Why the West is dirt poor
07 March 2011
Author : Dr. Gordon Wong
The thing about rare earths is that…well they’re not that ‘rare’ really, although they were indeed thought to be when they were discovered in the late 18th century.
The thing about rare earths is that…well they’re not that ‘rare’ really, although they were indeed thought to be when they were discovered in the late 18th century.
So, misnomer or not, why have they suddenly become ‘flavour of the month’ with the world’s media and been causing governments around the world to get somewhat hot under the collar? The simple answer is: it appears that, for one reason or another, China holds a commanding position in the rare earth mining industry.
China is reported to account for 95% of global rare earths production, and China’s Ministry of Industry and Information Technology (MIIT) claims that the country holds 55% of known reserves of rare earths, though this figure has been variously reported elsewhere at anything from one-third to one-half of known global reserves. Recent rumours that China had placed a total ban on exports of rare earths was the catalyst for creating the media and political noise.
The group of 17 elements, known as rare earth metals, is widely touted as being crucial to our collective ‘Green future’. In addition, they’re also deployed in high-tech military equipment such as radar and sonar systems, precision-guided weapons, cruise missiles, and lasers, and as such are seen as strategic resources.
The properties of elements/metals such as neodymium, lanthanum, europium and cerium make them key to the ongoing miniaturisation of consumer electronics and the growth of emerging Green technologies.
Europium is used in coloured phosphors deployed in energy-efficient lighting. Phosphors made from yttrium and other metals are deployed in LED lamps to create coloured light.
The most common use for rare earths is permanent magnets. Certain metals, notably Neodymium, have strong magnetic fields, which make them a vital component in electric motors. Other metals can be used for magnets but they can't match the power per ounce of rare earth metals particularly in applications where size and weight matter, such as vehicles, consumer electronics and weapons systems.
For electronics, a supply shortage is not as serious as has been portrayed in some media reports. Computers and phones, for example, use only a few ounces of the materials in each unit. But, for the rapidly-expanding hybrid/electric vehicles (HEV/EV) market, a hybrid car can have up to five pounds of rare earth metals such as Lanthanum in its magnets and battery electrodes.
Further, in the rapidly-emerging wind power sector, where China is a big player, permanent magnets deployed in direct drive turbines to improve reliability and lower the cost of generating electricity require hundreds of pounds of Neodymium. It is going to be a challenge to meet China’s projected future demand for wind power generating equipment, let alone the rest of the world.
It’s little wonder that when China restricted exports of these incredibly versatile minerals in order to conserve its own resources that the rest of the world got into a bit of a flap. Prices spiked, and the level of China bashing also stepped up a notch. In particular, Japan was upset both because it’s a major importer of rare earths and also because it felt that it was being singled out for political reasons. It accused China of imposing an embargo on these metals because of conflict over the Senkaku/Diaoyu Islands.
This was subsequently denied by the China government.
It’s undoubtedly a sensitive issue. Set against current resources and pricing structures, supply has become a problem. China sharply reduced its export quotas over the last two years in order to conserve its own resources, according to statements from the Chinese, a move that contributed to a spike in prices and angst around the world. That said, the economic intricacies and arguments behind this are probably outwith the scope of this piece, so probably better to leave it at that, for now at least.
The US Energy Department has also been vocal in its criticism of China and has called for more countries to boost production of rare earth metals to break China's monopoly.
Diversifying supplies of rare earths is important to the Obama administration, because of the critical role that they play in clean energy technology products which the White House is promoting as a key element of its plans to overhaul the US economy.
Despite the criticisms and politicking, China has been up front about its interest in rare earth elements for many years. It has clearly stated that it aims to dominate in emerging Green energy technologies such as wind turbines, batteries and solar panels and needs to secure its own resources. It is already ready widely recognised as leading the way in wind and solar power technology development.
According to Keith Delaney, the executive director of the US-based Rare Earth Industry and Technology Association, "They (China) are going to manage their reserves by taking care of their own requirements."
Rare earths can be found in many countries, including the US, Canada and Australia. As it has with many manufactured items, China over the past 20 years has developed an industry that has been efficiently and cheaply supplying the world with these minerals. The country has also established a supply chain for mineral refinement and production of end-use products, such as magnets.
Up until the late 1980s, the US was the global leader in rare earth metals production, but low prices around that time made it difficult to extract the minerals in profitable quantities, which led to their production to being concentrated in China.
Mining rare earth metals is quite challenging and is not without danger. They are usually found together and extraction requires a lot of specialised chemistry and metallurgy to separate and purify the elements. Typically, rare earth mines contain radioactive thorium, which has to be handled with extreme care, and mining the metals can be very damaging to the environment.
China has felt a little aggrieved about the way that they have been portrayed over the whole issue of supplying rare earths to the world. A recent report in China Daily from Xinhua, the official government news agency, cited unfairness in the current global economic and trade order.
The report pointed out that the rest of the world had not shown China appreciation when it was burdened with the dirty job of supplying the world with cheap rare earths for more than two decades.
In an effort to ease international concerns that China may be using its rare earth exports as an economic and political lever, the China government made an official statement that makes it clear that it will not use its current dominance of the global rare earth supplies as a bargaining tool.
Further, China has declared that it has taken some measures to restrict the exploitation, production and export of rare earths, to help address problems in the rare earths industry such as waste and pollution, claiming that it has decided to strengthen its regulatory measures on the exploration, production and export of rare earths in line with international practice and World Trade Organization rules. Given the severe environmental problems associated with their exploration, as well as their increasing value as essential elements in new energy technologies, it is all too natural that rare earths will become much dearer than before.
In October 2010, Chinese Premier Wen Jiabao during the Sixth China-European Union Business Summit said, "It is necessary to exercise management and control over the rare earths industry, but there won't be any embargo. China is not using rare earths as a bargaining chip."
More recently, in February 2011, China Daily reported that Premier Wen has announced a five-year policy guideline for the industry at an executive meeting of the State Council. Wen said the government would strive to establish a healthy development of the rare earth industry with appropriate development, rational production, high utilisation and technological advancement within five years.
Lai Zhaotian, the deputy secretary general of the Rare Earth Industry Association in Ganzhou, Jiangxi province, said he believed the detailed rules in the policy guideline would be issued for the improvement of the capability of rare earths regulatory authorities. The move is also meant to consolidate the mining sector and to promote the renovation and utility of rare earth elements.
In the meantime, China's domestic production of electronic components and magnets is now increasing so rapidly that it is beginning to outpace current production levels. It is likely that, moving forward, China will need to use all its production for its own manufacturing.
Two new rare earth mines will go online outside of China in 2012, in the US and Australia. Restarting the industry will throw up a few challenges for the operating mining companies. The break in production means that there has been a loss of industry expertise and the supply chain for mineral refinement and the production of end-use products has run down significantly. But, more new mines will need to be developed around the world with demand set to increase due to the importance of the applications that they target. Rare earths are finally living up to ‘what’s on the tin’.
As always, the opinions expressed in this column are those of the author and do not necessarily reflect those of EMTWorldWide. If you would like to comment on this article please contact the editor at tim.fryer@imlgroup.co.uk
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