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Rare earth minerals (REEs) news does not generally capture headline news of major newspapers or broadcast media. That is not to say that the 17 or so extremely rare minerals are not important. In fact, they are critical to many products, both industrial and consumer. The use of REE varies from commercial to military applications and hence the overwhelming concentration (97 per cent) of these minerals in the People’s Republic of China has prompted American policymakers to treat the subject as a matter of national security.
In many respects, the matter of REE hit world headlines when The Independent of the UK revealed in late 2010 that China could be cutting back on supply of two metals in 2012, primarily to meet its domestic demand. This has precipitated a mad rush by some of the world’s largest economies in Western Europe to look for alternative sources as far and wide as South Africa to Greenland. What makes REEs so precious is that they are used to produce many components and products we have come to take for granted. These include: Dysprosium – helps make electric motor magnets 90 per cent lighter; Terbium – makes electric lights 80 per cent more efficient; Praseodymium – used to make lasers and ceramic materials; Gadolinium – used to manufacture computer memory (RAM). Industrial minerals such as Ytterbium (used to make infrared lasers) and Erbium (essential to the manufacture of vanadium steel), whilst other metals help produce wind turbines, solar panels, hybrid car batteries and fibre-optics, all play a vital role in churning out products that are crucial to one industry or another.
According to a United States (US) Congressional report on REE published in late 2011, the global demand for REEs stood at 136,100 tons in 2010 with annual global production standing at 133,600 tons. It was estimated that by 2015, global demand could reach 210,000 tons per annum. While the Industrial Minerals Company of Australia (IMCOA) puts that demand at a more conservative 185,000 tons in the year 2015, the fact remains that China’s output is estimated at no more than 140,000 tons. What is evident from the data presented above is that the balance of 45,000 – 70,000 metric tons of REEs will have to be sourced from elsewhere to feed the world’s voracious demand. At this juncture, it remains unclear as to where such material can be found, in sufficient quantities to feed demand, especially in light of the fact that mining rare metals have proved ecologically disastrous for China. Hence, whilst it may be ‘politically’ and ‘economically’ acceptable for China to go ahead and extract these metals at whatever cost to the environment, it may be a whole different issue for countries like South Africa which have significant untapped deposits.
The adverse effects of overdependence on a single source for such vital resources are already evident in the global geopolitical scene. When the Obama administration announced in early 2010 of arms sales to Taiwan worth US$6.4 billion, an article in Shanghai Dongfang Zaobao, a pro-Chinese Communist Party paper, proposed the banning the sale of REEs to American companies as retribution. Although the threat did not ultimately materialise, it did help wake up Western capitals to the dire prospects of a potential clampdown on exports by China. Although China controls about 97 per cent of the world’s current output of REEs, it certainly does not have all the deposits. According to the United States Geological Survey (USGS), China’s share of reserves stands at 55 million metric tons out of 110 million metric tons. The US has around 13 per cent followed by South Africa and Canada. Other potential players include Australia, India, Russia, South Africa, Brazil, Malaysia, and Malawi.
Unlike China, the US has not sufficiently developed this industry. The supply chain for REEs includes mining, separation, refining, alloying and manufacturing (devices and component parts). The Achilles heel for the US is its lack of refining, alloying, and fabricating capacity to handle any type of rare earth production. The end result of this lack of investment and interest in such a crucial sector translates into the US (and indeed almost all other nations) is that it must source practically its entire need for REEs from China. This gloomy scenario has forced the Congress into action. A number of legislations have been brought forth in the 112th Congress that range from ‘H.R. 1388, the Rare Earths Supply Chain Technology and Resources Transformation Act of 2011′ which hopes to re-establish a competitive domestic rare earths supply chain with the Department of Defence’s Logistics Agency, to the ‘H.R. 1314, the Resource Assessment of Rare Earths (RARE) Act of 2011′ that directs the USGS to “examine the need for future geological research on rare earth elements and other minerals and determine the criticality and impact of a potential supply restriction or vulnerability”.
Indeed, capitals across the industrialised world have now been sufficiently alarmed and the search for new sources of REEs is on in full swing. As stated above, sources of known deposits are already known. The tricky question of extracting the rare metals under acceptable terms to the environment remains, till date, a major challenge. One can only hope that alternative sources of supply can be found so that we can move away from mono-sourcing of such metals. For a disruption in the supply chain of REEs could spell disaster for the global economy, already reeling under sustained recession that is looking more and more like the ‘great depression’ of the 21st century.
By: Syed Mansur Hashim
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
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.
By: Brian Truscott
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