you’ve designed them out.”

But Harper argues that advances in technology promise to make the search for substitutes faster and less expensive than has traditionally been possible. “Computer simulation technology has replaced the test tubes in the world of chemistry,” Harper said. “Now we can do a lot of that testing in silicon and can figure out how things are going to behave before we make them. All you have to worry about is synthesizing the most promising candidates, which gives a huge productivity gain when trying to come up with new materials.”  ◆

by Cherie Rowlands Back to top