In the summer of 2011, motor and magnet manufacturers found themselves in the formerly unheard-of position of not getting a firm price until delivery or having to pay for their order up front. The primary market characteristic was instability. Six months later, things have moderated. The price of neodymium has fallen by almost half from its peak, though the material remains significantly more expensive than it was a few years ago. Dysprosium has dropped in price, as well, but it remains expensive.
As we reported at the time, a common opinion during the cost hikes was that they were triggered by reductions in Chinese export quotas. Now analysis suggests that the issue was not a real contraction in supply, but a speculation bubble created by hoarding.
Though Chinese export quotas for rare earth elements dropped appreciably starting in 2008, quantities shipped per year have never exceeded those quotas. (Source: Technology Metals Research LLC)
“There's a lot of misunderstanding about the export quotas,” says Gareth Hatch, founding principal of Technology Metals Research LLC. “Certainly, in 2010, which is when we saw the first price increases in the raw materials, there was a drop in the export quota numbers of about 40 percent compared to the prior year. The reality is that we've never actually gotten close to those limits. Of the materials that could have been exported last year -- roughly 30,000 tons -- it appears that less than half was actually exported.”
When demand for rare earth materials softened last fall in response to price hikes, speculators began releasing the materials they held, and prices went down.
New sources of neodymium, such as Molycorp.'s Mountain Pass mine, are expected to come online this year, though new supplies of dysprosium will probably be delayed until 2016 or 2017. That's the good news. The bad news is that, from early 2010 to last summer, the price of materials like neodymium rose by more than a factor of five. A 50 percent reduction is helpful but won't erase that major price bump. Though prices will very likely continue to decrease somewhat, they're unlikely to return to pre-bubble levels.
Kristen, thanks for the overview on rare earth metals and specifically the background on what's causing the shortages. I think the three scenarios you keyed in on at the end of your post could be really instrumental for engineers looking for alternatives to these materials or at least a strategy for lessening their dependence on them for their designs. Given the state of the world economy and global tensions, constant price spikes seem to be the new order. I'm sure I speak for our audience when I say I'd love to hear more about each of those three strategies and I'm hoping subsequent posts in your series hit on these tactics.
Nice article, Kristen. And it's an important subject. I know Molycorp had come back online -- now that rare earth elements command a significant price again, but I didn;t realize that dysprosium would not come online for years yet. I know Australian mines have come back online. Will Australia help with some of these shortages?
Wikipedia has an interesting submission that explains why these rare-earth magnets exhibit such good magnetic properties:http://en.wikipedia.org/wiki/Rare-earth_magnet. The US Geolgical Survey offers an interactive map that shows worldwide mines, deposits, and occurrances or rare-earth minerals: http://mrdata.usgs.gov/mineral-resources/ree.html. You'll see that rare-earth minerals are not particularly rare, although it's rare to find sites for economical mining.
As apresher says, excellent article. This is the type of issue that forces design engineers to adapt an find alternatives. This is a good thing for all. Whether the price increases are due to supply shortages, environmental costs other factors, we are often forced to explore alternatives. Somtimes this efforts leads to better designs.
Kristin, thanks for a fascinating article. It was interesting to learn that the price increases were brought about by speculation, rather than the Chinese export limits. I'm looking forward to the rest of the series.
Great article. We all know the effect of speculation in the oil market, but most of us never think about speculation in the rare earth materials market. The fact that neodymium speculation could create such volatility surprises me.
The kudos for Kristin's article are justified, and I would also add that this is an example of the longer-form, deeper dive articles we intend to bring to the Design News audience. More to follow...
While working on a design we always strive to use components and materials that will be widely available throughout the life of a product. It's astonishing to see that we now must not only examine the actual supply, but also examine whether the material will be wildly traded by speculators because it becomes so popular that it has visibility to investors, instead of inventors.
@Rob Spiegel: Molycorp is planning to ramp up rare-earth production by the end of the year. There are insignificant quantities of dysprosium (Dy) and other heavy rare earths at their Mountain Pass deposit in California. The situation is a little better with the Mount Weld deposit in Australia, owned by Lynas Corp ( assuming they can get past the problems of rolling out their separation facility in Malaysia ) - but still, they will not be producing significant amounts of heavies. There are however some promising sources of heavies in Australia, including the Dubbo Zirconia Project owned by Alkane Resources; in the near term we should see some heavies from the Steenkampskraal mine in South Africa, owned by Great Western Minerals. But it will be a number of years until we have significant new quantities online. See www.rareearths.org for info on specific advanced projects that might be of interest.
Gareth Hatch
Technology Metals Research, LLC
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