TODAY’S STUDY: THE WHAT, WHERE AND WHEN OF RARE EARTH ELEMENTS
Rare Earth Elements: The Global Supply Chain
Marc Humphries, September 6, 2011 (Congressional Research Service)
The concentration of production of rare earth elements (REEs) outside the United States raises the important issue of supply vulnerability. REEs are used for new energy technologies and national security applications. Is the United States vulnerable to supply disruptions of REEs? Are these elements essential to U.S. national security and economic well-being?
There are 17 rare earth elements (REEs), 15 within the chemical group called lanthanides, plus yttrium and scandium. The lanthanides consist of the following: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium. Rare earths are moderately abundant in the earth’s crust, some even more abundant than copper, lead, gold, and platinum. While more abundant than many other minerals, REEs are not concentrated enough to make them easily exploitable economically. The United States was once self-reliant in domestically produced REEs, but over the past 15 years has become 100% reliant on imports, primarily from China, because of lower-cost operations.
click to enlarge
There is no rare earth mine production in the United States. U.S.-based Molycorp operates a separation plant at Mountain Pass, CA, and sells the rare earth concentrates and refined products from previously mined above-ground stocks. Neodymium, praseodymium, and lanthanum oxides are produced for further processing but these materials are not turned into rare earth metal in the United States. Molycorp anticipates reopening its Mountain Pass mine (as a low-cost producer) in 2012.
Some of the major end uses for rare earth elements include use in automotive catalytic converters, fluid cracking catalysts in petroleum refining, phosphors in color television and flat panel displays (cell phones, portable DVDs, and laptops), permanent magnets and rechargeable batteries for hybrid and electric vehicles, and generators for wind turbines, and numerous medical devices. There are important defense applications, such as jet fighter engines, missile guidance systems, antimissile defense, and space-based satellites and communication systems.
click to enlarge
World demand for rare earth elements is estimated at 136,000 tons per year, with global production around 133,600 tons in 2010. The difference is covered by previously mined aboveground stocks. World demand is projected to rise to at least 185,000 tons annually by 2015. Additional mine capacity at Mt. Weld Australia is expected to come on stream later in 2011, to help close the raw materials gap in the short term. Other new mining projects could easily take 10 years to reach production. In the long run, however, the USGS expects that global reserves and undiscovered resources are large enough to meet demand.
Several legislative proposals have been introduced in the 112th Congress in the House and Senate to address the potential of U.S. supply vulnerability and to support domestic production and supply chain development of REEs because of their applications for national security/defense systems and clean energy technologies. The House Committee on Natural Resources approved H.R. 2011, the National Strategic and Critical Minerals Policy Act of 2011, on July 20, 2011…
click to enlarge
What Are Rare Earth Elements?
There are 17 rare earth elements (REEs), 15 within the chemical group called lanthanides, plus yttrium and scandium. The lanthanides consist of the following: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium. Rare earths are moderately abundant in the earth’s crust, some even more abundant than copper, lead, gold, and platinum. While some are more abundant than many other minerals, most REEs are not concentrated enough to make them easily exploitable economically.2 The United States was once self-reliant in domestically produced REEs, but over the past 15 years has become 100% reliant on imports, primarily from China, because of lower-cost operations.3 The lanthnides are often broken into two groups: light rare earth elements (LREEs)—lanthanum through europium (atomic numbers 57-63) and the heavier rare earth elements (HREEs)—gadolinium through lutetium (atomic numbers 64-71). Yttrium is typically classified as a heavy element.4
Major End Uses and Applications
Currently, the dominant end uses for rare earth elements in the United States are for automobile catalysts and petroleum refining catalysts, use in phosphors in color television and flat panel displays (cell phones, portable DVDs, and laptops), permanent magnets and rechargeable batteries for hybrid and electric vehicles, and numerous medical devices (see Table 1). There are important defense applications such as jet fighter engines, missile guidance systems, anti-missile defense, and satellite and communication systems. Permanent magnets containing neodymium, gadolinium, dysprosium, and terbium are used in numerous electrical and electronic components and new-generation generators for wind turbines. About 75% of permanent magnet production is concentrated in China. See Table 1 for selected end uses of rare earth elements…
click to enlarge
Rare Earth Resources and Production Potential
Rare earth elements often occur with other elements, such as copper, gold, uranium, phosphates, and iron, and have often been produced as a byproduct. The lighter elements such as lanthanum, cerium, praseodymium, and neodymium are more abundant and concentrated and usually make up about 80%-99% of a total deposit. The heavier elements—gadolinium through lutetium and yttrium—are scarcer but very “desirable,” according to USGS commodity analysts…
Most REEs throughout the world are located in deposits of the minerals bastnaesite…and monazite…Bastnaesite deposits in the United States and China account for the largest concentrations of REEs, while monazite deposits in Australia, South Africa, China, Brazil, Malaysia, and India account for the second largest concentrations of REEs. Bastnaesite occurs as a primary mineral, while monazite is found in primary deposits of other ores and typically recovered as a byproduct. Over 90% of the world’s economically recoverable rare earth elements are found in primary mineral deposits (i.e., in bastnaesite ores)…
Concerns over radioactive hazards associated with monazites (because it contains thorium) have nearly eliminated it as a REE source in the United States. There are high costs associated with thorium disposal. Bastnaesite, a low-thorium mineral (dominated by lanthanum, cerium, and neodymium) is shipped from stocks in Mountain Pass, CA. The more desirable HREEs account for only 0.4% of the total stock. Monazites have been produced as a minor byproduct of uranium and niobium processing. Rare earth element reserves and resources are found in Colorado, Idaho, Montana, Missouri, Utah, and Wyoming. HREEs dominate in the Quebec-Labrador (Strange Lake) and Northwest Territories (Thor Lake) areas of Canada. There are high-grade deposits in Bayan Obo, Inner Mongolia, China (where much of the world’s REE production is taking place) and lower-grade deposits in South China provinces providing a major source of the heavy rare earth elements…Areas considered to be attractive for REE development include Strange Lake and Thor Lake in Canada; Karonga, Burundi; and Wigu Hill in Southern Tanzania…
click to enlarge
Supply Chain Issues
The supply chain for rare earth elements generally consists of mining, separation, refining, alloying, and manufacturing (devices and component parts). A major issue for REE development in the United States is the lack of refining, alloying, and fabricating capacity that could process any future rare earth production. One U.S. company, Electron Energy Corporation (EEC) in Landisville, PA, produces samarium cobalt (SmCo) permanent magnets, while there are no U.S. producers of the more desirable neodymium iron-boron (NdFeB) magnets needed for numerous consumer electronics, energy, and defense applications. EEC, in its production of its SmCo permanent magnet, uses small amounts of gadolinium—an REE of which there is no U.S. production. Even the REEs needed for these magnets that operate at the highest temperatures include small amounts of dysprosium and terbium, both available only from China at the moment. EEC imports magnet alloys used for its magnet production from China.
The underinvestment in U.S. supply chain capacity (including processing, workforce development, R&D) has left the United States nearly 100% import dependent on all aspects of the REE supply chain and dependent on a sole source for much of the material. An April 2010 Government Accountability Office (GAO) report illustrates the lack of U.S. presence in the REE global supply chain at each of the five stages of mining, separation, refining oxides into metal, fabrication of alloys and the manufacturing of magnets and other components. According to the GAO report, China produces about 95% of the REE raw materials, about 97% of rare earth oxides, and is the only exporter of commercial quantities of rare earth metals (Japan produces some metal for its own use for alloys and magnet production). About 90% of the metal alloys are produced in China (small production in the United States) and China manufactures 75% of the NeFeB magnets and 60% of the SmCo magnets. A small number of SmCo magnets are produced in the United States. Thus, even if U.S. rare earth production ramps up, much of the processing/alloying and metal fabrication would occur in China…
click to enlarge
Molycorp’s “Mine to Magnet” Vertical Integration Approach for Rebuilding the U.S. Rare Earth Supply Chain
From the mid-1960s through the 1980s, Molycorp’s Mountain Pass mine was the world’s dominant source of rare earth oxides. The ramp up in production had been driven primarily by Molycorp’s higher grade, its relatively low cost, and a rapid rise in the demand for the LREEs, particularly europium used for red phosphors in television and computer monitors, and cerium for glass polishing.38 However, by 2000, nearly all of the separated rare earth oxides were imported, primarily from China. Because of China’s oversupply, lower cost production, and a number of environmental (e.g., a pipeline spill carrying contaminated water) and regulatory issues at Mountain Pass, Molycorp ceased production at its mine in 2002. Since then, the United States has lost nearly all of its capacity in the rare earth supply chain, including intellectual capacity. However, under new ownership since 2008, Molycorp has embarked upon a campaign to change the rare earth position in the United States with its “mine to magnet” (vertical integration) business model.
After major energy producer Chevron purchased Union Oil Company of California (UNOCAL), which included the rare earth mine at Mountain Pass, Chevron wanted to focus on its energy business. They were willing to sell-off its non energy Molycorp Mountain Pass asset.
click to enlarge
When investor groups purchased Molycorp from Chevron in 2008, they did not inherit the environmental liability that resulted from the pipeline spill. Chevron continued the cleanup that resulted from an earlier ruptured water disposal pipeline carrying some chemical contaminants from the oxide separation facility. Since its purchase by the new owners, Molycorp CEO and engineers have been adamant about minimizing their environmental footprint during the separation phase of the process. Molycorp designed a proprietary oxide separation process that would use fewer reagents and recycle the waste water, thus doing without a disposal pond. Molycorp recently broke ground for their new separation facility at the Mountain Pass mine. This complex process separates out the individual elements which follows the mining of the raw material. Molycorp is in the process of reopening the mine in 2012 as the lowest-cost operator, according to their calculation. They expect production costs at around $2.77/kg versus an estimated $5.58/kg in China and a potentially much higher cost operation at Lynas at about $10.11/kg. Molycorp engineers suggest that they will use one-half the amount of ore to get the same amount of usable end product. In addition, they will use fewer reagents, use “full loop” recycling, and no evaporation ponds…
All permits are in place to commence mining with the exception of a permit to transport natural gas that will be used to power the separation facility. The rights of way for a pipeline must beapproved by the Bureau of Land Management (BLM) and the pipeline permit by Federal Energy Regulatory Commission (FERC). In the meantime, Molycorp will truck in liquid natural gas for its energy source until the pipeline is approved…
Molycorp recently acquired the Japanese subsidiary Santoku America in Tolleson, AZ, and renamed it Molycorp Metals and Alloys (MMA). This acquisition is part of the firm’s strategy to become a vertically integrated company. It produces both NdFeB and SmCo alloys used in the production of permanent magnets. Molycorp Metals and Alloys is the sole U.S. producer of the NdFeB alloy. Their intention is to modernize the facility and expand metals and metal alloy production…Molycorp also recently purchased a majority interest in AS Silmet, an Estonian based rare earth element and rare metals processor, which will double its capacity for rare earth oxide and metal production (separation) in the near-term, according to Molycorp officials.
click to enlarge
Molycorp has entered into a cooperative research and development agreement (CRADA) with U.S. Department of Energy’s Ames Laboratory to study new methods to create commercial-grade permanent magnets used in commercial applications. Development of downstream activities such as refining, rare earth metals alloying, and permanent magnet manufacturing will require a large amount of financing, a skilled workforce, and a sizeable U.S. market, all of which could be more completely developed in the long term. A potential barrier to entry to permanent magnet manufacturing, in the short term, is the intellectual property rights for permanent magnet manufacturing held by two firms: Hitachi in Japan and Magnequench (formerly a U.S. firm) which is owned by the Chinese. Months-long talks between Hitachi and Molycorp to jointly pursue permanent production in the United States were suspended in August 2011. Some investor because of the intellectual property rights issue.
The management at MMA is also examining ways to improve metal recycling. Much of their recycling research is focused on the magnets and the highly valued HREEs. They want to probe into the commercial feasibility of recycling materials contained in permanent magnets used in consumer goods. Sourcing sufficient quantities of end-use materials and understanding the metallurgical processes for extracting the heavy rare earth elements such as the dysprosium and terbium is an important part of the research. Testing the quality of the recyclable material and evaluating the economics will determine the project’s success. Molycorp is also evaluating nearterm opportunities to recycle energy efficient light bulbs for the phosphors…
Keeping and recruiting top talent (in engineering, science, and finance) that can help Molycorp achieve its mine-to-magnet mission is one of the company’s top priorities, according to company officials. Their aim is to consistently invest in the right people and the right training to accomplish its goal…
click to enlarge
Role of China
State-run (“State-Key”) labs in China have consistently been involved in research and development of REEs for over fifty years. There are two State-Key labs: (1) Rare Earth Materials Chemistry and Applications, which has focused on rare earth separation techniques and is affiliated with Peking University, and (2) Rare Earth Resource Utilization, which is associated with the Changchun Institute of Applied Chemistry. Additional labs concentrating on rare earth elements include the Baotou Research Institute of Rare Earths, the largest rare earth research institution in the world, established in 1963, and the General Research Institute for Nonferrous Metals established in 1952…This long term outlook and investment has yielded significant results for China’s rare earth industry.
Major iron deposits at Bayan Obo in Inner Mongolia contain significant rare earth elements recovered as a byproduct or co-product of iron ore mining. China has pursued policies that would use Bayan Obo as the center of rare earth production and R&D. REEs are produced in the following provinces of China: Baotao (Inner Mongolia) Shangdong, Jiangxi, Guangdong, Hunan, Guangxi, Fujian, and Sichuan. Between 1978 and 1989, China’s annual production of rare earth elements increased by 40%. Exports rose in the 1990s, driving down prices. In 2007, China had 130 neodymium-iron boron magnet producers with a total capacity of 80,000 tons. Output grew from 2,600 tons in 1996 to 39,000 tons in 2006.
Spurred by economic growth and increased consumer demand, China is ramping up for increased production of wind turbines, consumer electronics, and other sectors, which would require more of its domestic rare earth elements. Safety and environmental issues may eventually increase the costs of operations in China’s rare earth industry as domestic consumption is becoming a priority for China. REE manufacturing is set to power China’s surging demand for consumer electronics—cell phones, laptops and green energy technologies. According to the report by Hurst, China is anticipating going from 12 gigawatts (GW) of wind energy in 2009 to 100 GW in 2020. Neodymium magnets are needed for this growth…
click to enlarge
China’s policy initiatives restrict the exports of rare earth raw materials, especially dysprosium, terbium, thulium, lutetium, yttrium, and other heavy rare earths. It is unclear how much the export restrictions affect exports of downstream metal and magnets. According to Hurst, China wants an expanded and fully integrated REE industry where exports of value-added materials are preferred (including consumer products). It is common for a country to want to develop more value-added production and exports if it is possible.45 China’s goal is to build-out and serve its domestic manufacturing industry and attract foreign investors to participate by locating foreign-owned facilities in China in exchange for access to rare earths and other raw materials, metals and alloys, as well as access to the emerging Chinese market.
Some foreign investors are hesitant to invest in China because of the concerns related to technology sharing. Also, the September 2010 maritime conflict between China and Japan in which Japanese officials claimed that China held up rare earth shipments to Japan (denied by Chinese officials) has heightened the urgency among many buyers to seek diversity in its sources of rare earth materials.
Some have urged the U.S. Trade Representative to bring a dispute resolution case against China in the WTO, similar to a case the United States brought against China in 2009 over its export restrictions (such as export quotas and taxes) on certain raw materials (including, bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus, and zinc). The United States charges that such policies are intended to lower prices for Chinese firms (especially the steel, aluminum, and chemical sectors) in order to help them obtain an unfair competitive advantage. China claims that these restraints are intended to conserve the environment and exhaustible natural resources. According to some press reports, a WTO panel in April 2011 ruled that China’s export restraints on raw materials violated WTO rules.
According to a press account, a letter written by four U.S. Senators in March 2011 urged the Obama Administration to instruct the U.S. Executive Director at each multilateral bank, including the World Bank, to oppose the approval of any new financing to the Chinese government for rare earth projects in China.46 The letter also urged the Administration to impose the same types of restrictions on Chinese investment in mineral exploration and purchases in the United States as China imposes on foreign investment in rare earth in China…
The Chinese government announced in 2010 that it intends to restructure the rare earth mining industry under the umbrella of a few world-class mining and metal conglomerates for greater efficiencies and to reduce environmental degradation. In addition to the consolidation of the industry and environmental cleanup efforts, investor analyst Jack Lifton reports that China is building strategic stockpiles of rare earths and other critical materials that could meet domestic demand for several years. South Korea and Japan are also building strategic stockpiles.48 The level of stockpiling could have a dramatic impact on the market, particularly for HREEs.
The value of U.S. rare earth imports from China rose from $42 million in 2005 to $129 million in 2010, an increase of 207.1%. However, the quantity of rare earth imports from China fell from a high of 24,239 metric tons in 2006 to 13,907 metric tons in 2010, a 42.6% decline…
…Japan’s Interests…Selected Possible Policy Options…Research and Development…Authorize and Appropriate Funding for a USGS Assessment…Support and Encourage Greater Exploration for REE…Challenge China on Its Export Policy…Establish a Stockpile…