An apocalypse that wasn’t – The rare earth mineral shortage

Leland Teschler, Executive Editor
lteschler@wtwhmedia.com
On Twitter @ DW_LeeTeschler

Scan the news pages from about eight years ago and you will likely notice a lot of hand-wringing about shortages of “critical materials” crucial for high-tech motors. The materials in question were rare-earth metals used for, among other things, making magnets with a super-high energy density. Back then, China began limiting exports of rare-earth metals. Because that country supplied 97% of the world’s rare earths, the price of neodymium used in brushless motor magnets quadrupled. This price explosion led to the founding of Molycorp Inc., a U.S. mining company with a way of extracting rare earth metals from ore that experts said was innovative.

Today, the price of rare earths has come back down to earth. Recently you could buy a ton of neodymium oxide for about $47,000 whereas the same amount of material in 2011 went for over $250,000. Molycorp entered Chapter 11 bankruptcy a few years ago and its assets were recently liquidated. China still provides about 70% of the world’s rare earth metals. So you might wonder why the price of rare earths crashed, even in the face of a trade tariff war with the main source.
Insights come from a paper by University of Texas public affairs Prof. Eugene Gholz, who advises the DoD on rare earths. Gholz points out that Chinese producers found various ways of getting around the export limits the Chinese government imposed on rare earths. He estimates the Chinese illegally exported as much as 30,000 tons of rare earths annually.

Moreover, some of the applications for rare-earth permanent magnets turned out to be illusory. When the price popped, demand for these magnets fell partly because some manufacturers were able to get by with weaker ones. And materials researchers cranked up efforts to minimize the use of rare earths in magnet alloys.

Even so, the magnetics in motors and electronics accounted for only a small fraction of total rare earth production. At the time of the production bruhaha, cellphones needed a few grams of neodymium and a Toyota Prius used about a kilogram of the stuff. Toyota says it has since reduced its neodymium needs by about 20% per car, though it uses more of the cheaper lanthanum and cerium to do so. Experts predict a surplus of these two materials for many years to come.

Actually, the main application for rare earths back in the days of the bubble was as catalysts in gasoline refining. But you can refine gasoline without rare earths. Gholz reports that some refiners did so at the peak of the 2011 rare-earths price pop, at the expense of a slightly less efficient refining process. The change didn’t do much damage to their financials, he says.

Meanwhile, production of rare earths outside China ramped up. Though Molycorp met an ignominious end, Lynas Corp. in Australia now produces rare earths at a rate of about 22,000 tons annually. Russia and Brazil both put out a few thousand tons each.

The fear back in 2011 was that rare earth metal supplies would go the way of the 1973 oil embargo. But the lesson from the ensuing panic, says Gholz, is that the oil embargo was a special case. Where there’s economic coercion, there’s also an opportunity for introducing competition and a rationale for investing in potential innovations.