On September 22, 2010 word began circulating among rare earth traders that China was ‘unofficially’ suspending rare earth exports to Japan. The suspension occurred as a result of an ongoing territorial dispute between China and Japan, which escalated after Japan detained the captain of a Chinese trawler near the disputed Senkaku/Diaoyu islands in the East China Sea. China demanded that Japan release the captain while Japan insisted on holding him until they completed a full investigation over the incident. By September 23, news that China had suspended rare earth deliveries to Japan captured the attention of the global media. Within hours, China denied all reports of withholding rare earths, and Japanese prosecutors announced that the captain would soon be released.
As of late November, there has been conflicting information on the status of rare earth exports to Japan. Some claim that exports have recommenced. Others say China continues to withhold exports. Still others claim that exports have recommenced but they are not clearing customs. No matter what the status, there is a lesson that can be drawn about over-dependence on one country for a vital resource.
The news that China withheld rare earth exports to Japan has renewed urgency in revitalizing the rare earth industry. Rare earth elements are vital in the production of hundreds of modern technologies. They can be found in cell phones, i-Pods, computer hard drives, green technologies, and critical military weapons systems to name a few. China produces over 95% of the world’s rare earth elements, and the country has been steadily cutting back its export allocations since 2006, causing the Western world to begin scrambling for alternatives.
While governments and private companies seek out alternative sources, there is often confusion from misinformation spread through the media and other sources. With all the fuss over rare earth elements by government officials and investors, it is important that decision makers have a basic understanding of the industry in order to promote good decision-making.
Four Experts
The following article is derived from interviews with four of the world’s leading rare earth experts. Dudley Kingsnorth is one of the foremost authorities in the rare earths industry. He is the Executive Director of the rare earth consulting company Industrial Minerals Company of Australia (IMCOA). Gareth Hatch has a background in materials science and metallurgy and is the co-founder of Technology Metals Research, LLC. Mark Smith, with over 25 years experience in the energy and mining industries, is the chief executive officer of Molycorp, which owns and operates Mountain Pass, the only rare earth mine and processing facility in the United States. Finally, Karl Gschneidner is a distinguished professor in the Department of Materials Science and Engineering and senior metallurgist at the US Department of Energy's Ames Laboratory.
Misconception #1: If China cuts off all exports of rare earth elements, we will no longer be able to manufacture modern day technology
Reports exaggerate what might happen if China stops all exports of rare earth elements. For example, in an article titled “Global Supply of Rare Earth Elements Could be Wiped out by 2012,” it assumed that if China stopped exporting rare earth elements to the rest of the world, “the Western world will be crippled by the collapse of available rare earth elements. Manufacturing of everything from computers and electronics to farm machinery will grind to a halt. Electronics will disappear from the shelves and prices for manufactured goods that depend on these rare elements will skyrocket.”
This is a fallacy. Since the late 1990s, China has been enticing manufacturing sectors to move their facilities to China with the promise that they will have access to rare earth elements as long as their manufacturing operations remain in China. Mark Smith describes a three-tiered priority system within China’s rare earth industry. At the top of the list as priority one are Chinese consumers. Not only do Chinese consumers get first dibs at rare earth elements, but costs are maintained at the lowest level. The second priority-consumers are international companies that move their manufacturing facilities to China. These consumers pay more than domestic consumers, but less than the rest of the world. The balance of the world’s rare earth consumers fall under priority three. Obviously, the real danger is for countries that are heavily dependent on China for their rare earth metals if demand at the two tier priority levels is high which may crimp supply for the remainder of world consumers.
Because of this system, more and more Western companies have been progressively moving their manufacturing to China. Control over rare earths acts as an incentive in providing more job opportunities to Chinese citizens. Clearly, manufacturing will not grind to a halt if China cuts off its exports.
Also noteworthy is that alternatives to rare earth elements do exist. However, these alternatives are not generally as effective as the rare earths themselves. For example, prior to the discovery of rare earth magnets, many applications relied on alnico and ferrite magnets, neither of which contain rare earths. Both the alnico and ferrite magnets are considerably weaker than their rare earth counterpart. In order to match the same magnetic power as a rare earth magnet, these traditional magnets would have to be made larger. This poses a great problem for many applications. According to Smith, “If you were to use ferrite magnets, as opposed to Neodymium-Iron-Boron (Nd-Fe-B) magnets (Note: The Nd-Fe-B rare earth magnets are the strongest magnets available), in hybrid and electric cars, the vehicles would never meet the definitions of hybrids for electric vehicles, or the zero emissions vehicles. The size of each unit would become so big. As the size gets bigger, of course, the battery can only operate for so long.”
Misconception #2: A rare earth is a rare earth is a rare earth
This misconception is truly in the eye of the beholder. According to Gareth Hatch, there is a tendency to talk uniformly about rare earth elements as if they were one. This is misleading because they are all different, with different levels of demand-consumption patterns and different levels of abundance.
From an electronics point of view, there are heavy rare earth elements, medium rare earth elements, and light rare earth elements. For our purposes they will be broken down into light and heavy rare earth elements. The light rare earth elements as generally defined by industry—lanthanum, cerium, praseodymium, neodymium, and samarium—are more abundant in the earth’s crust than the heavy rare earth elements. Scientifically, according to Karl Gschneidner, while rare earth elements are similar in their chemical properties, when it comes to what is known as the 4f-electrons each element is unique.
The generally accepted standard for the breakdown of rare earth elements by their applications is that used by IMCOA and Roskill. Once a rare earth oxide, chemical or metal is transformed into a ‘value added’ product, it is no longer part of the rare earths data base. For example, the ‘magnetic’ rare earths have an estimated gross value of $400-500 million; the gross value of the rare earth magnets is $4-5 billion; and the electric motors in which they are used have a value that is another order of magnitude greater. This is the reason China seeks to maximize the ‘value added’ in China.
Some of the elements are used as a means to process other materials, but are not present in the ultimate end products of that process. For example, lanthanum is used as a catalyst for cracking petroleum products. Cerium is used to polish glass. On the other hand, Smith warned that some catalyst manufacturers are sensitive about the issue. “Those people who make the catalyst consider that catalyst to be the end product,” said Smith. Gschneidner, pointing out that 28% of rare earths produced in 2009 were mixed rare earth compounds. These compounds are made up of mostly light rare earths and are used in catalysts and mischmetal.
At the other end of the “misconception stick,” according to Hatch, “I encounter people every week who believe that there are primary neodymium mines, just like there are lead and copper mines.” This isn’t true. Rare earth elements are found grouped together within the same mineral deposits. With the exception of scandium and promethium, it would be impossible to mine one particular rare earth element without them being mixed in with the other rare earth elements.
Misconception #3: China possesses nearly all the world’s rare earth elements
Past estimates have shown China to possess more than 55% of all known global rare earth reserves. In 2008, according to the US Geological Survey (USGS), China possessed approximately 57% of base reserves. Base reserves include all rare earth deposits including those that are not economical enough to be mined. Today, however, according to the USGS, the country possesses approximately 36.5% of economically viable deposits of rare earth. Dr. Chen Zhanheng of the Chinese Society of Rare Earths explained China’s declining percentage of the world’s rare earth reserves, “With the discovery of new rare earth deposits worldwide and consumption of the proved rare earth reserves in China, this ratio is declining, estimated as 35% and will continue to decline." (Dr. Chen Zhangheng, “The Development and Policies of China Rare Earths Industry, Presentation, April 6, 2010).
Some sources within China offer even lower estimates. For example, according to Lin Donglu, Secretary General of the Chinese Society of Rare Earths, China’s reserves account for only 25% to 30% of the world’s rare earth resources. According to Kingsnorth, approximately 35%-40% of overall rare earth reserves (both heavy and light rare earths) are located in China. When it comes to heavy rare earths, though, the country probably has over 50% of global supply.
Presently it is impossible to ensure complete accuracy in China’s rare earth reserves. While professional mining associations worldwide have set standards on calculating mining reserves, China has no such standards. What is certain, though, is that China, with what reserves it does have, is responsible for over 95% of the global production of rare earth elements. It is also important to note that not all the reserves and resources identified by the USGS and others are economic. However, as China has lower environmental standards, lower chemical costs, and a better established rare earths infrastructure than the rest of the world, a greater portion of its reserves are likely to be economically viable.
Misconception #4: Heavy rare earth elements are of more concern because they are less abundant than light rare earth elements
Indeed, heavy rare earth elements are much less abundant than the light ones. However, as Kingsnorth points out, typically the ratio in which rare earth elements are used does not necessarily match the ratio in which they are found in the earth’s crust. In fact, demand rates have varied dramatically over the past 70 years. For example, in the early 1960s lanthanum was used in the optical glass industry, cerium was widely used to polish media, and didymium, which is a mixture of neodymium and praseodymium, was widely used in the glass industry for coloring. However, there was no market for samarium and europium, and large stock piles of these materials grew. Then, in 1965, the United States began to use europium as a red phosphor in color televisions. In the 1970s, samarium became a key ingredient for the samarium cobalt permanent magnet, and by the 1990s, demand for the magnetic rare earths was taking off. According to Kingsnorth, “We now have a situation in this decade in which the demand for magnets is growing much more quickly than the demand for phosphors. So, the demand for neodymium is probably, to a certain extent, going to dictate the rate at which we produce rare earths” since the rare earth elements are found within the same deposits.
Currently, the demand for the heavy rare earth elements is significantly lower than the demand for the light rare earths. Smith insists that “you don’t need a whole lot of production of these heavy rare earths to take care of the needs that this country has.” For example, the projected global demand for terbium in 2015 is estimated to be less than 500 tons a year. Smith believes that if all the advertised and promoted mines come online and begin producing terbium and other heavy rare earth elements needed in today’s technologies, there could actually be a surplus, which would likely lower the cost of the oxides and make them uneconomical for companies to produce. Hatch has a different perspective and believes that if all the advertised and promoted mines come online, there is a greater probability for a global surplus of light rare earths than heavy ones. “This is because you still have to extract and separate out the light rare earths present in a deposit in order to get at the heavies present,” he explained. Kingsnorth tends to agree with Hatch for the medium term, but agrees with Smith in the longer term (post 2020).
Gschneidner pointed out that “everyone is fixated on the heavies, but you have to go through the lights to get the heavies out of the ores, unless you are lucky with a heavy rare earth deposit.” Currently, the only viable heavy rare earth deposits right now are in South China’s ionic clays. However, due to their higher value, those deposits with a greater proportion of heavy rare earths are receiving the most attention. Therefore, normal market forces will likely work to achieve a balance in the longer term.
Misconception #5: Rare earth elements are rare
The belief that rare earth elements are rare can be attributed to their name. The term “rare earth” however, is a result of history. Kingsnorth explained that the name “rare earth” was generated about two centuries ago. At that time, if a mineral could not produce a metal, for example, by heating it with coal, it was called an “earth.” When the first rare earth elements were discovered, people were unable to produce a metal from them. In addition, the stone discovered was considered rare. Therefore, it was called “rare earth.” It would take another 100 years from the time of the initial discovery before the metals could be separated.
Rare earth elements are not rare at all, being found in low concentrations throughout the Earth’s crust, and in higher concentrations in certain minerals. They are found in almost all massive rock formations. However, their concentrations range from ten to a few hundred parts per million by weight. Therefore, finding them where they can be economically mined is rare.
Misconception #6: China is the number one exporter of rare earth elements
In general it is true that China is the largest exporter of rare earth elements. However, a few notes of clarification need to be made. While China was once a heavy exporter of rare earth oxides, its business model has been changing. Today, the country is increasingly pushing on exporting finished- and semi-finished products. “The biggest misconception here,” said Hatch, “is that most of the 124,000 tons of rare earth produced by China is exported, when clearly it isn’t,” at least not in their raw forms. Hatch explained that much of the rare earth produced by China is made into finished products, which are then either exported or used within China. Smith pointed out that “The Chinese consumer is now becoming much more powerful and their internal consumption is growing.”
Chinese officials have been open about their ambition to become more of an exporter of end products than rare earth oxides. On 2 September 2009, speaking at the annual Minor Metals and Rare Earth Conference in Beijing, Wang Caifeng, Deputy Director General of the Materials Department at the Ministry of Industry and Information Technology, pointed out that China would encourage the sales of finished rare earth products, but limit the export of semi-finished goods.
According to Kingsnorth, over the past 40 years, China has experienced a major transition in its export products. In the 1970s, China exported rare earth mineral concentrates. In the 1980s, the country began exporting mixed rare earth chemical concentrates. By the late 1990s, China was exporting magnets, phosphors, and polishing powders. Now, in the new millennium, China has upgraded its production capabilities and is exporting finished products, such as electric motors, computers, batteries, LCDs, and mobile phones.
One of the best explanations for China increasing its role in the production supply chain is one offered by Kingsnorth. “If China just mined the rare earth and sold the minerals (the minerals contain the rare earth elements), that would employ hundreds of people,” he said. “If they separated rare earths and sold those (the oxides), that would employ thousands of people. However, if they went all the way up the value added chain, and they can produce computers, cameras, vehicles, and those types of things, that employs millions of people. That is their goal.”
Misconception #7: Recycling is a simple alternative
Every year, hundreds of millions of tons of “e-waste” end up being sold to third world and developing countries such as Ghana, Malaysia, Vietnam, Pakistan, China and India, where they are stripped of some of their components and reassembled into working units. Those units that are unsalvageable are stripped of their copper, iron, or even traces of gold. Rare earth elements, on the other hand, are not normally recycled because they are usually mixed with other materials, making it difficult to separate them out. According to Kingsnorth, most applications use such small quantities of rare earth that it is unlikely to be economical to recycle.
Misconception #8: Every wind turbine has a neodymium-iron-boron magnet in it
In September 2010 a blogger talked about the shortage of rare earths. At the bottom of the blog was a photo of several old, worn-down wind turbines, suggesting that the neodymium from these old wind turbines really should be recycled. By their rundown appearance and older style, it was obvious that the wind turbines pictured did not use the neodymium-iron-boron, also known as permanent magnet generators (PMG).
Today, only 5%-10% of wind turbines use PMGs. Currently, there is a trend to develop larger wind turbines. As these wind turbines grow in size the use of PMGs will likely also rise. In a forward looking statement, Kingsnorth estimated that over the next ten years, the use of PMG driven wind turbines is likely to increase to 20% to 25% of total annual installations. Meanwhile, according to Hu Bo-Ping, who spoke during the 6th International Conference on Rare Earth Development and Applications in August 2010, China is aiming to increase its production/installation of wind turbines by 50% per annum for the next 10 years. Furthermore, within the next five years, 25% of China’s wind turbines will be using rare earth PMGs.
Misconception #9: Starting up rare earth mining and processing operations in the West will resolve the current rare earth crisis
While starting up rare earth mining and processing operations outside of China will be beneficial, the current rare earth crisis is about more than a lack of diversified sources. According to Hatch, “There is a missing piece—the ability to turn rare earths into metals and alloys.” Smith added, “We can mine all the rare earths that we want, but if we don’t have a supply chain that connects us with the end use of those products, then what we are going to end up doing is sending the rare earth oxides someplace else, more likely China, to do the finishing work. Then they send it back. So, what have we really accomplished?”
Smith has been advocating the supply chain for over two years. According to a study released by the Government Accountability Office in April 2010, it could take up to 15 years to rebuild the US supply chain. Smith strongly disagrees with this assertion as Molycorp’s plans call for full supply chain operability by the end of 2012.
Misconception #10: The rare earth dilemma can be beat with a bag of money
There are two angles to this misconception. Restarting the supply chain will take time, money and expertise, the latter of which is largely missing or in retirement status in the United States. While China’s expertise in the industry has grown, the United States seems to have lost or is losing most of a generation of scientists, engineers and academics in the field.
Today, China, with tens of thousands of scientists focused on rare earth elements, is sinking hundreds of millions of dollars into research and development. Meanwhile, the United States has mere handfuls of experts. “The Question is,” stated Hatch, “why did we miss it? People (in the United States) have either retired or passed away. There seems to be little interest in addressing this issue, which has to be addressed if the USA is to have any hope of regaining expertise in the rare earths.” Smith, who doesn’t disagree with the premise that, “anything can be beat with a bag of money,” sees this misconception from a different lens. “In a capitalistic society, it would make sense that with enough money, you can get the expertise you need, given enough time to develop it.”
Misconception #11: Determining a mine’s mineralogy is a great indication of a mine’s future potential success
Determining mineralogy (which means identifying the mineral(s) containing the rare earths and ascertaining whether they can be readily separated) is indeed critical to the potential success that a rare earth mining venture might have. However, there is more to it than meets the eye. Many people underestimate the complexity of mining and processing rare earth elements. There is confusion between being able to do it technically and being able to do it economically. It may be technically possible to extract rare earth elements from a known deposit, but at what price?
Smith explained that the higher the required purity of a needed rare earth element, the more steps involved, which drives up the price. “If you are going to achieve a “five nines” (99.999 percent), or “six nines” (99.9999 percent) purity level, you are going to increase the steps,” he said. The refining steps are referred to as cells. Extracting rare earth elements uses a liquid extraction counter-current flow design. For the heavy rare earths, even more cells are required, sometimes exceeding 1,000 cells. Therefore, while the percentages or quantities of heavy rare earth elements might sound good at first, after calculating the number of cells required to extract them, along with other factors such as logistical requirements, the project may no longer be economic enough to accomplish.
Kingsnorth offered this example. “There’s a ton of lithium (not a rare earth element) in a cubic mile of sea, but it’s not economic to take it out. It’s not just a question of whether it is there. It’s the concentration that’s there, and it’s the form in which it is that enables you to determine whether or not it is economic.”
Misconception #12: Mountain Pass stopped producing rare earth elements in 2002
Mountain Pass has never stopped producing rare earth elements in the facility’s almost 58 years of operation. However, in 2002 mining of fresh ore to feed the processing systems came to a halt due to a lack of tailings basin capacity and of a new permit to expand the old basin or build a new one. After numerous upgrades and revisions to resolve the issues, Molycorp is poised to restart mining of fresh ore as early as 2011 to ensure its mill can be fed by the middle of 2012.
Misconception #13: The rare earth elements industry is a dirty one
Press reports have honed in on the idea that the rare earth industry is unhealthy, unsafe, and environmentally damaging. This has been the case in China, especially in the south where illegal mining has been rampant. The rare earths themselves are not toxic.
However, according to Kingsnorth, the Chinese government is acting to improve environmental conditions. Over the past year, China’s government has been consolidating or eliminating smaller companies and stamping out illegal mining. In 2009, the Ministry of Land and Resources suspended any applications nationwide for new mining licenses for rare earth ores until June 30, 2010. More recently this has been extended to June 20, 2011. Meanwhile, as China tries to resolve its environmental issues, the United States and other western nations already have in place strict guidelines, so strict in fact, that this tends to slow progress.
Conclusions
Less than two years ago, despite their importance to modern day technologies, practically nobody ever heard of rare earth elements. Meanwhile, over the past two decades, China has been ramping up efforts that would ultimately put it in a dominant position over a highly strategic resource. (Note: For a comprehensive look at China’s rare earth industry, refer to the author’s China’s Rare Earth Elements Industry: What Can the West Learn?)
While the United States was once the largest producer of rare earths, throughout the 1990s Chinese exports of rare earth grew to the point that prices fell. This drove most of its competitors out of business and made China the largest producer in the world, affording it complete control over the industry. Currently, China supplies over 95% of the world’s rare earth needs.
Recent news of China putting a temporary halt on rare earth exports to heavily dependent Japan amidst a territorial dispute has elevated the gravity of the situation. It has brought to life the idea that China possesses a strong bargaining chip through its rare earth industry. Despite Chinese insistence that it has no intention to use rare earth as a bargaining chip, tensions have still risen.
Exacerbating the situation are some of the many misconceptions of the scientific aspects and of industry that seem to circulate. Indeed, China does have a clear advantage. However, like other complex resource issues, rare earths must be understood in a nuanced way, with misconceptions either explained or dismissed and a baseline understanding of where the global rare earths’ industry is evolving.
Cindy Hurst is an analyst for the US Army’s Foreign Military Studies Office, Fort Leavenworth, KS