Rare earths—minerals, metals and their oxides—have been a looming problem for several years but became a political football recently when China reduced its export quotas for the second half.
Jittery markets responded by upping already rising prices for rare earths, and manufacturers with strategic stockpiles have begun tactical hoarding, a move that analysts warn could drive prices even higher. The cost of rare earths hasn’t yet had much of an impact on the pricing of electronic components that use them. But observers see impending shortages for the rare earths used to make the super-strong magnets designed into everything from hard drive heads to smart bombs, the phosphors used in many LEDs and fluorescent lamps, the slurries used for semiconductor polishing, the dopants sometimes used in optical components such as lasers, the magnetic films used for spin-polarized memories and the oxides used in advanced high-k dielectrics.
Stepped-up mining operations and accelerated manufacturing schedules in Africa, Australia, Canada, Malaysia, the United States, Vietnam and elsewhere could provide supply-chain alternatives to China, which controls more than 95 percent of the world’s rare earths. The U.S. House of Representatives, fearful the U.S. military might become dependent on Chinese-made electronics, approved H.R. 6160, the Rare Earths and Critical Materials Revitalization Act of 2010, late last month.
Japan, one of the countries hardest hit by the tightening of rare earth supplies, has fast-tracked efforts both to recycle rare earths from discarded electronics and to develop alternatives to the materials for use in electric motors and the nickel-metal-hydride batteries deployed in hybrid vehicles.
The total worldwide market for rare earths exceeds $1.3 billion, or about 124,000 metric tons, 96.8 percent of which comes from China, with India, Brazil and Malaysia splitting the remaining 3.2 percent. China’s virtual monopoly on rare earth supplies doesn’t reflect a freakish overabundance of the stuff on and under Chinese soil, sources said; rather it is the result of decisions made in global markets.
“We have allowed the Chinese to bankrupt our local rare earth industries,” asserted Tom Valliere, senior vice president at Design Chain Associates LLC (San Francisco). “We shut down our own mine in the U.S. We can rebuild that, but it will take time.”
Taking the long view, however, Valliere noted that “the real issue with rare earths is that they are not rare at all. In the short term we are at China’s mercy, because they are our sole source, but in the long term there is no problem.”
Indeed, according to the U.S. Geological Survey, rare earths are as commonplace as chromium, nickel, copper, zinc, molybdenum, tin, tungsten and lead.
“Rare earths are not rare elements; they are just highly dispersed in the geology,” said an Intel Technology Poland spokesman. “These elements have concentrations in many areas of the world. The issue is one of economic feasibility to bring these reserves to market.”
According to market watcher iSuppli Corp., China has about 50 percent of the world’s discovered deposits of rare earth ores, the Commonwealth of Independent States (former Soviet Republics) 14 percent, the U.S. 9 percent and Australia 4 percent, with Canada and miscellaneous nations collectively holding as much as 23 percent. But the Chinese “are the only ones in full production,” said iSuppli chief research officer Greg Sheppard. “Over the next 18 months or so, tactically, China will have a lot of control over the price of rare earths, until the other countries ramp up production.”
Demand for rare earths today exceeds supply by “about 20,000 tons . . . mostly because China has been reducing its exports of rare earths by an average of about 6 percent per year,” said Jim Sims, director of public affairs at Molycorp Co., the only U.S. operation that mines rare earths.
Short supplies inevitably raise prices. Metal Pages, which tracks metals on the commodities markets, reports that the price of neodymium—the key rare earth used in super-strong magnets for high-efficiency electric motors and generators—doubled in the past year. According to Robert Castellano, president of The Information Network, cerium sold for $9 per kilogram in September 2009 but rose to $50/kg by September 2010.
Hybrid automobiles make use of rare earths in almost every major subsystem. Click on image to enlarge.
To: "R. Colin Johnson" Cc: "george leopold" "junko yoshida" "paul miller" "nicolas mokoff" Sent: Thursday, November 18, 2010 5:08:58 PM
Subject: Re: I have been named: Kyoto Prize Fellow | Re: "Never overlook the oblivious." cautions Notos.
Hello Mr Johnson,
Neat EE Times article on rare earths.
Rare earth supply chain: Industry's common cause.
Yep. I appreciate what you've noted here Dave. If it is sufficiently and near-universally clear, or becomes so, that China is manipulating market dynamics and (by definition) WTO rules and responses are insufficient to deal with the problem then there does seem to be the [unpleasant but real] possibility of groups of countries teaming together to cooperate on a combined view and behavior of the group's best interests (a'la CoCom). This would seem to have the feel of a "trade war" though which, generally, is viewed as not being in anyone's best interest.
It's hard to believe that this manipulation of the market is entirely due to China's desire to move up the production food chain. China knows where deposits lie: if 13% seem to be in the US and Australia, and another 14% in Russia, there's more than enough ore around to make for competition in the near future. Besides, rising prices will force the development of alternatives to rare earth metals and compounds where possible, and probably scuttle less important uses: slurries for polishing? Surely there are other ways to do that. Ditto for additives to diesel fuel. And car windshields? Well, wear sunglasses. Or build the sunglasses into the windshield.
as the article says "China’s virtual monopoly on rare earth supplies doesn’t reflect a freakish overabundance of the stuff on and under Chinese soil, sources said; rather it is the result of decisions made in global markets", i do not think that Chinese are devil but are smart businessman and i am being neutral commentator here. Chinese can ramp up their production and export if they see any other country start mining and producing the minerals.
This is another example of how all countries and companies function in their own interest, whether it be by increasing investment and production or by reducing it. Again the economics dictate the results. The real factor is whether countries and companies take the long view or the short view in doing so (and keep in mind that you have to get through the short term to get to the long term).
You can't blame China for this ... rare earth are not rare, just no-one except China sees any value (i.e.profit) in them. Welcome (again) to the blindingly obvious 'dark' side of market forces !!!!! Foundry wafers are next .....
China is a violent military dictatorship with no conscience or ethical constraints. Free traders smile as they ride China's tiger. They return from the ride with the traders inside and the smile on the face of the tiger. We have lost to China the talented communities that won WWII. We are being bled like African cattle, a little every day til we ar thin and weak economically, addicted to low priced chinese imports with coaster wagons to carry our inflated currency to the store. China will not change except in their own interest.
@R.ColinJohnson: the article reads like story a line for a hollywood hit, with the maneuvering the Chinese businesses attempted in buying Molycorp and its eventual owner Unocal; but bidding by more a half-billion over Chevron's bid is a dead give away so I wonder if that was really the intent of the Chinese business involved in the acquisition bid.
Well, the steps for risk mitigation are quite clear: get Molycorp's Mountain Pass mine operating again to build up rare earth metal reserves while US & western markets can continue to source from China. This can also act as a guard against unwarranted price increases. Longer term, there is no alternative to China's reserves of rare earth's, they just happen to have it! Geopolitical machinations can be a tough act to fathom.
I too haven't heard anything on how the OEM's and OSAT's are planning to dealt with this critical supply problem.
Dr. MP Divakar
the US used to have substantial "Rare Earth" production not to long time ego, but it was more expensive than to buy from China therefore it was dismantled, see how fare do you get with greed.. and stupidity get banished sooner or later in that case sooner
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