LED Applications Growing, Will Only Lead to More REE Demand
An end product’s supply chain can be far reaching, with parts or all of the upstream and downstream producers sometimes getting hit at different times by economic forces.
This appears to be happening in China’s domestic LED market, which has seen a marked fall-off in demand, according to the China Strategic Monitor. That’s hit pricing during the second half of this year.
“Investment plans are being curtailed both in the upstream and downstream compared to those presented last year,” according to the report. “Despite this there are many companies still attracted to the market and many pharmaceutical companies and even wineries in South China are moving into LED lighting products. Based on this trend the industry is likely to realize large-scale production capacity over the next 2 or 3 years and pricing for products should fall a further 20-30%.”
Industry watchers reckon 10% of LED-driven businesses in China could go bankrupt this year. And one chief executive, speaking at the recent China Industrial Development Forum for the Low Carbon Economy, said 90% of all China’s LED businesses are running at a loss.
Interesting. The country’s Guangdong province said earlier this month that it had exported US$3.81 billion worth of lighting products between January and August – that’s a 21% increase over the same time period last year.
“Customs authorities indicated that the main export market is still Europe and America with the two taking up 63.2% of the total,” a report said. “Though exports to Hong Kong, Japan and other ASEAN countries are up 60% on last year.”
The massive rise in LED exports is ascribed to the increasing trend of upgrading to energy-efficient lighting combined with the higher production values and quality in China, according to the report.
Still, various companies producing LED products complain that the industry is hit with high selling, raw material and R&D costs. So, while a company reports a 32% jump in LED sales in the third quarter of 2011when compared to 2Q10, the senior executives also talk about the need to implement structural changes, improve execution, reduce overhead costs and initiate job cuts.
Now, the LED industry uses a wide range of phosphor materials to convert light emission from LED chips into a different wavelength. So, combining a blue LED with one or more phosphors can create a white LED. Many of the phosphors used in LEDs contain rare-earth elements, the most common one being the yttrium aluminum garnet, which is doped with cerium. Another phosphor, called TAG, contains terbium, while silicate and nitride phosphors are commonly doped with cerium or europium.
Here’s a small example of how LED products are being used: Kingsun Optoelectronic Co has just installed more than 10,000 street lights containing one million high-efficiency white LEDs along 75 miles of roads in Shenzhen. Kingsun anticipates a 60-percent reduction in energy consumption compared to the high-pressure sodium fixtures that have been replaced in the upgrade.
And while LEDs are now widely recognized as emerging light sources for general illumination, it turns out that LED lighting can also be used in a broad range of life-science applications such as skin-related therapies, blood irradiation, pain management, hypertension reduction and photodynamic therapy, which, when combined with drugs, is finding its way into cancer research.
In other words, the LED industry is only now just starting to be exploited, meaning demand will grow across all sectors. Translation – more rare earths will be needed in producing these products as research advances are made and commercial producers become more lean and efficient.
Source: http://www.raremetalblog.com/
By: Brian Truscott
China’s Rare Earths Monopoly - Peril or Opportunity?
September 30, 2011 (Source: Market Oracle) — The prosperity of China’s “authoritarian capitalism” is increasingly rewriting the ground-rules worldwide on the capitalist principles that have dominated the West’s economy for nearly two centuries.
Nowhere is this shadow war more between the two systems more pronounced than in the global arena of production of rare earths elements (REEs), where China currently holds a de facto monopoly, raising concerns from Washington through London to Tokyo about what China might do with its hand across the throat of high-end western technology.
In the capitalist West, as so convincingly dissected by Karl Marx, such a commanding position is a supreme and unique opportunity to squeeze the markets to maximize profits.
Except China apparently has a different agenda, poking yet another hole in Marx’s ironclad dictums about capitalism and monopolies, further refined by Lenin’s screeds after his Bolsheviks inadvertently acceded to power in 1917 in the debacle of Russia’s disastrous involvement in World War One. Far from squeezing its degenerate capitalist customers for maximum profit (and it’s relevant here to call Lenin’s dictum that if you want to hang a capitalist, he’ll sell you the rope to do it), Beijing has apparently adopted a “soft landing” approach on rare earths production, gradually constricting supplies whilst inveigling Western (and particularly Japanese) high tech companies to relocate production lines to China to ensure continued access to the essential commodities.
REEs are found in everyday products, from laptops to iPods to flat screen televisions and hybrid cars, which use more than 20 pounds of REEs per car. Other RRE uses include phosphors in television displays, PDAs, lasers, green engine technology, fiber optics, magnets, catalytic converters, fluorescent lamps, rechargeable batteries, magnetic refrigeration, wind turbines, and, of most interest to the Pentagon, strategic military weaponry, including cruise missiles.
Technology transfer is the essential overlooked component in China’s economic rise, and Beijing played Western greed on the subject like a Stradivarius, promising future access to China’s massive market in return, an opium dream that rarely occurred for most companies. You want unimpeded access to Chinese RREs? Fine – relocate a portion on your production lines here, or…
Which brings us back to today’s topic.
Rare earths and investment – where to go?
China is riding a profitable wave, which depending on what figures you read, produces 95-97 percent of current global supply, and unprocessed raw earth earths ores are currently going for more than $100,000 a ton, or $50 a pound, which some of the exotica fetching far more (niobium prices has increase an astounding 1,000 percent over the last year). Rare earth elements like dysprosium, terbium and europium come mainly from southern China.
According to a United States Energy Department report, dysprosium, crucial for clean energy products rose to $132 a pound in 2010 from $6.50 a pound in 2003.
The soaring prices however have also invigorated many countries and producers to begin looking in their own back yards, for both new deposits and former mining sites that were shuttered when production cost made them uneconomic before prices went through the ceiling.
However, a number of unknown factors play into developing alternative sources to current Chinese RRE production. These include first prospecting possible sites, secondly, their purity and third, initial production costs, where modest Chinese labor costs are a clear factor.
The 17 RRE elements on the Periodic Table are actually not rare, with the two least abundant of the group 200 times more abundant than gold. They are, however, hard to find in large enough concentrations to support costs of extraction, and are frequently found in conjunction with radioactive thorium, leading to significant waste problems.
At hearings last week before U.S. House of Representatives Committee on Foreign Affairs Subcommittee on Asia and the Pacific, Molycorp, Inc. President and Chief Executive Officer Mark A. Smith stated that his company was positioned to fulfill American rare earth needs, currently estimated at 15,000-18,000 tons per year, by the end of 2012 if it can ramp up production at its Mountain Pass, California facility.
Which brings us back to foreign producers. A year ago Molycorp announced that it was reopening its former RRE mine in Mountain Pass, Calif., which years ago used to be the world’s main mine for rare earth elements, filing with the SEC for an initial public offering to help raise the nearly $500 million needed to reopen and expand the mine. Low prices caused by Chinese competition caused the Mountain Pass mine to be shuttered in 2002.
Mountain Pass was discovered in 1949 by uranium prospectors who noticed radioactivity and its output dominated rare earth element production through the 1980s; Mountain Pass Europium made the world’s first color televisions possible.
Molycorp plans to increase its capacity to mine and refine neodymium for rare earth magnets, which are extremely lightweight and are used in many high-tech applications and intends to resume production of lower-value rare earth elements like cerium, used in industrial processes like polishing glass and water filtration.
In one of those historic economic ironies, China was able to increase its RRE production in the 1980s by initially hiring American advisers who formerly worked at Mountain Pass.
The record-high REE prices are also underwriting exploration activities worldwide by more than six dozen other companies in the United States, Canada, South Africa, Malaysia and Central Asia to open new RRE mines, but with each start-up typically raising $10 million to $30 million, not all will succeed. That said, the future is bright, as almost two-thirds of the world’s supply of REEs exists outside of China and accordingly, China’s current monopoly of REE production will not last.
So where do investors look to cash in on the RRE boom?
First, do your homework.
Exhibit A is Moylcorp, which would seem to be in unassailable position as regards U.S. production, but which nevertheless on 20 September after JPMorgan Chase & Co. lowered its rating of the company, citing declines in rare-earth prices, causing its stock to plummet 22 percent in New York Stock Exchange composite trading, despite being the best-performing U.S. IPO in 2010 after beginning trading in July, more than tripling after rare-earth prices soared as China cut export quotas.
Is there money to be made in RREs?
Undoubtedly – but the homework for the canny investor needs to extend beyond spreadsheets to geopolitics, mining lore, chemistry and Wall Street puffery. That said, it seems likely that whatever U.S.-based company can cover the Pentagon’s RRE requirements is likely to see more than a minor boost in its bottom line.
Gentlemen, place your bets – but do your homework first.
China Consolidates Grip on Rare Earths
BEIJING In the name of fighting pollution, China has sent the price of compact fluorescent light bulbs soaring in the United States.
The price of compact fluorescent light bulbs has risen drastically in the last year because of the rising cost of rare earth metals.
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By closing or nationalizing dozens of the producers of rare earth metals â which are used in energy-efficient bulbs and many other green-energy products â China is temporarily shutting down most of the industry and crimping the global supply of the vital resources.
China produces nearly 95 percent of the world’s rare earth materials, and it is taking the steps to improve pollution controls in a notoriously toxic mining and processing industry. But the moves also have potential international trade implications and have started yet another round of price increases for rare earths, which are vital for green-energy products including giant wind turbines, hybrid gasoline-electric cars and compact fluorescent bulbs.
General Electric, facing complaints in the United States about rising prices for its compact fluorescent bulbs, recently noted in a statement that if the rate of inflation over the last 12 months on the rare earth element europium oxide had been applied to a $2 cup of coffee, that coffee would now cost $24.55.
A pack of three 11-watt G.E. compact fluorescent bulbs each the lighting equivalent of a 40-watt incandescent bulb was priced on Thursday at $15.88 on Wal-Mart’s Web site for pickup in a Nashville, Ark., store. The average price for fluorescent bulbs has risen 37 percent this year, according to the National Electrical Manufacturers Association.
Wal-Mart, which has made a big push for compact fluorescent bulbs, acknowledged that it needed to raise prices on some brands lately. Obviously we don’t want to pass along price increases to our customers, but occasionally market conditions require it, Tara Raddohl, a spokeswoman, said. The Chinese actions on rare earths were a prime topic of conversation at a conference here on Thursday that was organized by Metal-Pages, an industry data firm based in London.
Soaring prices are rippling through a long list of industries.
The high cost of rare earths is having a significant chilling effect on wind turbine and electric motor production in spite of offsetting government subsidies for green tech products, said one of the conference attendees, Michael N. Silver, chairman and chief executive of American Elements, a chemical company based in Los Angeles. It supplies rare earths and other high-tech materials to businesses.
But with light bulbs, especially, the timing of the latest price increases is politically awkward for the lighting industry and for environmentalists who backed a shift to energy-efficient lighting.
In January, legislation that President George W. Bush signed into law in 2007 will begin phasing out traditional incandescent bulbs in favor of spiral compact fluorescent bulbs and other technologies. The European Union has also mandated a switch from incandescent bulbs to energy-efficient lighting.
Representative Michele Bachmann of Minnesota is running for the Republican presidential nomination on a platform that includes strong opposition to the new lighting rules in the United States and has been a leader of efforts by House Republicans to repeal it.
China says it has largely shut down its rare earth industry for three months to address pollution problems. By invoking environmental concerns, China could potentially try to circumvent international trade rules that are supposed to prohibit export restrictions of vital materials.
In July, the European Union said in a statement on rare earth policy that the organization supported efforts to protect the environment, but that discrimination against foreign buyers of rare earths was not allowed under World Trade Organization rules.
China has been imposing tariffs and quotas on its rare earth exports for several years, curtailing global supplies and forcing prices to rise eightfold to fortyfold during that period for the various 17 rare earth elements.
Even before this latest move by China, the United States and the European Union were preparing to file a case at the W.T.O. this winter that would challenge Chinese export taxes and export quotas on rare earths.
Chinese officials here at the conference said the government was worried about polluted water, polluted air and radioactive residues from the rare earth industry, particularly among many small and private companies, some of which operate without the proper licenses. While rare earths themselves are not radioactive, they are always found in ore containing radioactive thorium and require careful handling and processing to avoid contaminating the environment.
Most of the country’s rare earth factories have been closed since early August, including those under government control, to allow for installation of pollution control equipment that must be in place by Oct. 1, executives and regulators said.
The government is determined to clean up the industry, said Xu Xu, chairman of the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters, a government-controlled group that oversees the rare earth industry. The entrepreneurs don’t care about environmental problems, don’t care about labor problems and don’t care about their social responsibility, he said. And now we have to educate them.
Beijing authorities are creating a single government-controlled monopoly, Bao Gang Rare Earth, to mine and process ore in northern China, the region that accounts for two-thirds of China’s output. The government is ordering 31 mostly private rare earth processing companies to close this year in that region and is forcing four other companies into mergers with Bao Gang, said Li Zhong, the vice general manager of Bao Gang Rare Earth.
The government also plans to consolidate 80 percent of the production from southern China, which produces the rest of China’s rare earths, into three companies within the next year or two, Mr. Li said. All three of these companies are former ministries of the Chinese government that were spun out as corporations, and the central government still owns most of the shares.
The taxes and quotas China had in place to restrict rare earth exports caused many companies to move their factories to China from the United States and Europe so that they could secure a reliable and inexpensive source of raw materials.
China promised when it joined the W.T.O. in 2001 that it would not restrict exports except for a handful of obscure materials. Rare earths were not among the exceptions.
But even if the W.T.O. orders China to dismantle its export tariffs and quotas, the industry consolidation now under way could enable China to retain tight control over exports and continue to put pressure on foreign companies to relocate to China.
The four state-owned companies might limit sales to foreign buyers, a tactic that would be hard to address through the W.T.O., Western trade officials said.
Hedge funds and other speculators have been buying and hoarding rare earths this year, with prices rising particularly quickly through early August, and dipping since then as some have sold their inventories to take profits, said Constantine Karayannopoulos, the chief executive of Neo Material Technologies, a Canadian company that is one of the largest processors in China of raw rare earths.
“The real hot money got into the industry building neodymium and europium inventories in Shanghai warehouses,” he said.
Correction: September 17, 2011
An article on Friday about the effect of China’s control over rare earth metals on energy-efficient products like light bulbs misstated the price of 11-watt G.E. compact fluorescent bulbs listed on Wal-Mart’s Web site. The price of $15.88 is for a three-pack, not a single bulb.
www.nytimes.com
Sephanie Clifford
09/15/2011