Editor’s Note: Mike Luther, Editor and MD of Global REEs Venture indicates “Whether news about tightening rare earth exports from China is speculation or a real provocative action, it is abundantly clear that the global rare earth shortage is a crisis in-the-making. In light of massive growth in EV production, wind turbines and other new energy devices, rare earth consumption is poised for explosive growth. Chronic global rare earth shortages coupled with China dominance is the elephant in the room.”
This problem has been a long time in coming. This morning I took another look at the 2010 New York Times article about rare earth elements entitled Amid Tension, China Blocks Crucial Exports to Japan. Some eight years later, a New York Times story told the same story with How Rare Earths (What?) Could Be Crucial in a U.S.-China Trade War. Lynas Corp., one of the few non-Chinese rare earth producers is facing a very real threat of nationalization, closure or substantial regulation for its plant in Malaysia. The situation is underscored and exasperated by the 2019 National Defense Authorization Act, which prohibits the U.S. Department of Defense from acquiring rare earth magnets – along with certain tungsten, tantalum and molybdenum products – from China, Russia, Iran, and North Korea. According to Ryan Castilloux of Adamas, a firm that tracks the rare earth industry, prices for one key rare earth mineral, PrNd Oxide, could increase by 10% to 50% within the next 12 months, and is on track to double in price within next five years as demand outpaces supply, Castilloux said.
China rare earth cuts scare global manufacturers
October 25, 2018 at 11:30 JST
LONDON/HOUSTON–The Chinese government is limiting domestic production of rare earth minerals in the second half of the year, a move likely to crimp international exports and send prices for the critical materials soaring, according to data from Adamas Intelligence.
China is by far the world’s largest producer and consumer of rare earths, a group of 17 elements used to make electric vehicles and consumer electronics. The move is already forcing manufacturers to scour the globe for alternative supplies.
For the second half of 2018, China’s quota for rare earth separation and smelting has been cut 36 percent, an attempt to better control the market, according to Adamas, a research firm that closely tracks the rare earths industry.
China’s decision to limit domestic rare earth production to 45,000 tons for the second half of 2018–the lowest in more than five years–provides only enough supply for China’s domestic buyers, according to Adamas.
The semiannual quota had risen to 70,000 tons in the first half of 2018, 40 percent higher than the first half of 2017. But that move was largely seen by analysts and electronics manufacturers as a step to legitimize black market production, with Chinese manufacturing consuming most of that supply.
While China is likely to attend to its own needs before exporting, increased exports would require the country to draw on already-low inventories of neodymium (Nd), prasesodymium (Pr) and dysprosium (Dy), used in electric vehicle motors, said Ryan Castilloux of Adamas.
Prices for one key rare earth mineral, PrNd oxide, could increase by 10 percent to 50 percent within the next 12 months, and is on track to double in price within next five years as demand outpaces supply, Castilloux said.
Chinese exports typically supply around 80 percent of the globe’s rare earth needs, about 156,000 tons annually. Still, exports tend to oscillate wildly from month to month.
In September, for example, rare earth exports jumped 15 percent from August levels, despite slipping earlier in the year, according to Chinese government data.
The Chinese Ministry of Industry and Information Technology and the Ministry of Natural Resources did not respond to faxed requests for comment.
China’s export reticence and market dominance has spooked manufacturers, including Japanese electronics maker Panasonic Corp., which said it is moving to find fresh supply.
“We have been diversifying our procurement channels, building partnerships with our suppliers and working to reduce the use of rare earths,” Panasonic said in a statement to Reuters.
The U.S. military is worried about China’s dominance of the rare earths market, calling it a “significant and growing risk,” according to a Pentagon study released earlier this month.
Australia’s Lynas Corp. is the only significant producer of rare earths outside of China through its processing plant in Malaysia. But last month a Malaysian politician said that plant should be closed, denting the company’s stock and further unnerving the rare earths market.
Research into rare earth alternatives has come up largely empty, leaving manufacturers beholden to the specialized minerals just as demand for batteries for electric vehicles and other products that use the materials is soaring.
A typical Toyota Prius, for example, uses 25 kilograms of rare earths, compared to 1 kg in a typical combustion-engine vehicle.