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.
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