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Rare Earths Supply at Risk Due to Growing Shift to Green Energy
Rare Earth Elements
Any global effort to save and prolong the life of Mother Earth, such as investing into and inventing technologies that use clean fuel and green energy are most welcome. But with the world still yet to determine a suitable, dependable and reliable source of rare earths outside of China, these efforts could prove detrimental to the rare earths supply chain.
Production of two rare earths metals, dysprosium and neodymium, critical components used to aid technologies in manufacturing wind turbines to generate electricity and make electric vehicles, have been found to have increased by only a few percentage points per year, according to www.clickgreen.org.uk. Versus projected global demand seen to grow by 700 per cent for neodymium and 2,600 per cent for dysprosium over the next 25 years, it is believed the supply of the precious metal could not keep up given that the two metals are most especially available almost exclusively in China.
Citing a publication in the ACS journal Environmental Science & Technology authored by Dr Randolph E. Kirchain, inventions of green technologies would definitely carry out a proposed stabilisation in atmospheric levels of carbon dioxide, the main greenhouse gas, at 450 parts per million.
However, to meet the objectives of these green technologies would mean a parallel growth in the supply of rare earths.
“To meet that need, production of dysprosium would have to grow each year at nearly twice the historic growth rate for rare earth supplies,” Mr Kirchain said.
“Although the rare earths supply base has demonstrated an impressive ability to expand over recent history, even the rare earths industry may struggle to keep up with that pace of demand growth,” the author said.
In order to keep up, shortfalls in future supply could be mitigated “through materials substitution, improved efficiency, and the increased reuse, recycling, and use of scrap.”
Rare earth metals are essential for clean energy technologies, such as PVs; hybrid and electric vehicles; high-efficiency wind turbines; smart grid technologies; compact fluorescent lights; fiber optics; lasers and hard disk drives, defense guidance and control systems; global positioning systems; and advanced industrial, military and outdoor recreation water treatment technology.
Rare earth metals are not really rare. It is the mining procedure and operations that make them rare. Unfortunately, majority of the world’s rare earth metals, about 97 per cent, are mined in China, which have considerably slashed export quotas in 2010 and 2011 for domestic consumption and manufacturing purposes.
These “economically important metals are at risk of supply disruption due to human factors such as geopolitics, resource nationalism, along with events such as strikes and accidents,” www.energytrend.com said, citing a report by the British Geological Survey.
In December 2011, the U.S. Department of Energy (DOE), in its 2011 Critical Materials Strategy, said “many clean energy technologies depend on raw materials with potential supply risks” as it assessed the 16 elements considered most critical.
Dysprosium, neodymium, terbium, europium and yttrium were included in the short-term critical supply list. On the medium term were lithium and tellurium.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
By: Esther Tanquintic-Misa
Source: http://community.nasdaq.com/News/2012-03/rare-earths-supply-at-risk-due-to-growing-shift-to-green-energy.aspx?storyid=125795
Obama’s Rare-Earths Case With WTO Won’t Ensure Security: View
Photograph by Doug Kanter/Bloomberg
The Cold War had Americans worried about a “missile gap.” Should the rise of China have us nervous about a neodymium gap?
It’s a question President Barack Obama is taking seriously, as he showed Tuesday in asking the World Trade Organization to look into China’s manipulation of the global market in so-called rare-earth elements. We wish the U.S. Defense Department would show an equal amount of concern.
Neodymium is one of 17 rare-earth metals that have become vital to industrial production and national security in our high-tech age. Its unique magnetic properties are integral to computer hard drives, hybrid-car motors, aircraft turbines and those Beats by Dr. Dre headphones your teenager apparently can’t live without.
One thing neodymium isn’t is rare — it is as commonplace in the earth’s crust as prosaic metals like copper, and scattered around the globe. Much the same can be said of praseodymium (used in Hollywood’s arc lights), samarium (guided missiles) and lanthanum (night-vision goggles). Yet, despite this abundance, China produces more than 90 percent of the global supply of rare earths.
Mining Isn’t Easy
There are many reasons for this: The ore is usually found in small quantities that aren’t cost-effective to mine and refine. Because it is often in seams of thorium and other radioactive or harmful substances, extraction can create an environmental disaster. Opening a new mine in the U.S. can cost upward of $1 billion, and can take as long as 15 years before it becomes operational. These difficulties give an advantage to China, with its vast rare-earth deposits in Inner Mongolia and elsewhere, state-financed mining operations, and lax environmental and worker protections.
It’s never good to have a single supplier develop a market stranglehold, and the problem is compounded in this case because China is a commercial and military rival with no qualms about pressing every advantage. It places quotas on exports and sets prices for rare earths far lower for the domestic market — a ploy to get Western manufacturers to move factories inside China. According to a study by Bloomberg Government, the average Chinese export price of neodymium oxide was $321 per kilogram in the summer of 2011, 66 percent higher than the domestic price and a 563 percent increase compared with the same period in 2010.
The stakes go beyond commerce: In 2010, after Japan detained a Chinese fishing captain near some disputed offshore islands, Beijing played some power diplomacy by placing an embargo on rare-earth exports to its island neighbor.
In response, Japan has been shaping a national strategy on rare earths, centered on increasing stockpiles, recycling from discarded electronics and finding new sources (its scientists believe they may have found large deposits under the ocean). Yet the jury is out on Japan’s approach, and such steps may not lend themselves to the U.S.’s military-industrial structure. Congress is rightly leery of intervening in the market through creation of a large-scale defense stockpile, and most electronic devices contain too little rare-earth metal to make recycling financially worthwhile.
On new sources, however, things are looking up. Molycorp (MCP) of Greenwood Village, Colorado, has recently reopened its Mountain Pass mine in California’s Mojave Desert, which is particularly rich in so-called light rare earths such as lanthanum, cerium, praseodymium and neodymium. Mountain Pass was shut down more than a decade ago because of radioactive discharge. This time around, however, Molycorp seems to be saying and doing all the right things environmentally, and plans to be at full production later this year.
A Market Success
Congress had considered providing loan guarantees for Molycorp’s efforts to reopen Mountain Pass. In the end, the market worked just fine. The company raised nearly $400 million in an initial public offering last July and this month reached a $1.3 billion deal to purchase Canada’s Neo Material Technologies Inc. (NEM), a major refiner of rare earths. (Although this is mostly good news, Neo Material has two plants in China, raising the troubling possibility that ore from Mountain Pass could be exported there.) Meanwhile, the other major Western company in the field, Lynas Corp. of Australia, is running into local opposition in efforts to build a refinery in Malaysia.
Still, given the importance of rare earths to the U.S. economy and national defense, the government has a role to play in the success of Molycorp and its smaller domestic rivals.
The complaint to the WTO is justified, but is hardly certain to succeed. This is a tougher issue than a 2009 case on broader raw materials that China lost, as Beijing will probably cite concerns over the environmental impact of rare-earth mining as reason for restricting exports.
Better to concentrate on increasing non-Chinese supplies. Representative Mike Coffman, a Republican who represents the Colorado district where Molycorp is based, has been pressing the Pentagon for years for a report on its rare-earths strategy. Defense officials, who have blithely dismissed the idea of a rare-earth security threat in the past, are expected to give Congress a classified briefing on the issue this month.
At the very minimum, the Pentagon needs to have its Defense Logistics Agency conduct an inventory of rare earths on hand and its potential needs over the next five years, and develop a plan should Beijing officials jack up prices or turn off the supply. It could also look at long-term purchasing contracts with Molycorp, smaller U.S. companies and even foreign, non-Chinese firms like Lynas to assure diversity of supply. These minerals could eventually be sold off to military contractors and other manufacturers.
Thirty years ago, Deng Xiaoping presciently said: “There is oil in the Middle East, there is rare earth in China.” The U.S. has seen the ill-effects of dependence on Middle Eastern petroleum. We have a chance to avoid a similar fate with neodymium.
Source: http://www.bloomberg.com/news/2012-03-13/obama-s-rare-earths-complaint-before-wto-won-t-ensure-u-s-security-view.html
No future without scarce metals
(Nanowerk News) It is not just in laptop computers, mobile telephones and LED screens that scarce metals are to be found but also in solar cells, batteries for mobile technologies and many other similar applications. The rising demand for these metals increases the risk of a bottleneck in supplies.
Empa researchers and representatives from industry explained at the “Technology Briefing” why scarce metals are essential for many key technologies and how an impending scarcity might be avoided.
“There is no future without scarce metals!” This was the very clear message with which Peter Hofer, a member of Empa’s Board of Directors, greeted guests at the recent Technology Briefing on scarce metals held at the Empa Academy. After all, it is scarce metals in batteries and motors that keep electric vehicles rolling and which, in automobile catalytic converters, clean up the exhaust gases. Hofer again: “Materials with special properties are essential if we are to find solutions to the problems caused by our ever-increasing mobility requirements.”
The term scarce metals includes gallium, indium, cobalt and the platinum metals, in addition to the rare earth metals which are used (together with iron and boron), for example, to make the very strong magnets needed in wind turbines. And manufacturers like to use tantalum for the capacitors on mobile telephone printed circuit boards (PCBs) because this transition metal, when used in these tiny components, enables them to store and release large amounts of electrical energy. The demand is high, with more than 60 per cent of the tantalum mined being used for this application.
The darker side
But, as Patrick Wäger, the initiator of this Technology Briefing and an expert on scarce metals, explained, everything has a darker side to it. Raw materials which can only be mined and refined in a few countries, for which alternatives are not easy to find and which have a low rate of recycling must are considered to be critical. China, for example, almost completely controls the supply of rare earth metals from which high-performance permanent magnets are manufactured. Wäger, who is a staff member of Empa’s Technology and Society laboratory, added that by imposing export restrictions the Chinese government has forced prices to rise, leading to delivery bottlenecks. Currently great efforts are being made to reduce this dependency by expanding supply capacities outside of China, such as in the USA, Australia or Greenland – with implications also for the environment.
Tantalum, required for high-performance micro-capacitors, is viewed in the microelectronics industry as a material which is difficult to substitute, and to date it has not been possible to recover it from end-of-life products. Particularly worrying are the facts that tantalum is illegally mined in certain Central African countries under degrading conditions, and the profits from its sale are used to finance civil wars.
“Swiss companies also need to think closely about how they can reduce this dependency and avoid the possibility of delivery bottlenecks, ” remarked Jean-Philippe Kohl, the head of Swissmem’s Economic Policy Group. A recent survey of the industry association’s members in the Swiss mechanical engineering, electrical and metal sectors showed that every single company contacted used at least one of the critical raw materials. In order to protect themselves from possible shortages many of the companies had signed long-term delivery contracts with their suppliers. The others are cooperating with research institutions, either to develop alternative raw materials and technologies, or to optimize existing processes.
Alternatives from research labs
As an example of this approach, Stephan Buecheler explained how Empa’s Thin-Films and Photovoltaic laboratory was working to reduce the thickness of the critical tellurium layer in flexible solar cells which use cadmium telluride (CdTe) as the active material. Similarly, efforts are being made in solar cells based on copper-indium-gallium-diselenide (CIGS) to replace the critical indium oxide with zinc oxide. In making these changes no loss of performance is expected. Quite the opposite, in fact – the aim is to increase the efficiency of these devices by optimal use of raw materials and fast processes. Researchers have already shown that this is possible, having set a new efficiency record last year.
Again with the aim of reducing scarce metal usage, the institution’s Internal Combustion Engine laboratory has developed an extremely efficient and economic foam catalyst. Changing the form of the ceramic substrate has enabled the use of less of the noble metals palladium and rhodium in comparison to conventional catalysts. In collaboration with Empa’s Solid-State Chemistry and Catalysis laboratory, the motor scientists are conducting research work on regenerative exhaust gas catalysts which employed perovskites instead of scarce metals. The former are multifunctional metal oxides which, because of their special crystal structure, are capable of transforming heat directly into electrical energy.
The “recycling” challenge
Despite all the doom and gloom, we will not have to do without scarce metals entirely. As Heinz Boeni, head of the Technology and Society laboratory, maintained there is of course a reserve of scarce metals to be found in end-of-life electrical and electronic products. While natural primary deposits are being used up, the “anthropogenic” secondary deposits created by man are increasing continuously. In a ton of natural ore as mined there is typically about 5 g of gold. In a ton of discarded mobile telephones, on the other hand, there is about 280 g, while the same weight of scrap PCBs contains as much as 1.4 kg of the precious metal!
But recovering scarce metals is anything but easy. “You can’t just pull them out from electronic waste with a screwdriver and a hammer. The recovery process is at least as complex as the design and development of the old appliances themselves”, recycling expert Christian Hagelüken made clear. A large percentage of scarce metals are to be found in the form of very thin layers or mixed with other substances in the form of alloys, added Hagelüken, whose employer, Umicore, is one of the largest recycling companies involved in the recovery of precious metals from complex waste material. Recycling scarce metals demands the use of complicated recovery processes.
Furthermore, suitable recovery processes alone are not enough to guarantee high recycling rates. According to the experts it is necessary to keep an eye on the whole recycling chain, from collection, disassembly and sorting of the scrap to the actual recovery process itself. The greatest efforts are in vain if, as is the case in certain countries, end-of-life computers and other electronic appliances are exported to developing and threshold countries where the scarce metals are lost through the inappropriate treatment of the electronic waste, which also represents a danger to human health and the environment. Or, if with a mechanical disassembly – which is common today in Switzerland – the scarce metals are dissipated into fractions from which they cannot be recovered.
Source: http://www.nanowerk.com/news/newsid=24127.php
Critical Metals Vital to Our Lives in Tight Supply
Rare Earth Elements
We begin 2012 similar to how we started 2011 when it comes to rare earth, rare technical metals and rare industrial metals. China has over 90% of production and refining. The US and EU governments are scrambling to legislate, source, produce, open and reopen mines. The West has decided to continue down the road of the idea that the markets will take care of the supply and price of these metals. What is alarming is how easily the West was lulled to sleep by China´s ability to supply the world its metals cheaply and efficiently. The West concentrated on making money trading stocks and futures that dealt with these commodities. China concentrated on building the most extensive mining industry in the history of man. Here in 2012 the Department of Energy in the USA has approved a spending bill that includes $20 Million to focus on the supply issues of these metals.
The metals I am speaking about are so vital to our everyday lives. These metals are found in your mobile phones, computers, LCD and LED TV´s, hybrid cars, solar power, wind power, nuclear power, efficient lighting and medical technologies. Here is a list of metals that have been deemed critical.
- Indium RIM (Solar, Mobile Phones, LCD)
- Tellurium RIM (Solar, Computers, Semi-conductors)
- Gallium RIM (Solar, Mobile Phones, LED´s, Fuel Cells)
- Hafnium RIM (Processors, Nuclear, Lighting, Plasma Cutting Tools)
- Tantalum RIM (Capacitors, Medical Implants, Mobile Phones, Nuclear)
- Tungsten RIM (Nuclear, Armaments, Aviation)
- Yttrium REE (Lighting, Medical Technology, Magnets in Hybrids)
- Neodymium REE (Magnets in Wind power, Super Magnets, Hybrid Vehicles)
- Dysprosium REE (Computers, Nuclear, Hybrid Vehicles)
- Europium REE (Lighting, LED´s, Lasers
- Lanthanum REE (Hybrid Vehicles, Magnets, Optics)
- Cerium REE (LED´s, Catalytic Converters, Magnets)
RIM=Rare Industrial Metal REE=Rare Earth Element
The supplies of these metals could hold back the production of green technologies. According to the latest report by the Department of Energy, ¨Supply challenges for five rare earth metals may affect clean energy technology deployment in the years ahead¨. If Green technology is to become main stream, the costs of these technologies have to reach cost parity with traditional energy sources. As long as there are serious supply issues with these metals the costs can´t reach these levels. The other option is finding alternatives like Graphene and Nanotechnologies.
The US and EU need supply chains of the metals that include both mining and refining of these metals. Relying on sovereign states for critical metals such as these, leave a nation vulnerable to outside influence in both politics and economics. Environmentalists have succeeded in influencing politicians to close mines throughout the West. Politicians have legislated the mining industry into the position it is in today. The Western nations must start now to build its supply chain or continue to be at the mercy of the BRIC (Brazil, Russia, India and China) nations for its metal needs.
The best the West can do now is provide, enough metals to meet its own demands. China has reached a point where it can now demand that certain industries produce their products there. If a company decides to try to produce the product in another country China will make producing that item cost prohibitive outside of China by raising the prices of the metals.
The demand for the products these metals are used to produce, are showing few signs of slowing down even in a so-called recession. Governments are subsidizing Green technology, people are buying mobile phones across the planet and everybody wants a nice flat screen TV. Will 2012 pass without countries truly taking this opportunity to fix the problem or will they step up and make the hard decisions which can put the countries back in control over their own destiny?
Critical Reading for Rare Earth Metals Investors
Rare Earth Element - Yttrium
A quick search of media stories from the month of December, 2009 shows 24 clips including references to the 15 lanthanides and their related elements scandium and yttrium. By contrast, one day in December, 2011 produced 56 stories on the same resources. Even the tone of REE coverage has transformed over the years. Two years ago, an analyst piece from veteran metals consultant Jack Lifton titled “Underpriced Rare Earth Metals from China Have Created a Supply Crisis ” was a common headline as the world discovered that cheap supplies had left manufacturers vulnerable to a monopoly with an agenda. That supply fear made REE the investment de jour and sent almost all of the rare earth prices through the roof. In December of 2010, the headlines in big outlets like The Motley Fool announced that the “Spot Price of Rare Earth Elements Soar as much as 750% since Jan. 2010.”
Reality soon set in as investors realized that this was not a simple supply and demand industry. First, demand was still vague, subject to change and very specific about the type and purity of the product being delivered. Second, the ramp-up period for companies exploring, getting approval for development, mining, processing efficiently and delivering to an end-user was very, very long. Some became discouraged. That is why this year, the consumer finance site, The Daily Markets ran an article with the headline: “Why You Shouldn’t Give Up on the Rare Earth Element Minerals” by Gold Stock Trades Newsletter Writer Jeb Handwerger.
Through it all, Streetwise Reports has focused on cutting through the hype to explain what is really driving demand, how the economy and geopolitics shape supplies going forward and which few of the hundreds of companies adding REE to their company descriptions actually had a chance of making a profit.
Back in June of 2009, in an interview titled “The Race to Rare Earths,” we ran an interview with Kaiser Research Online Editor John Kaiser that concluded “China’s export-based economy, once dependent on American greed, is now but a fading memory. While the U.S. was busy printing and preening, the Chinese were long-range planning. But America wasn’t the only country caught off guard by China’s strategic, if surreptitious, supply procurement.” Even while other analysts were panicking, Kaiser was pointing out how investors could be part of the solution–and make a profit in the process.
“For the juniors, the opportunity right now is to source these projects. They get title to them, and when these end users want to develop them, they’re going to have to pay a premium to have these projects developed,” Kaiser said. “So it will not be economic logic that results in these companies getting bought out and having their deposits developed. It’ll be a strategic logic linked to long-term security-of-supply and redundancy concerns. And we’re seeing that sort of psychology at work in this market. It’s a bit of a niche in this market. Not as big as gold, but it is an interesting one because of the long-term real economy link implications.”
After years of covering the space by interviewing the growing chorus of analysts and newsletter writers singing the praises of rare earth elements, in June of 2011, we launched The Critical Metals Report to give exclusive coverage to the entire space, including rare earth elements, strategic metals and specialty metals. One of the first experts interviewed was Emerging Trends Report Managing Editor Richard Karn in an article called “50 Specialty Metals under Supply Threat.” He warned that investing in the space is not as simple as some other mining operations. “The market is just starting to become aware of the difficulty involved with processing these metals, which, in many cases, more closely resemble sophisticated industrial chemistry than traditional onsite brute processing. Putting flow sheets together that process these metals and elements economically is no mean feat.”
In this early article, Karn busted the myth that manufacturers would find substitutions, engineer out or use recycled supplies for hard-to-access materials. “The advances we have seen especially in consumer electronics over the last decade and a half have not been driven by lone inventors or college kids tinkering in their parents’ garages, but rather by very large, well-equipped and well-staffed research arms of powerful corporations. The stakes are high and if a certain metal is critical in an application, they will buy it regardless of the price,” he said.
Similarly, a July 2011 article for The Critical Metals Report featured Energy and Scarcity Editor Byron King sharing “The Real REE Demand Opportunity” driven by the automobile industry and beyond. He was one of the first to point out that not all rare earths are the same with Heavy Rare Earth Elements demanding big premiums.
“Going forward, the serious money will be in HREEs, which have a lot of uses other than EVs,” King said. “For example, yttrium is used in high-temperature refractory products. There’s no substitute for yttrium. Without it, you can’t make the refractory molds needed to make jet-engine turbine blades. If you can’t make jet-engine turbine blades, you don’t have jet engines or power turbines. The price points for these HREEs will reflect true scarcity and unalterable demand. People will bite the bullet and pay what they have to in order to get the yttrium.”
House Mountain Partners Founder Chris Berry also addressed the impact of electric vehicle demand on vanadium, a popular steel alloy strengthener now being used in lithium-ion batteries in the interview “Can Electric Vehicles Drive Vanadium Demand? “
“The use of vanadium in LIBs for EVs is not significant yet, but could eventually become important as the transportation sector electrifies. One of the real challenges surrounding LIBs is settling on the most effective battery chemistry. In other words, what battery chemistry allows for the greatest number of charge recycles, depletes its charge the slowest and allows us to recharge the fastest? Today, based on my research, lithium-vanadium-phosphate batteries appear to offer the highest charge and the fastest recharge cycle. It seems that the lithium-vanadium-phosphate battery holds a great deal of promise, offering a blend of substantial power and reliability. I am watching for advances in battery chemistry here with great interest,” Berry said.
In September, Technology Metals Research Founding Principal Jack Lifton shared his insights on why some junior REE companies are prospering while others wither and die. In the article, “Profit from Really Critical Rare Earth Elements,” he said: “Rare earth junior miners are now being culled by their inability to raise enough capital to carry their projects forward to a place where either the product produced directly or the value to be gained from the company’s development to that point by a buyer can be more profitable than a less risky investment. The majority of the rare earth junior miners do not understand the supply chain through which the critical rare earth metals become industrial or consumer products. Additionally, they do not seem to recognize the value chain issue, which can be stated as ‘How far downstream in the supply chain do I need to take my rare earths in order to be able to sell them at a profit?’”
Then Lifton made this important point for Critical Metals Report readers. “It is very important for the small investor to understand that the share market does not directly benefit the listed company unless the company either sells more of its ownership or pledges future production for present, almost always sharply discounted, revenue.” As always, Lifton encouraged investors to follow the money to a specific end rather than the general market demand often envisioned by investors accustomed to the more defined gold market.
In October, JF Zhang Associates’ Principal Consultant and Chief China Strategist J. Peter Zhang shared his insights on “U.S. Manganese Supply as a Strategic Necessity.”
Manganese is now largely used largely in the production of low quality stainless steel, but is being incorporated into lithium-ion batteries. That increased demand is focusing attention on the limited supply outside China. “There really is no electrolytic manganese metals production in the U.S. or anywhere outside China except for a small percentage from South Africa. We don’t produce even a single ounce in North America. Relying on other countries to supply essential commodities (like oil for instance) is always a problem. If China suddenly decided to reduce production, or in the likely event that its domestic demand increases, the world would be out of options. Policymakers need to understand this risk and Congress needs to take action to minimize the potential impacts,” he said. “From the end of 2008 to 2009, China tied things up. Since then, the price has doubled, tripled and quadrupled. That should be a wakeup call. North America needs to either establish a strategic reserve system for critical metals or build production capacity to mitigate supply risk. I think there is some sense of urgency right now, but a lot more needs to be done.”
Picking the right junior is the trick. In the November article “Navigating the Rare Earth Metals Landscape” Technology Metals Research Founding Principal Gareth Hatch outlined the odds. “TMR is tracking well over 390 different rare earth projects at present; I can’t see more than 8-10 coming onstream in the next 5-7 years. Projects already well past exploration and into the development and engineering stage, and beyond, clearly have first-mover advantage.”
Just this month, in an interview entitled, “The Age of Rare Earth Metals” Jacob Securities Analyst Luisa Moreno compared the impact REEs will have on our daily lives with the transformation in the Bronze Age.
“There is an economic war over the rare earths, with China on one side and other industrialized nations on the other—Japan, the United States and the E.U. China is probably winning. It has decreased exports in the last few years and increased protection. It has attracted a great deal of the downstream business and it is positioning itself well. At this point, it produces most of the world’s rare earths, and prices are at record highs. Japan and the other countries have been left with few options, and those options are more expensive, such as substitution, recycling and adapting production lines to use less efficient materials.” Moreno then pointed to the seven companies that could come to the world’s rescue and usher in a miraculous new world of smaller, stronger, more powerful gadgets based on a steady supply of REE materials from reliable sources.
By: The Gold Report
Source: http://jutiagroup.com/20111227-critical-reading-for-rare-earth-metals-investors/
2012 Outlook: Uncertainty Continues For Rare Earths Prices, China Still Major Player
Rare Earth Elements
(Kitco News) – After exploding onto the metals scene in 2010 and garnering widespread media and investor attention, rare earths element prices have dropped and have been unstable mainly due to demand tapering off in 2011, leading to uncertainty in 2012.
Low demand during 2011 was caused by high rare earths prices from both heavy and light rare earths metals, which despite their fluttering prices, remain historically high.
Despite unstable prices throughout 2011, there is some expectation that rare earths prices might become more stable in 2012.
“I think that rare earth metals, they tend to be more strategic in nature and supply versus demand remains quite balanced in favor of prices being stronger in 2012,” said Mike Frawley, global head of metals at Newedge Group. “The pace of consumption in mainland China is a critical component of demand, prices.”
The Chinese continue to control most of the rare earths supply but reports show that Chinese exports are extremely low. Information provided by Metal Pages, a news site that focuses on non-ferrous metals, ferro alloys and rare earths, indicated that rare earth elements exports have dropped 65% in 2011 and that China has only exported 11,000 metric tons of rare earths through the first three quarters of the year.
Reports suggested that the Chinese government may change regulations that would get around Chinese producers who have cut their supply while keeping prices high.
Rare earths prices alone are also an issue not only with volatility, but with their general cost.
According to a report focused on rare earth elements performance for the upcoming year from A.L. Waters Capital, the firm highlighted some specific rare earths and their current prices compared to their peak prices.
A heavy rare earth such as dysprosium, which is commonly used in televisions and lasers, reached a market high of $2,800 per kilogram while its current price is $2,000.
Another heavy rare earths type, europrium, which is used in television screens, peaked at $5,900/kg while its current price is $3,900.
Some light rare earths come at a substantially cheaper price, such as neodymium, which is used in magnets, peaked at $410/kg on the market and currently sits at $270. (A complete list of all 17 rare earth metals and their uses can be found at the end of the article.)
While rare earths are expensive to use in producing several products used daily, the drop in demand does not come from an alternate substance that can be as effective for a fraction of the cost.
“Demand has gone down (in 2011) but I also think that they haven’t really been able to replace rare earth metals,” said Arnett Waters, chairman of A.L. Waters Capital. “I think that part of what’s going on is that businesses are spending less money on more expensive stuff. If I have a use for europrium and I can use a quarter of a pound of it and it does ok in the product that I’m making, I’m not going to adopt a new product in this economy. It would cost too much money.”
Also, with current economic crises around the globe, it is expected that demand will not be strong in 2012 given the historical high prices of rare earths.
Waters used strategic military defense equipment as an example.
“In the case of strategic military equipment, defense budgets are declining,” Waters said. “I realize the U.S. may not be cutting stealth bomber production, but I am saying that in many countries that would like to use these rare earth metals for strategic purposes are cutting their defense budgets and they cannot afford it.”
Rare earths metals play a large role in current modern technology, cruise missiles and other weapons systems.
PRODUCING RARE EARTHS METALS OUTSIDE OF CHINA
China holds most of the processing capacity for rare earths metals.
“A lot of the processing capacity is in China and you can’t use Chinese capacity unless you’re actually getting your rare earths from them,” said Waters. “That’s why Lynas Corporation Ltd. (ASX: LYC) and others have been building their plants in Malaysia.”
Lynas currently has a concentration plant under construction at Mount Weld in Western Australia as well as an advanced materials plant in Kuantan, Malaysia. Neither plant has begun production yet.
Molycorp Inc. (NYSE:MCP) has three facilities, two located in the U.S., California and Arizona respectively, as well as one located in Estonia. The company stated earlier in 2011 that production from the three facilities would produce between 4,941 and 5,881 metric tons by the end of 2011. The company expects to raise production to 19,050 metric tons by the end of 2012.
The sentiment to mine and produce rare earths outside of China does not fall squarely on the shoulders of these two companies but it is still believed that bigger companies will gain more control of mines and production compared to smaller mining companies.
“At the end of the day it just means that there’ll be fewer smaller mines and there’s a natural evolutionary process that takes place in all developing parts of the world,” said Frawley. “You’ll have the small miners who will be succeeded by stronger companies. A more efficient process will begin to emerge.”
“That takes a long time and I don’t see it changing the balance of that supply any time soon.”
RARE EARTHS AS AN INVESTMENT OPTION FOR THE GENERAL PUBLIC
The biggest obstacle rare earths metals face as an investment is that although classified under the umbrella of rare earths metals, there are 17 different types and they are separated into two categories.
“Rare earth prices are not listed like precious and base metals prices so it is difficult for the average person to invest in,” said Waters. “It’s a barrier to the growth of the industry.
“As the market is maturing, there is going to be a need for a centralized source of information.”
Although newer in the metals world than precious and base metals, information can always be found.
“They’re small markets in comparison to gold, copper and aluminum in terms of tonnage and consumption tonnages,” Frawley said. “In terms of price transparency of these markets you’ll have to dig a little deeper.”
-List of heavy and light rare earths metals and their uses-
Heavy
Yttrium TV, glass and alloys
Promethium Nuclear batteries
Europium TV screens
Gadolinium Superconductors, magnets
Terbium Lasers, fuel cells and alloys
Dysprosium TVs, lasers
Holmium Lasers
Erbium Lasers, vanadium steel
Thulium X-ray source, ceramics
Yterrbium Infrared lasers, high reactive glass
Lutetium Catalyst, PET scanners
Light
Samarium Magnets, lasers, lighting
Neodymium Magnets
Lanthanum Re-chargeable batteries
Cerium Batteries, catalysts, glass polishing
Praseodymium Magnets, glass colorant
Scandium Aluminum alloy: aerospace
By Alex Létourneau of Kitco News
Source: http://www.forbes.com/sites/kitconews/2011/12/30/2012-outlook-uncertainty-continues-for-rare-earths-prices-china-still-major-player/3/
Endangered Elements: Tungsten Among China’s Potential Embargo List
China Tungsten Carbide Rods
ANALYSIS – ProspectingJournal.com – It didn’t take long for the panic to set in, last year, when the Chinese government flexed its muscle by threatening the world’s Rare Earth Element (REE) supply. With 95% of REE supplies coming from China, that scare was indeed legitimate. But REEs aren’t the only elements with which China has the potential to choke off. On American Elements’ 2011 Top 5 US Endangered Elements List, three elements (tungsten, indium and neodymium) have over 50% of world supply coming from Chinese mines.
To refresh the memory of those who followed the rare earth surge from last year, and the subsequent piquing of interest in rare earth companies, it began with Japan. As the summer of 2010 was coming to a close, reports of an embargo of shipments to Japan for REEs raised concern for manufacturers who depend upon the elements for production primarily in the tech industry. Within a month, that embargo spread to North America and Europe, and concern over Chinese monopolization rose, along with REE prices, and those of the companies devoted to them.
When the embargo ended, relief came to the sector, while the pace of development outside of China received only a minor increase. The threat of supply shortages still lingers, especially with tungsten, indium and neodymium.
The example of tungsten is not to be ignored, as 85% of global production comes from China, which has already indicated it might end all exports altogether due to domestic demand increases.
With the highest melting point and greatest tensile strength of all elements, tungsten’s importance is unquestionable. Used in all situations that call for high temperature thresholds or hardness and strength, tungsten is imperative to many modern living standards that depend upon it. From a US perspective, the element’s use in the aerospace program, electronics and military (including in bullets and armor) is critical. To the mining industry as a whole, tungsten is a savior with many uses within the assembly of mining equipment itself, including drills in need of durability.
Strangely enough, the United States dismantled domestic production of tungsten ore in 1994 with the last tungsten mine, the Pine Creek Mine in Inoyo, California, going down as a historical footnote en route to Chinese dependence.
Today, tungsten production remains primarily within China, but awareness of a need to develop outside of the PRC is becoming clearer. Options in the western hemisphere are appearing, and may soon be getting the attention they need to aid this drive for domestic independence. Juniors such as North American Tungsten [NTC – TSX.V] and Playfair Mining [PLY – TSX.V] may provide answers that mitigate a possible future supply breakdown.
For North American Tungsten, the title of being the western world’s leader in tungsten production doesn’t come lightly. Through developing its Cantung Mine, it provides tungsten concentrate production within the borders of Canada’s Northwest Territories, which from an international standpoint is a much more secure mining investment environment to work within.
At a much earlier stage, Playfair Mining is not yet a producer, but is heavily leveraged to the price of tungsten, which today sits around $440/MTU (“metric tonne unit”) or over $20/lb. With a goal in mind to partner with an end user of tungsten metal in order to finance its Grey River deposit into production, Playfair is well aware of the potential impact a tungsten shortage would carry.
Due to its high level of use in the manufacturing sector, a significant number of Fortune 500 companies are dependant upon tungsten’s availability. General Electric and its Tungsten Products Division, along with others like Kennametal and ATI Firth Sterling are among those that would most likely benefit from securing a long term tungsten supply, and are among potential targets should Playfair seek a high-worth partner to put its nearest term tungsten property into production.
The company has 4 high-grade deposits with two located in the Yukon, one in the Northwest Territories and another on the southern coast of Newfoundland. Each of the properties was acquired strategically during a period of massively deflated tungsten prices, prior to this latest surge over the $440/MTU mark. This increase represents a 70% rise from the recent low prices that graced Playfair’s entry period. While the commodity’s price has risen, the company’s stock has yet to follow suit.
While the current price of the stock seems to have languished, the team is making strides to be better prepared for when the bigger end-users in need of tungsten come knocking. The board includes experienced individuals who have taken deals into production before, as well as Director James Robertson who took the last big tungsten company outside of China to successful acquisition.
In both combined 43-101 compliant and non-compliant resource categories, Playfair’s tungsten properties contain more than an estimated 5.5 million MTUs of WO3. It’s to be expected, though, that since Playfair is an exploration company, these resources have room for expansion.
As economic uncertainty lingers in all global markets, crucial and endangered elements such as REEs, tungsten, indium and neodymium will be within the watchful eye of western manufacturers in need of these ingredients for their operations. Whether another anticipated panic is inflicted by possible impending embargo actions by China doesn’t change the dependence we have on endangered elements. And like last year’s REE crisis, a price surge on those companies were set to move prior complications is entirely a likely scenario.
By: G. Joel Chury
Source: http://www.prospectingjournal.com/endangered-elements-tungsten-among-chinas-potential-embargo-list_12_21_2012/
Rare Earth Elements are not the same as Rare Industrial Metals
Rare Earth Elements
Randy Hilarski has also released a video on this article that can be watched by clicking here.
I read articles from other writers who often refer to Rare Industrial or Technical Metals as Rare Earth elements. I would like to take some time and clear up the issue. I deal with RIM’s and REE´s on a daily basis. The two might both be considered metals but that is where the similarities end.
First we have REE´s or Rare Earth Elements. These metals consist of 17 metals, the Lanthanides plus Scandium and Yttrium on the periodic table of the elements. These metals are in a powder form, making them difficult to assay and store. One important factor that is often mentioned is that they are not rare. This is very true, but finding REE´s in large deposits is difficult.
In the mining sector REE mines are standalone mines, that focus on the mining and refining of REE´s exclusively. Currently around 97% of all REE´s are mined and refined in China. Historically REE mining and refining has been a dirty business, which has affected the environment around the mines. The elements Thorium and Uranium are often found along with the REE´s in the deposits causing the slurry to be slightly radioactive when processed. The use of highly toxic acids during the processing can also have serious environmental impact. Many companies are trying to open REE mines but they are meeting headwinds, as nations and people do not want these mines in their backyard.
Over the last few years China has dramatically cut its export of REE´s. This and the increased need for REE´s have caused a meteoric rise in the value of these metals. The one area that very few people talk about is the role of the media combined with speculators in raising the value of REE ETF´s in particular. For the last couple years REE´s were the rock stars of the metals. The news has calmed as of late, but the supply and demand factors that caused the metals to soar are still in place. Recently China closed it BaoTao mine until REE prices stabilize.
Rare Earth Metal - Indium
Rare Industrial Metals, RIM´s or Technical metals are another group entirely. The RIM´s are made up of metals used in over 80% of all products we use on a daily basis. Without these metals you would not have the world of the 21st century with our mobile phones, hybrid cars, flat screen TV´s, highly efficient solar energy and computers. Some of these metals include Indium, Tellurium, Gallium, Tantalum and Hafnium. These metals really are rare compared to the Rare Earth Metals which causes a great deal of confusion. These metals are in a metallic form, stable and easy to store and ship.
RIM´s are mined as a by-product of base or common metal mining. For example Tellurium is a by-product of Copper mining and Gallium is a by-product of Aluminum and Zinc mining. The mining of the RIM´s currently are for the most part at the mercy of the markets for the base or common metal mining. If the Copper mines of the world decide to cut production due to Copper losing value, this will have a huge impact on the amount of Tellurium that can be refined. Up until now, because of the previous small size of the RIM market, many companies do not feel the need to invest money into better technology to mine and refine these metals. The RIM´s would have to be valued much higher to gain the attention of the mining industry.
When China cut exports of REE´s they also cut exports of RIM´s. This put pressure on the value of these metals. RIM´s have increased in value, but nowhere near the meteoric rise of the REE´s. Most of the metals increased in value around 47% in 2010 and 25% so far in 2011. There is still a lot of room for growth in the value of these metals (not based on speculation like REE´s) as demand is exceeding supply now and in the future.
For Example, when REE´s and the stock market recently fell sharply the RIM´s came down slightly in value but have held their own extremely well. On a further note, according to Knut Andersen of Swiss Metal Assets, ¨Even though prices of the Rare Industrial Metals continue to go up in value, consumers will eventually only see a very small increase in the price of the end products, because there is so little of each metal used to produce these products. Also if the people can´t afford a smartphone they will still buy less expensive phones that still use the same Rare Industrial Metals¨.
The need for RIM´s has risen sharply over the years and will continue to grow at astronomical rates. China, India, South America and the whole of Africa with hundreds of millions of new consumers are now buying and using computers and mobile phones to name just a few products.
The future is bright for the technologies and the Rare Industrial Metals that make them work and for anyone who participates in stockpiling these metals now to meet future increased demand.
By: Randy Hilarski – The Rare Metals Guy
Chasing Rare Earths, Foreign Companies Expand in China
Rare Earth Elements
CHANGSHU, China — China has long used access to its giant customer base and cheap labor as bargaining chips to persuade foreign companies to open factories within the nation’s borders.
Now, corporate executives say, it is using its near monopoly on certain raw materials — in particular, scarce metals vital to products like hybrid cars, cellphones and energy-efficient light bulbs — to make it difficult for foreign high-tech manufacturers to relocate or expand factories in China. Companies that continue making their products outside the country must contend with tighter supplies and much higher prices for the materials because of steep taxes and other export controls imposed by China over the last two years.
Companies like Showa Denko and Santoku of Japan and Intematix of the United States are adding new factory capacity in China this year instead of elsewhere because they need access to the raw materials, known as rare earth metals.
“We saw the writing on the wall — we simply bought the equipment and ramped up in China to begin with,” said Mike Pugh, director of worldwide operations for Intematix, who noted that the company would have preferred to build its new factory near its Fremont, Calif., headquarters.
While seemingly obscure, China’s policy on rare earths appears to be directed by Prime Minister Wen Jiabao himself, according to Chinese officials and documents. Mr. Wen, a geologist who studied rare earths at graduate school in Beijing in the 1960s, has led at least two in-depth reviews of rare earths this year at the State Council, China’s cabinet. And during a visit to Europe last autumn, he said that little happened on rare earth policy without him.
China’s tactics on rare earths probably violate global trade rules, according to governments and business groups around the world.
A panel of the World Trade Organization, the main arbiter of international trade disputes, found last month that China broke the rules when it used virtually identical tactics to restrict access to other important industrial minerals. China’s commerce ministry announced on Wednesday that it would appeal the ruling.
No formal case has yet been brought concerning rare earths because officials from affected countries are waiting to see the final resolution of the other case, which has already lasted more than two years.
Karel De Gucht, the European Union’s trade commissioner, cited the industrial minerals decision in declaring last month that, “in the light of this result, China should ensure free and fair access to rare earth supplies.”
Shen Danyang, a spokesman for the commerce ministry, reiterated at a news conference on Wednesday in Beijing that China believed its mineral export policies complied with W.T.O. rules. China’s legal position, outlined in recent W.T.O. filings, is that its policies qualify for an exception to international trade rules that allows countries to limit exports for environmental protection and to conserve scarce supplies.
But the W.T.O. panel has already rejected this argument for the other industrial minerals, on the grounds that China was only curbing exports and not limiting supplies available for use inside the country.
China mines more than 90 percent of the world’s rare earths, and accounted for 60 percent of the world’s consumption by tonnage early this year.
But if factories continue to move to China at their current rate, China will represent 70 percent of global consumption by early next year, 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.
For the last two years, China has imposed quotas to limit exports of rare earths to about 30,000 tons a year. Before then, factories outside the country had been consuming nearly 60,000 tons a year.
China has also raised export taxes on rare earths to as much as 25 percent, on top of value-added taxes of 17 percent.
Rare earth prices have soared outside China as users have bid frantically for limited supplies. Cerium oxide, a rare earth compound used in catalysts and glass manufacturing, now costs $110,000 per metric ton outside China. That is more than four times the price inside China, and up from $3,100 two years ago, according to Asian Metal, an industry data company based in Pittsburgh.
For most industrial products that are manufactured in China using rare earths and then exported, China imposes no quotas or export taxes, and frequently no value-added taxes either.
Companies do that math, and many decide it is more cost-effective to move to China to get cheaper access to the crucial metals.
“When we export materials such as neodymium from China, we have to pay high tariffs,” said Junichi Tagaki, a spokesman for Showa Denko, which announced last month that it would sharply expand its production of neodymium-based magnetic alloys, used in everything from hybrid cars to computers, in southern China.
The company saves money by manufacturing in China instead of Japan because the alloys are not subject to any Chinese export taxes or value-added taxes, he said.
Big chemical companies are also shifting to China the first stage in their production of rare earth catalysts used by the oil industry to refine oil into gasoline, diesel and other products. They are moving after Chinese state-controlled companies grabbed one-sixth of the global market by offering sharply lower prices, mainly because of cheaper access to rare earths. Chemical companies are also working on ways to reduce the percentage of rare earths in catalysts while preserving the catalysts’ effectiveness.
Production of top-quality glass for touch-screen computers and professional-quality camera lenses, currently done mostly in Japan, is also shifting to China.
Factories are moving despite worries about the theft of trade secrets. Intematix takes elaborate precautions at a factory completed last month here in Changshu, 60 miles northwest of Shanghai, where the company manufactures the rare earth-based phosphors that make liquid-crystal displays and light-emitting diodes work. While Intematix hired Chinese scientists to perfect the industrial processes here, only three know the complete chemical formulas.
China’s timing is excellent, said Dudley Kingsnorth, a longtime rare earth industry executive and consultant in Australia. Mines being developed in the United States, Australia and elsewhere will start producing sizable quantities of rare earths in the next several years, so China seems to be using its leverage now to force companies to relocate.
“They’re making the most of it, and they’re obviously having some success,” he said.
Until Western governments and business groups and media began pointing out the W.T.O. issues, Chinese ministries and officials had repeatedly stated that the purpose of the rules was to encourage companies to move production to China. They switched to emphasizing environmental protection as the trade issues became salient.
China has stepped up enforcement this summer of mining limits and pollution standards for the rare earth industry, which has reduced supplies and pushed up prices within China, although not as much as for overseas buyers. The crackdown might help the country argue to the W.T.O. that it is limiting output for its own industries.
But other countries are likely to argue that the crackdown is temporary, and that previous crackdowns have been short-lived.
Charlene Barshefsky, the former United States trade representative who set many of the terms of China’s entry to the W.T.O. in 2001, wrote in an e-mail that one problem with the W.T.O. was that its panels did not have the power to issue injunctions,. So countries can maintain policies that may violate trade rules until a panel rules against them and any appeal has failed.
Even then, the W.T.O. can order a halt to the offending practice, but it usually cannot require restitution for past practices except in cases involving subsidies, which are not directly involved in the rare earth dispute.
To be sure, China is offering some carrots as well as sticks to persuade foreign companies to move factories to China.
Under China’s green industry policies, the municipal government of Changshu let Intematix move into a newly built, 124,000-square-foot industrial complex near a highway and pay no rent for the first three years.
Intematix pays $400 to $500 a month (2,500 to 3,000 renminbi) for skilled factory workers like Wang Yiping, the 33-year-old foreman on duty on a recent morning here. It pays $500 to $600 a month (3,000 to 3,500 renminbi) for young, college-educated chemical engineers like Yang Lidan, a 26-year-old woman who examined rare earth powders under an electron scanning microscope in a nearby lab.
It was also relatively cheap to buy the factory’s 52-foot-long blue furnaces, through which rare earth powders move on extremely slow conveyor belts while superheated to 2,800 degrees Fahrenheit. With many Chinese suppliers competing, Intematix paid one-tenth to one-fifth of American equipment prices, said Han Jiaping, the factory’s vice president of engineering.
Still, Mr. Pugh said that the company’s decision to build the factory in China was based not on costs but on reliable access to rare earths, without having to worry about quotas or export taxes.
“I think this is what the Chinese government wanted to happen,” he said.
By: KEITH BRADSHER
Source: http://www.heraldtribune.com/article/20110824/ZNYT01/108243014?p=1&tc=pg&tc=ar
EU Feels Pressure of China’s Rare Earths Supply Pinch
Rare Earth Elements critical to 80% of Modern Industry
The pressure to use low-carbon technologies less damaging to the environment is hitting hard on industries using rare earths in the European Union.
European Commission’s Vice President Antonio Tajani raised the concern regarding the steady supply of rare earths, which are primary components to solar panels and energy-efficient light bulbs.
Rare earth metals are also used in common electronic gadgets like iPhones and iPads.
The site www.theengineer.co.uk cited a report by Tajani’s early this week that a separate plan must be conceived to secure the supply of rare earths and allow the smooth execution of the EC’s Strategic Energy Technology Plan.
“European companies need to have a secure, affordable and undistorted access to raw materials. This is essential for industrial competitiveness, innovation and jobs in Europe,” Tajani’s report said.
The EC has been conducting a study of the rare earths metals in pursuing the low-carbon technology indicated in the plan, which includes nuclear, solar, wind, bio-energy, carbon capture and storage and updating electricity grids.
The study, “Critical Metals in Strategic Energy Technologies,” reveals that five metals commonly used in these technologies (neodymium, dysprosium, indium, tellurium and gallium) show a high risk of shortage, according to www.rareearthassociation.org.
China’s clamping down on rare earth production has led other nations to consider their options in securing their steady supply of the metals.
The United States has been considering building its own stockpile, which some industry specialists said could also distort world prices and the supplies.
China currently holds close to 95 percent of current supply and commanded a premium price raging from 100,000 to 300,000 renminbi early this month.
To be less reliant on China for rare earths, companies like Molycorp, Lynas Corp., Alkane Resources, Globe Metals Mining, among other mining firms have embarked on mineral exploration projects to uncover more of the coveted rare earths.
Recently, the U.S. Congress considered a strategic stock pile of rare earths as they are used in a variety of applications including global positioning and guidance and control systems, according to a Congressional Research Service report.
By Christine Gaylican
Source: http://au.ibtimes.com/articles/249401/20111115/eu-feels-pressure-rare-earths-supply-pinch.htm
China’s Rare Earths Monopoly – Peril or Opportunity?
Rare Earth Elements critical to 80% of Modern Industry
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.
Rare Earth Q4 Outlook
It’s a familiar story for rare earth market watchers, sky-high prices and tight supply outside of China.
But until significant production outside of China is established, analysts foresee few changes to this trend, barring end users shutting up shop to cut demand.
2011 has thus far seen prices for most rare earth elements take off in the wake of tight control from over production and export quotas. Total production in China for 2011 has been capped at 93,800 tonnes , an increase of 5 percent from 2010, while exports have been restricted to 30,184 tonnes,slightly less than the 30,258 tonnes permitted last year.
Although Lynas Corporation Ltd . (ASX:LYC ) officially opened their Mount Weld mine in Western Australia on August 4th , production from this facility, which will initially be 11,000 tonnes per year, is not likely to make an impact on the REE market until 2012, as the first feed of rare earths concentrate into the yet-to-be-fully-licensed Lynas Advanced Materials Plant (LAMP) in Malaysia is scheduled for Q4 .
In the meantime, Molycorp Inc . (NYSE:MCP) remain the only major producer filling the gap outside of China, and the Colorado-based company has profited nicely from the comparatively modest amount of supply it has been able to pump into REE markets so far this year.
Last month Molycorp’s reported production results of 815 metric tonnes of rare earth oxides for Q2, and also announced that they expected output of 977-1,321 metric tonnes during Q3, and 1,017-1,377 metric tonnes for Q4.
Coupled with the sky-high prices most REE are currently fetching, the anticipated increase in output from Molycorp has left some analysts quite bullish on the company’s performance outlook for the remainder of the year.
Prices may climb further still as China halts production at 3 mines
One twist that may still play a major role in REE markets before the year is out is the halt in production announced by the Chinese government on Monday .
State media reported that production has been ordered suspended by year’s end at 3 out of 8 mines in Ganzhou, Jiangxi Province. The Ganzhou region produces nearly 40 percent of China’s rare earths.
Li Guoqing , Director of the Ganzhou City Mining Management Bureau, commented on Monday that it was unknown when production at the 3 mines would resume, and that an eventual resumption of operations would be based on directives from the provincial government.
Although the shutdown is mostly a consequence of China hitting its annual production quota too early and the government clamping down on illegal mining and exports, it is unlikely to have an impact on the 15,000 tonnes of rare earths slated to be exported from China over the last half of the year. The prospect of a prolonged shutdown in one of China’s key mining regions may well begin to ripple through REE markets during Q4.
EU reveals it is stockpiling rare earths to reduce dependence on China
Another development that could play out on REE markets over Q4 was the disclosure by the European Union (EU) on Tuesday that they are stockpiling rare earths to reduce their dependence on China.
Speaking to Reuters , Andrea Maresi, press officer for EU industry minister Antonio Tajani confirmed that they were “working to secure supplies of these minerals from outside of the EU, such as from Latin America, or from Africa or other countries like Russia.”
“We are trying to improve our sourcing and reduce our dependence on China”, he added.
David O’Brock , CEO of Molycorp’s majority owned Molycorp Silmet AS in Estonia, revealed to Reuters in a recent interview that he had been approached by the EU about stockpiling, and had advocated stockpiling at least 3,000 tonnes of rare earth carbonate.
In spite of his conviction that the EU should be stockpiling to offset export restrictions from China, however, O’Brock believes REE prices will level-out in Q4.
“I think that prices have already started to stabilize. And consumers have found their upper boundaries that they can pass on to their customers, unless the Chinese suddenly open the flood gates, I don’t see prices dropping and I don’t see a continued climb in the prices,” he said.
By Robert Sullivan
Rare Earth Investing News
09/07/2011
Rare earth metals and elements may affect future global relations China
Jim Sims, from Molycorp, says China is starting to export fewer rare earth elements than previously
Wars have been fought over oil and water. But are the future global tensions going to be over access to Scandium, Neodymium or Dysprosium?
Or could conflicts be fought over any other of the 17 rare earth elements, which, week by week, are becoming more and more important in developing the latest high-tech products?
Tucked onto the periodic table of the elements, in a little section once ignored by chemistry teachers, rare earths are now everywhere.
They are in your iPod or tablet computer, are vital for the red colour in your TV screen whatever make you have and allow your headphones to be small enough to fit into your ears.
Jim Sims
As China’s exports are being restricted, we are looking at outright shortages of rare earths, probably this year and next.
Jim Sims Molycorp representative
They are in hybrid cars – both in the batteries and the fuel – and in new generation wind turbines, missile defence systems, solar panels and even F-16 fighter jets.
At the moment China provides 97% of the world’s rare earth elements, which is making America nervous from both an economic and a security perspective.
Their price has gone up 1000% in just a year, which is making mining them in the US worthwhile once again.
‘Rare earth shortages’
A deep hole in the ground high up in the Mojave Desert is America’s only rare earths mine, and the race is on to dig out the supply to match the demand as only a few places in the world have enough reserves to make mining them practical.
“The world – America, Britain, everyone – relies on what China exports to meet their needs,” says Jim Sims from Molycorp, the company running California’s Mountain Pass mine.
“As China’s exports are being restricted, we are looking at outright shortages of rare earths, probably this year and next,” he adds.
America’s only rare earths mine is located in the Mojave Desert in the US south-west
So the huge diggers and trucks moving vast volumes of rocks around, the daily explosive charges blasting the mountainside apart, are harvesting one of the world’s biggest deposits.
The mine closed down 10 years ago when a flood of cheap Chinese rare earth elements made profits hard to maintain.
Until just a few weeks ago, Molycorp was asking for the US government’s help to cover costs of digging these elements out, separating them off and moulding them into metal alloys.
But the price has gone up so rapidly, rare earths is suddenly looking like a good business.
Last year China’s exports of rare earth elements to Japan were interrupted during a political row over territorial waters, which sent shudders around the world.
“We should be worried when any country completely dominates any raw material supplies,” says Christine Parthemore, from the Center for New American Security in Washington DC.
“I don’t think China is uniquely at fault in this situation, but they are using the political leverage that’s derived from cornering the market they have as any country would.
“I’m sure America would do the same,” he adds.
Increasing demand
The creation of permanent magnets, a key component in so many green technologies, is one of the key uses of rare earths.
They make the new generation of wind turbines more efficient and reliable. But there are such an increasing variety of uses for these elements, down to glass polishing, that there aren’t enough of the raw materials to go around.
The speed of China’s growth means the country is consuming more of its own rare earths, which has led to a drop in the amount available for export.
“It is a security issue strictly in the sense that these minerals are used in critical military components for their properties, which we don’t currently have substitutes for,” says Christine Parthemore.
“If the prices go way up or there are actual supply shortages, it can drive prices up over the long term on military procurement – or it can mean there are parts that we can’t manufacture here in the United States anymore.”
It increases the need for an industry to extract the ore and process the materials.
“The elements are all mixed together in the ore we mine,” Jim Sims says.
“We turn them into a liquid, and let these elements settle out into oxides which are like powders,” he adds.
Inside a warehouse at the mine are dozens of huge white sacks, each weighing a metric tonne and each worth $200,000 (£125,700).
“Those powders then get turned into metals as magnets or used in their oxide forms for a variety of uses in a variety of different substances,” Mr Sims says.
As new uses are found for materials like rare earth elements, there will be more competition, and access to them may change the shape of global politics.
By Alastair Leithead BBC News, Mojave Desert, US July 12, 2011
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