China presently produces more than 95% of all rare earth materials that are vital in the creation of a big variety of electronic technologies including lithium car batteries, solar panels, wind turbines, flat-screen television, compact fluorescent light bulbs, petroleum-to-gasoline catalytic cracking, and military defense components such as missile guidance systems. It also dominates abilities to process them. This enables it to attract product manufactures to operate there as a condition of doing business, ration exports to maximize prices, and punish nations that don’t go along with its policy interests through supply embargoes. Beijing reduced rare earth shipments by 9% in 2010 over 2009, and has recently announced plans to reduce exports by another 35%.
China produces the vast majority of two particularly important rares, dysprosium (99 percent) and neodymium (95 percent). The motor of a Prius requires about 3 pounds of the latter. While other countries, including the U.S., have significant amounts of these, China’s low-cost labor and lax environmental restrictions has afforded it a big advantage in this mining-intensive industry.
Last year Congress required the Pentagon to examine the use of rare earth materials in defense applications to determine if non-U.S. supplies might be disrupted and identify ways to ensure adequate supplies by 2015. In response, the Pentagon sent back an unpublished report last month titled “Rare Earth Materials in Defense Applications” which concluded that the military is in pretty good general shape except for yttrium, an element used mostly in lasers. While China produced about 98% of the world’s yttrium in 2011, U.S. natural reserves of that material are about half as large.
Is it time to end that Chinese monopoly control of materials important to our military and to high-tech manufacturing? Following years of unsuccessful efforts, the Obama administration now appears to realize the importance of doing so, announcing on March 13 that it intends to press the World Trade Organization to force China to discontinue levying restrictions on rare earth exports. While WTO rules technically permit export quotas on natural resources for environmental purposes (which China claims to be the case in regard to rare earths), trade lawyers argue that China’s caps on its export violates that spirit. They note that while Beijing has been cutting access to these vital materials by other countries through quotas, it has been slow to limit rigid production limits at home that might help to protect the natural environment.
Some other countries are also working to ensure access to rare earths. After China enacted a 2010 embargo on rare earth shipments to Japan for leverage in a territorial dispute, Japan now maintains a stockpile of seven rares and is talking about offering government loans that encourage companies to fund foreign investments private reserves. The Toyota and Sojitz Corporations have already entered into tie-ins with Vietnamese rare earth claim-holders. Toyota is also operating a small rare earths mine in India.
Elsewhere in the Far East, South Korea announced plans last year to stockpile 76,000 tons of rares over the next five years, about 10% of all global production. The country has allocated a huge $8 billion war chest for this purpose, an amazing sum considering that its economy is one-fifteenth the size of ours.
In Europe, Sweden has declared a Norra Harr heavy rare earth project owned by Tasman Metals, Ltd. to be in its “national interest” under the Swedish Environment Act; and German Chancellor Angela Merkel recently inked an agreement to obtain rare earths from Mongolia.
American companies are on their own in the rare earth race, and some of them, along with taxpayers, may reasonably prefer to keep it that way… so long as government will get out of their way. A 2010 U.S. Geological Survey Report estimates that known reserves of rare oxides are about 1.5 million tons, and total domestic resources might be 13 million tons. At peak 10,200 2007 U.S. consumption levels, supplies from known reserves would last nearly 150 years, and possibly more than one thousand years if other resources are explored and exploited. In addition, other friendly, stable countries like Australia and Canada have substantial rare earth deposits as well. The Australian mining company Lynas Corporation aims to annually produce 11,000 tons of rare earth oxides from its new Mount Weld mine.
Up until the 1990s, the U.S. dominated world rare earth production, primarily drawing upon the Mountain Pass mine in southern California. The mine was closed in 2002 in response to a combination of environmental restrictions and lower rare earth prices, although processing of previously mined ore from the site has continued. Molycorp Minerals, the current owner, is now reopening it with the goal of producing 20,000 tons of rare earths in the near-term, and 40,000 tons by mid-decade. It claims that a new milling process will enable material production at half of the cost that the Chinese are currently charging. W.R.Grace has announced a deal with Molycorp that could lock up three-quarters of Molycorp’s planned lanthanum production.
Molycorp has recently struck a $1.3 billion deal that paves the way to ship minerals from its California mine to Chinese operations of a Neo Material Technologies arm called Magnequench. General Motors originally sold Magnequench in 1995 to a group of investors that included government-owned China National Non-Ferrous Materials Import and Export.
There’s really no good reason for America to depend on imports for many rare earths that we have right here. While China produces 99% of the world’s dysprosium, a heavy variety used in such applications as computer hard drives, wind turbine generators, cordless tool motors and audio systems, for smart phone manufacture, locations in Idaho, Montana, Colorado, Missouri, Utah and Wyoming are likely to contain heavy rare earth deposits of the yttrium group. Most of these sites, however, are in early exploratory stages of development. It will require seven to fifteen years before production can even begin after capital is secured. After that, it is likely to require an additional two to five years more to develop pilot plants capable of refining the ore into pure metals.
Neo Material is one of the leading expert companies for chemistry needed to transform rare earths into specialized magnets. While Molycorp says that the deal creates the most diversified rare earth company outside China, Ed Richardson, president of the U.S. Magnetic Association regards it as worrisome. He argues that the U.S. is already “dangerously dependent on China” for materials which include those needed in weapons systems, and that Molycorp’s “export of U.S. rare earth assets into China will only exacerbate this problem.”
And there’s an even bigger problem. Assuming that large U.S. deposits of heavy rares exist, developing them on a scale necessary to meet projected demands will require rolling back decades of EPA obstacles in order to make mining and processing cheap enough for American industries to be competitive and profitable.
Some companies in the U.S. and abroad are working to address these issues through development and use of alternate non-rare earth materials. General Electric has recently announced the development of a “super alloy” that could replace rares, but admits that commercialization still has a long way to go. Frank Johnson, a GE materials scientist said “… we’re exploring several hard and soft materials but haven’t selected a special chemistry yet.”
Researchers at DOE’s Ames Laboratory are working to replace rare earth elements in magnets with electrolytic manganese. Not surprisingly, Larry Reaugh, CEO of American Manganese Inc. agrees, commenting that “The rare earth squeeze has made companies go full bore looking for alternatives, and manganese has been found to be one of the more diversified metals out there as an alternative. Researchers are looking to manganese to replace rare earths in magnets, which may be even stronger.”
Other companies are pursuing alternatives as well. NovaTorque, a California startup, has developed electric motors using low-cost ferrite magnets that the company claims outperform those made out of neodymium. Hitachi in Japan is also developing ferrite magnets for use in hybrid cars. Korean scientists are working on computer memories based upon grapheme oxide, a combination of common carbon and oxygen.
So where does all of this ultimately leave America’s electronics future? The good news is that our country is believed to have the world’s second most plentiful deposits of rare earth resources, and that use of alternative materials may eventually reduce demands even for these. On the other hand, a host of current government policies will likely continue to delay development and utilization of those mineral assets, and successful demonstration of alternatives remains theoretical and uncertain.
While as with energy resources we witness a familiar pattern here, perhaps there is a paradoxical new wrinkle. This time the issues directly pit anti-mining and anti-drilling agendas of environmental activists against their own companion goals to advance rare earth-dependent wind turbines, solar power, and more efficient electric vehicles.
Let’s get real, and acknowledge that the Chinese didn’t create our present rare earth challenges. We alone did through increasing dependence upon confused and conflicting government policies. It’s time to end this nonsense, and rediscover tried and true free market principles that will yield lasting solutions.