Rare Earths Worldwide
Rare earths supply and demand patterns will likely undergo several changes in the next few years.
The rare earths industry is in a state of transition. China, which currently dominates in the production and supply of rare earths, as well as in many downstream
product areas, is being challenged by new producers from other regions. This global diversification will potentially result in greater stability in terms of both supply and pricing.
Rare earths are categorized into two main groups: light and heavy. The heavy rare earths tend to be rarer and thus generally command higher prices, though there are exceptions. The proportions of light and heavy rare earths mined from any given deposit rarely match the market demand for the individual rare earth elements, with excesses of some of the light rare earth elements (e.g., cerium and lanthanum) but tight supply of several of the heavy rare earths.
Much of the new production outside of China involves deposits rich in light rare earths, a factor that is expected to exacerbate these excesses unless new applications can be developed. Even deposits that are promoted as being rich in heavy rare earths usually have significant volumes of light rare earths.
Imbalances in supply are likely to remain, although some of the previous predictions of shortages of rare earths have not come to pass. The general easing of supply since 2011 is a major reason for this, but shortages have also diminished as technological developments have reduced the requirement for rare earths in several applications (e.g., dysprosium in magnets).
Current global demand for rare earths is estimated to be 125,000 metric tons in terms of rare earth oxides, and this is expected to grow to 160,000 metric tons by 2017 (see Table 1). The sectors that consume rare earths tend to be technology led; therefore, developments in technology can result in significant changes in demand patterns.
China accounted for about 95% of the global supply of rare earths in 2012. This is set to fall steadily, to around 60% by 2020, as new non-Chinese production of rare earths comes onstream; Molycorp, Inc. of the U.S. and Lynas Corp. of Australia have already begun the first phases of their rare earths production. Currently, several hundred rare earth exploration projects are being conducted worldwide, with notable deposits discovered in every continent except Antarctica. However, only a relatively small proportion of these projects are likely to reach the production phase in the next five years, since forecast demand rates for rare earths predict that there would be large-scale surpluses if many of these projects were to begin commercial operation within this time period.
Successful new projects will require integration from mining the rare earth ores through to production of mixed rare earth concentrates to the separation of individual rare earths. Mixed rare earths obtain only a relatively small percentage of the value of separated products, with light rare earth mixtures achieving some 15-20% of the value of the contained rare earth oxides (although 30% is more common), rising to 40-50% in the case of heavy rare earths. However, as yet, there is little independent capacity for separation outside of China. A possible alternative is a centralized toll processing operation that can accommodate a range of ores.
China is not only the largest producer of rare earths but also the largest consumer, manufacturing significant quantities of rare earth magnets and other downstream products. Developing a market share within China could prove to be a challenge for the new non-
Chinese suppliers of rare earths. However, a number of consumers situated in other countries are already taking an interest in developing relationships with rare earth companies based outside of China, in order to secure long-term supplies that are not dependent on Chinese exports. Such relationships will help to foster the further development of production bases for downstream products outside of China. This process is likely to take some time in the face of continued competition from Chinese companies.
The permanent magnets industry is the largest single consumer of rare earths, and consumption rates are expected to grow at an average of 8.5% per year through 2017. Though this is a strong growth rate, it is less than predicted a few years ago due to lower growth being experienced in the wind turbine and hybrid/electric automobile sectors—two major applications for rare earth magnets. The main rare earth elements used are neodymium and praseodymium, as well as dysprosium and terbium. There had been fears that there would be significant shortages of dysprosium for this application, but consumers—particularly major Japanese companies—have developed technologies that enable them to substantially reduce the amounts required while retaining the advantages gained from the dysprosium additions.
The second largest consumer is the catalysts sector, encompassing fluid catalytic cracking (FCC) catalysts for petroleum refining, and automobile exhaust catalysts. Demand for rare earths from this sector is expected to grow by almost 10.5% a year, though the growth will be skewed higher in 2014 and 2015 due to new regulations covering emissions from diesel engines coming into force in the European Union; growth is then predicted to moderate and in the longer term is expected to level out at about 6% per year.
As with permanent magnets, FCCs have been subject to technical developments that have resulted in lower amounts of rare earths—primarily lanthanum—being needed. The spike in rare earth prices in 2010-2011 encouraged such developments. As prices and supplies have eased, however, the incentive to reduce the amount of lanthanum used has waned, and consumption levels are expected to increase as a result.
Demand for rare earths in metal alloys (including rare earths in both NiMH batteries and steel additives) is expected to grow at an average of 3.4% per year through 2017, although growth rates may decline after that as lithium-based batteries continue to replace NiMH batteries in many applications. Rare earths for polishing powders, primarily for glass, are also expected to show growth in demand, averaging 4.5% per year over the next three years, after a period in which the industry has made efforts to reduce consumption because of escalating prices.
Demand for rare earths used in phosphors is expected to average a modest 3% a year through 2017 and possibly may slow further or even decline after 2017 due to the replacement of compact fluorescent lighting by LED types, which require smaller additions of rare earths and have considerably longer operational lifecycles. Rare earths for glass additives are expected to grow at an average rate of 4.5% a year to 2017, while the wide range of other applications is predicted to grow on average at rates of 3% per year.
Rare earth prices have shown significant volatility over the past five years, and much of this has been the direct result of specific policies implemented by China. Prices of rare earths escalated several-fold in 2010 and reached a peak in mid-2011, mainly in reaction to China’s lower export quotas for 2010, which restricted global supplies, causing near panic and providing the impetus for exploration companies to seek new deposits outside of China. Concerned about shortages of supply, consumers built up rare earths stocks following the price spikes of 2010-2011, but their fears were unfounded and companies have since been running down these stocks, resulting in lower demand and lower prices.
Rare earth prices have shown significant volatility over the past five years, and much of this has been the direct result of specific policies implemented by China.
From the dramatically inflated peaks in 2011, prices for rare earths have since fallen significantly and are now closer to levels witnessed before the global economic downturn that began in 2008. Prices are currently viewed as being too low to encourage new suppliers, especially those processing light rare earths—cerium and lanthanum, in particular. The cost of setting up mines and plants to process rare earths through to separation requires substantial investment. However, prices are expected to strengthen through 2014, as demand picks up in line with general global economic improvements and by 2015 should stabilize at levels whereby a reasonable return could be expected among the new producers.
China’s rare earths industry is now entering a process of rationalization and consolidation. From a current base of as many as 200 companies involved with the mining and processing of rare earths, this process of rationalization may ultimately result in a reduction to just 10 major companies. This will address the excess capacity within China’s rare earths industry and result in a more organized industry with a substantial reduction of illegal production and better environmental practices, all of which is expected to put upward pressure on rare earths prices. In addition, the Chinese government has started purchasing rare earths to build up a stockpile, and a rare earths exchange has been started—currently only dealing in the spot market—to give more clarity on prices and introduce a level of longer-term stability.
A repeat of the price spikes seen in 2010-2011 is not expected through 2017, although a major political disruption, such as an escalation of the dispute over the sovereignty of islands claimed by both China and Japan, could undermine the current perceived stability of supply from China. Supplies from new producers outside of China would help negate the worst aspects of any such disruptions, though this is of course dependant on how far forward such new non-Chinese rare earths projects move toward commercialization.
China’s poor environmental record with regard to the mining of rare earths has come under considerable criticism. Part of the problem can be attributed to widespread illegal mining practices, which the Chinese government is now trying to eliminate through its rationalization and consolidation program. Meanwhile, legitimate producers are being forced to adopt more stringent environmental practices or face severe penalties.
An environmental issue that needs to be addressed by many of the new producers of rare earths involves the safe handling and long-term storage of radioactive waste generated by the processing of rare earth ores. There can be up to 0.1% of thorium oxide (ThO2) in bastnasite ore, and 4-10% ThO2 and 0.1-0.5% uranium oxide (U3O8) in monazite and xenotime ores. Monazite and xenotime are of particular interest to potential new producers since they contain higher levels of the more valuable heavy rare earths. The disposal cost of radioactive waste streams can be significant, as they require long-term secure storage, and this needs to be factored into the overall costs of establishing commercially viable rare earths operations.
Editor’s note: This article provides summary information from a new market report by Ted Dickson and Peter Harben of Materials Technology Publications entitled The Rare Earths Industry Worldwide 2014-2017. For pricing and additional details, visit www.mat-tech.co.uk.