by Jesse Emspak – International Business Times – Published: September 27, 2010
Cuts to rare earth exports from China could spur development of technology and infrastructure that has been absent from the U.S. for years, industry experts say.
Over the last week rumors of a Chinese ban on exports of rare earths – a class of elements used in many high technology products – to Japan has fanned concerns about the source of supplies. There are three places in the world where rare earths are available: China, Australia and the United States.
Rare earths are metals such as neodymium, lanthanum, cerium, and europium. Neodymium is used in the strong magnets that are part of computer hard drives, while lanthanum is used as a catalyst in refining crude oil. Europium was first used extensively for red phosphors in television screens. Cerium is used in some types of LCD glass.
Mining the rare earths is not the problem, says Gareth Hatch, co-founder of Technology Metals Research, a consulting firm. Processing the ore into useable metal is mostly done in China, with a smaller part of the market in Japan and Germany.
In the U.S., much of the expertise in extracting the metals from the ores has been lost as mines shut down and manufacturing of electronics was moved overseas. Even if all of the ores were mined in the U.S., Hatch says, they would have to be sent to China to be converted into metals. “There just isn’t any of the infrastructure or technology here anymore,” he says.
That trend could reverse in mid-2012, when MolyCorp opens up its processing facility in Mountain Pass, Calif. The facility will be near the site of a rare earths mine that was closed in 2002. Jim Sims, director of public affairs for the Greenwood Village, Colo.-based company, says by the end of 2012 MolyCorp will be able to process 20,000 tons of rare earths per year. MolyCorp plans to spend $511 million on the project.
In addition to processing the ore, MolyCorp also plans to make the rare earth magnets – primarily neodymium-iron-boron alloy – that go into hard drives and other electronics. Sims says the idea is to have the entire production process in the U.S. He adds that the company is applying new technologies to the processing in order to cut costs enough to be competitive with the Chinese processors as well as reduce the environmental impact.
Most high tech companies in the U.S. have already outsourced production to China, so any rare earths used in electronics such as iPhones and liquid crystal displays don’t fall under export restrictions. But the Chinese government has been trying to consolidate and modernize its mining industry, in part due to environmental concerns, says Hatch. That will cut into the amount produced every year.
Even if the Chinese government wanted to sell all of the country’s rare earth metals as fast as possible, the supply chain is still vulnerable. Hatch notes natural disasters can damage mines and extraction plants. “When there was an earthquake in Chile, if it had happened a hundred miles north, that could have meant a lithium shortage,” he said, referring to the 8.8 magnitude quake in February. Chile produces much of the lithium used in electronics, primarily batteries. “It just makes business sense to get these things from somewhere else.”
Processing rare earths into the magnets requires several steps. First the ore has to be treated with strong acids and bases and the oxides of the metals in it extracted. Those oxides have to be separated into pure metal, which must then be made into the relevant alloys.
Jeffery Green, president of J.A. Green & Company, a consulting and lobbying firm, says the move towards mining and processing more rare earths in the U.S. can’t come too soon. He says a strategy of “manufacturing first” will help insure that there is less chance of supplies of vital components being disrupted.
Green adds that the Chinese government has already been applying pressure to companies that want to buy the oxides of rare earths that are processed into metals. “One company was told, ‘if you want the oxides you have to co-locate in China,'” he said. “The electric vehicle makers were told that if they want these materials we demand the technology to make them in China.”
There is already a shortage of the metal itself, Green says. He puts the total demand for rare earths at about 180,000 tons per year, while the total production is 140,000 tons per year. Decreases in the Chinese export quotas have already pushed prices up anywhere from three- to eight-fold, depending on the metal. For example, samarium used in permanent magnets, went from $21 per kilogram earlier in the summer to $71 in September.
The fact that shares of MolyCorp, which were issued at just under $13 in a July initial public offering, have risen to $29 by Monday afternoon shows that there’s a lot of interest from investors in control of the supply chain.