Rare earths update: In pursuit of alternatives

Companies and industrialised nations continue to seek ways to reduce their dependence on China for access to rare earths. IndustryWeek’s Jill Jusko reports.

It was fewer than three years ago that many in the rare earth supply chain were rattled by exorbitant price hikes and increasingly restricted access to these key inputs to a host of high-tech products from hybrid cars, catalysts and defense technologies to lighting, glass polishing, wind turbines and more.

The culprit had a name — China — which dominates production of rare earths and whose export restrictions drove the price spike. 

In response to China’s actions, discussions ramped up about finding new sources of the 17 elements typically identified as rare earths — 15 lanthanides plus scandium and yttrium—which exhibit unique magnetic, luminescent and electrochemical properties. These properties help in the development of technologies with reduced weight, greater efficiency and other improvements.

Mining firms began exploring new opportunities outside of China. Dollars were put against research with a singular aim: to reduce or eliminate dependence on China for rare earths.

And in 2012 the United States, EU and Japan filed a complaint with the World Trade Organization, arguing that China was not playing by global trade rules with its export restrictions.

That was then. In July 2014, rare earth prices are a fraction of their 2011 highs. Prices dropped as precipitously as they shot up. The “noise” surrounding access to rare earths has diminished.

While China argued such restrictions were put in place to conserve its resources and for environmental reasons, the complainants said the restrictions were designed to provide Chinese industries with protected access

That’s not surprising. “The ‘noise’ tends to be related to the price of rare earths. Prices spiked horribly in 2010, 2011, and they settled back down,” says Alex King, director of the Critical Materials Institute, housed at the US Department of Energy’s Ames Laboratory. Nevertheless, he notes, “the prices are still two or three times higher than they were prior to 2010.”

In short, the rare earths dilemma remains for many companies and nations. Recent activity illustrates the many ongoing efforts to lessen China’s influence on the rare earths supply chain. Here’s a brief update:

In March the World Trade Organization ruled against China in the complaint filed by the United States, the European Union and Japan in 2012. The dispute centered on Chinese export restrictions on rare earths, tungsten and molybdenum in the form of export duties, quotas and limitations on the businesses permitted to export.

Rare earth ruling: Little immediate impact

While China argued such restrictions were put in place to conserve its resources and for environmental reasons, the complainants said the restrictions were designed to provide Chinese industries with protected access.

The WTO ruling had little immediate impact, as China appealed it almost immediately.

Moreover, Roskill Information Services, a metals and minerals market research firm, suggested in a June 14 briefing paper that even had China dismantled certain of its restrictions, the impact would be less than meaningful.

For example, notes Roskill, “The removal of the export quotas alone is not expected to have any significant impact on the volume or rare earth products exported from China, as actual rare earth export volumes have remained significantly below the export quotas set by the Chinese Ministry of Commerce since their introduction in 2005.” 

On the other hand, Roskill noted that a removal of export taxes “would be a significant step in opening up the Chinese domestic rare earths market to the rest of the world.” It could negatively impact non-Chinese rare earth producers such as Molycorp and Lynas, however, by driving down prices, the report noted.

Australia’s Lynas already has been troubled by delays in ramping up its advanced materials plant in Malaysia, and in June the company replaced its CEO.

Likewise, Greenwood Village, Colo.-based Molycorp continues to ramp up production at its mine in Mountain Pass., Calif. The company began active mining at Mountain Pass in December 2010 for the first time since 2002. The mine had been closed in response to environmental issues and declining prices for rare earths.

Molycorp is struggling. In first-quarter 2014 results, the company cited softening pricing for rare earths as a factor in its 4 per cent revenue decline over the previous year’s results. Moreover, it reported lower-than-expected production of rare earth oxides in the first quarter as a result of production interruptions while the company works to optimize operations.  

Still, Molycorp in March reported that it had completed the commissioning of a cracking plant in Mountain Pass that should both increase throughput and reduce production costs. 

Political maneuvers

In June US Rep. Steve Stockman, R-Texas, introduced H.R. 4883, the National Rare-Earth Refinery Cooperative Act. It is a House companion bill to legislation introduced earlier in the year by Sen. Roy Blunt, R-Mo.

Both bills promote the same idea: to lessen the United States’ reliance on China for access to rare earths and increase US production. Specifically, they promote the establishment of a thorium bearing rare-earth refinery cooperative “to provide for the domestic processing of thorium-bearing rare-earth concentrates as residual unprocessed and unrefined ores.”

“Our nation needs to establish this cooperative so American corporations no longer have to relocate their manufacturing facilities and jobs to China and relinquish control of their intellectual property rights to have access to a rare-earth supply chain,” Stockman said.

Both bills were referred to congressional committees.

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