Prices for rare earth elements -- an important component in motors and other electromechanical products -- have jumped by at least an order of magnitude over the past year as a result of export cutbacks from China, the world's largest source of the elements. Alternative supplies promise to provide a surplus, but not as soon as manufacturers using this materials might like.
Rare earth elements such as neodymium (Nd) and dysprosium (Dy) play essential roles in products ranging from motors to white-light LEDs. Permanent magnets containing Nd typically produce magnetic fields five or more times as large as those produced by ferric magnets. The addition of Dy prevents them from demagnetizing at high temperatures. Those attributes make rare earth magnets highly appealing for motor applications.
However, in the past year or so, changes to export quotas by China have sent prices soaring, leaving motor designers in a fix. Solutions range from the old (ferric or even aluminum-nickel-cobalt magnets) to the new (leveraging nanotechnology to get more performance out of smaller amounts of rare earth materials). There's also the obvious route of establishing new supplies.
Projections reveal potential supply status for rare earth oxides. Note: CREO (critical REOs) encompasses Nd, europium (Eu), terbium (Tb), Dy, and yttruim (Y). (Image courtesy of Technology Metals Research Inc.)
That approach -- opening or reopening mines outside China -- is already under way around the globe. Molycorp Minerals LLC of Greenwood Village, Colo., has secured permits and $781 million in funding to reopen the Mountain Pass mine in California, which was priced out of the market in 2004. According to a new report from Technology Materials Research LLC of Carpentersville, Ill., sufficient sources exist outside China to compensate for the export cuts as early as 2013 for some elements. (See chart.)
The name notwithstanding, rare earth elements, typically processed as rare earth oxides (REOs), are only scarce when compared with abundant elements like iron and aluminum. Significant deposits exist around the world in locations as varied as South Africa and California. China’s current position as the dominant global supplier derived from a mix of circumstances.
Several light REOs are the byproducts of iron ore mining, which is one of China's staple industries. The steps required to extract REOs typically involve toxic or even radioactive materials. And in the past, Chinese suppliers have been subject to less stringent environmental regulation than their international competitors, which helped them undercut prices and ultimately capture around 95 percent of the market.
Though the Chinese government began reducing exports of rare earth materials earlier, the skyrocketing prices can be tied to quota cuts that were imposed in the fall of 2010 and led to a year-over-year reduction in tonnage of around 40 percent.
"There was a significant drop in the official export numbers that was reflected in the price for exported materials," says Gareth Hatch, founding principal at TMR. "It caused some efforts within China to stockpile heavy rare earths. Suppliers started applying a surcharge."
Perhaps I am naive but it would seem this is an opportunity for some of the US suppliers of rare earth materials. It would be really good if the mining companies could restart the mining operations. If they could do it in a very environmentally safe way, using lots of new automation they might be able to become the low cost suppliers to US consumers of rare earths.
Obviously the US companies are not going to be able to compete with Chinese labor rates. They will have to compete based on higher quality, guaranteed supply schedules and by applying superior, cost effective automation and efficient production techniques.
As I recall after World War II, the US helped Japan and Germany rebuild their economies with new then modern plants. This put them in an excellent position to compete worldwide. The US needs a similar plan to help our manufacturers and suppliers compete using the best technologies and efficient automation.
The fact that we want to do this in an environmentally friendly way should make it a good selling point for everyone concerned with US jobs, productivity and the environmental activists. the US must adapt to compete with the rest of the world by playing to our strengths and minimizing our weaknesses.
Innovation, Information technology and automation coupled with long term investments in this countries resources will help us get out of the current economic doldrums.
Any additional suggestions? Am I wrong on any of the above?
@Ivan - In the US, the problem is more the with the regulations than an environmental impact. It is extremely difficult to start ANY new mining venture, simply because the word itself has a bad connotation regardless of the truth of limited impact.
On the larger issue of this article, it is really not that much of a surprise. With a finite quantity of RE available, China has both the mineral deposts and technology to go from mine to final product. This way they can flex their political / economic muscles by artifically creating a shortage.
It is agreed that more strigent regulation in the US may potentially shrink the US out of the RE magnet business. However, loosening our regulations is not reallyl an option. The mining conditions in some parts of China are basically not regulated. The big news on a recent vist to China was a deadly mine collapse in a northern province of China. The news came out that the owner was operating the mine illegally for about 15 years with no permits and therefore no inspections or safety measures. Of course someone running an illegal mine with low cost labor would be able to undercut any price. After squeezing everyone out of the market, China appears to be reducing the export amount to be able to fetch top dollar for their product.
One of the most interesting pieces of information in Hatch's report was a table that showed how much of the REE production from China is outside of official channels. In 2009, for example, roughly 36% of the REE tonnage shipped from China was in addition to official quotas. Black-market/graymarket producers operate on an entirely different cost basis than their competition.
As far as the Chinese government's motivation here, they do seem to be in general paying more attention to environmental protection. It can also be an effort to push commerce up the value-added chain, as RadioGuy suggested. There's another element that I've heard from analysts which is that China doesn't seem particularly concerned about outside suppliers positioning to take market share. They have an ever larger domestic market. The real subtext here may not be, "We're going to raise prices on you because you want to get as much profit as possible from your business" so much as "We're going to raise prices on you because we don'tReally need your business but if you insist on buying, we might as well make as much as we can."
I never thought of the domestic market in China as being viable end users of their own magnetic material. I guess that does make sense. On a grand scale, the Chinese government might just be trying to look out for its own citizens.
As Jack mentioned, the issue is not one of labor but of environmental impact and the sheer difficulty of the processing. Extracting rare earth elements is not as easy as mining a vein or even extracting aluminum from bauxite, for example. Even within the same mine, REEs can be present in multiple different types of ores. The refining process requires a large number of chemical processes. Because thorium is often present in the rock, byproducts can be radioactive wastewater.
At the Mountain Pass mine in California, which is currently in the process of being reopened by Molycorp, Radioactivewastewater leaks in the late 1990s/early 2000s Brought the facility under scrutiny from the US EPA. With China offering REEs at such low prices, it simply wasn't cost effective to go through the cleanup process. Now, it is, and Molycorp just closed on $781 million in funding to do the cleanup. No word, as yet, on when they expect to start refurbishing, let alone producing product, but the project is at least in process.
Ok, so I may have misspelled the words and I'm not sure I remembered the phrase exactly as it goes. But never the less, this might just drive companies to look at alternative ways to produce the same components. Perhaps, cheaper more efficient ways using less ROEs. I think there are more than a few examples of products that worked themselves out of the marketplace by artificially creating a shortage.
@jmiller: Couldn't agree more. The possibility of artificial shortages and unregulated and poor quality in terms of mining practices is reason enough for manufacturers to seek out alternative technologies to rare earth elements and particularly China's supply.
This is very old news that started when China began limiting shipments of rare earth materials to Japan in September of 2010. The suggestion that alternatives to rare earth metals must be developed is naive. For example alternatives such as ferrite magnets existed prior to rare earth magnets and still do. However they are not as effective. The world does not grind to a halt if China limits materials. Many other areas of the globe contain these materials. The primary reason that China has so much influence as stated by other posters is that by having only cursory interest in safety or environmental regulation, they are able to mine these materials at very low cost.
I'm not suggesting that other materials will replace the current materials but rather that technology will allow designs to accomplish the same functions using different technologies and/or just do things in a different way.
You hit the nail on the head! While some things such as advanced batteries will probably always require some rare materials, other things such as electric motors can be easily made without.
The fact that most hybrid cars are using rare earth magnets in their electric motors makes the motors a bit smaller and easier to acheive good performance - but good 'ol silicon iron + copper windings can certainly make a good motor too (induction motors, wound-field DC motors, etc.).
You hit the nail on the head! While some things such as advanced batteries will probably always require some rare materials, other things such as electric motors can be easily made without.
The fact that most hybrid cars are using rare earth magnets in their electric motors makes the motors a bit smaller and easier to acheive good performance - but good 'ol silicon iron + copper windings can certainly make a good motor too (induction motors, wound-field DC motors, etc.).
Reading this article, and the comments about reopening mines, I cannot help but think of George C. Scott shouting "Mr. President, we must not allow a mineshaft gap!"
Why did this cutback by China cause such a problem? The article states clearly in the first paragraph there are other sources. Most readers realize single sourcing materials (while economical), can definitely lead to problems (point proven here). And yet, here we are.
In some ways, the issue is one of logistics. Extracting these elements is not a simple process. Most non-Chinese players got priced out of the market and shut down operations years ago because magnets and motor manufacturers went for what was cheap. Launching or restarting facilities takes time. As Hatch pointed out, the heterogeneous supply chain will be reestablished, it's just not going to happen immediately.
You could essentially chalk up the issue to companies not thinking ahead, but we live in a time when planning horizons usually only reach the next set of financial releases. It becomes a situation of live by the sword, die by the sword. The perplexing part is that this is not a new paradigm – throughout the history of business and manufacturing, companies have made the mistake of depending on a single supplier or a single client, and then discovering (surprise!) that they no longer held any power in the relationship and were at the mercy of the entity that did.
Thanks for a timely piece. I design and about to produce 2kw wind generators and was surprised that Neo magnets had went up so much, 3x's the price last yr. Luckily I have designed it to take much lighter magnets so material cost doesn't go up that much.
In many places there is little need for REE's like EV's, Hybrids and those that now use them will have them designed out shortly. Since the replacement have variable fields mostly, they with have superior performance to PM fixed field motors.
Again in windgenerators, like EV's, did fine for 80-100 yrs without REE's. And like EV's with a variable field performance range will broaden, producing more power at both the lower and higher wind speeds.
This is a classic example of "communist" China behaving like a state capitalist entity, what we used to call a fascist state; the government acting to favor the country's largest industries.
US minerals companies used to own the market for rare earths, until China muscled in by lowering the prices so far that all the North American mine operators closed down. Then, once they had the market firmly in hand, they lowered the export quotas for the rare earth oxides, saying "if you want to use our REOs to make magnets, you must make the magnets here in China". The intent was to move up the value scale from exporting minerals to exporting magnets (and motors, and batteries and electric cars).
In the short run it is working. In the longer run, it will backfire, because there is now an awareness that you cannot allow China to be a monopoly supplier of anything, especially anything that has strategic or military applications.
I am experienced enough to realize there have been some remarkably stupid marketing ploys done in the past. Look at the Department of Energy heavy investment into permanent magnet electric machines, only to have this technology completely leveraged by China! So it is completely possible that a marketing and manufacturing dynamo like China made the classic marketing mistake of restricting their supply of minable rare earth material to open global competition. Or is there something else, “Perhaps the total global supply of practical minable rare earth materials from all known reserves (even those reopened) is insufficient to meet the demand if electric vehicles and wind turbines come to anticipated fruition.
Short term, the backdrop is what we all know -- prices for REEs have shot sky, up more than an order of magnitude, in some cases. The story I was trying to track here was how the supply chain for REEs is likely to adjust -- and when. Magnet manufacturers, and motor manufacturers and users need to know because they've got to make design decisions now. Long term, you read correctly, the supply chain for REEs required for high-density, high-stability magnets is going to broaden, but for a product going to market next year, that's not going to be a big help. Manufacturers with short time horizons are either going to have to suck it up, make other tradeoffs to compensate, or seek alternatives. Not pleasant, but at least if you know, you can plan.
One presently unexplored avenue for a new source of these rare elements would be recycling the devices that use them presently. How many discarded hard drives are there in landfills and other places? A huge advantage of recovering the elements from used product is the reduction in energy required, and the much lower level of pollution from pulling magnets out of hard drives.
I am sure that there are other products that contain the various rare elements that could also be the target of a cecycling effort. OF course, this really should have been started twenty years ago, which probably would have made the impact of this export reduction much smaller. But nobody would listen to me then. Perhaps now somebody will listen.
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