Rare earths companies are facing some of the
worst market conditions in the industry’s history,
market participants at the 10th International Rare
Earths Conference in Singapore glumly acknowledged in
Speaking on the eve of the conference, hard
pressed juniors, miners, processors and buyers agreed that rare
earths have been hit particularly hard by the general malaise
in the global resource cycle.
"It’s not just rare earths -
it’s pretty tough wherever you look," Mark Saxon,
CEO of TSX-listed Tasman Metals Ltd, which
is developing the Norra Karr rare earths
mine in Sweden, told IM. "Everything is
subject to financing, but it’s tough to get
meetings to take projects forward," he said.
Saxon said that the relaxation of TSX rules last
year which made it easier for retail investors to participate
in small financings had thrown a lifeline to some companies
that might otherwise have been forced to delist for want of
"It hasn’t been good for the
industry," he said, noting that the rare earths sector
continues to be crowded with juniors competing for financing
when only a handful have a realistic chance of making it into
Lloyd Kaiser, marketing manager for ASX-listed Arafura Resources,
similarly told IM that the funding hardship
was being felt across the mineral spectrum, but argued that the
"difference with rare earths", is their role in green energy,
particularly in electric and hybrid cars.
Kaiser noted that while most of the industries
suffering from falling demand are linked to an oversupply of
materials for construction sector, magnetic rare earths have
applications in technologies where there remains a significant
amount of growth potential.
Ian Bamborough, managing director Spectrum Rare
Earths, which is also listed on the ASX, agreed that large and
achievable market opportunities exist for some rare earth
"Everybody talks about 'lights’ and
'heavies’ - but what really matters when it comes
to rare earths is magnetics," he told IM.
"Cerium is worthless - there is too much of it
and nobody wants it," he said. "But if you look at the magnetic
minerals like neodymium and dysprosium, the high tech and
renewables sector are going to ensure these remain vital
materials for the foreseeable future."
Both Arafura and Spectrum are developing rare
earths projects in Australia’s Northern Territory,
south of the port city of Darwin.
Each company has devised a business model that
involves dropping cerium - the lowest valued rare earth, mainly
used in polishing powders - out of their refining process at an
early stage in the form of crude cerium carbonate.
Lighting industry offers dim
Adding to the junior sector’s
funding woes is the prospect of weakening demand in rare
earths’ traditional end markets.
Manufacturers of lighting systems, for example,
are moving away from phosphor-based fluorescent lighting
technology in favour of better performing light emitting diodes
(LEDs), which require smaller quantities of rare earths.
Bill Cohen, technology systems manager for
phosphors at GE Lighting USA, said that GE’s
phosphor blends typically comprise 50% rare earth elements,
broken down into 44% yttrium, 4% terbium and 2%
Cohen explained that while LEDs still need rare
earths, the volumes required are "15 to 20 times less" than
those in fluorescent phosphors.
Unlike other rare earths-consuming industries,
such as catalysts, polishing powders and magnets, which have
acted to cut their use of the minerals in response to concerns
about price volatility and supply security following the market
spikes of 2011, the consumption shift in the lighting industry
has been driven principally by innovation.
Cohen acknowledged, however, that concern about
volatility in the rare earths market had added impetus to the
move towards LEDs and remains a concern as long as the lighting
industry continues to require the elements, albeit in smaller
GE Lighting, which spends around $40bn annually
on raw materials, is "strategically assessing" its rare earths
requirements as it switches to manufacturing a greater
proportion of LEDs.
Cohen referred to a US Department of Energy
report released in August 2014, which published figures
indicating that phosphor usage in the US is set to decline by
65% between 2010 and 2030.
LED technology claims a number of advantages over
fluorescent lighting, being more efficient, longer lasting and
not requiring mercury. The price of LEDs has also come down
significantly since the technology first appeared in the 1960s,
making it more popular with industries and consumers.
Cohen said that while the overall trend for rare
earths usage is positive based on rising volume demand for
lighting systems, particularly in emerging economies, specific
consumption of rare earths by the industry will shrink.
Supply security biggest priority for
The challenges of establishing a viable rare
earths supply chain outside China notwithstanding, delegates in
Singapore were reassured that the need for reliable supply
sources remains of paramount importance to downstream
In a presentation discussing rare earths
consumption in the Japanese auto industry, Sumio Kozawa,
managing director of the Metal Economics Research Institute of
Japan (MERI/J), said that automakers have "real concerns" about
interruption of supply.
"Automakers are taking precautionary measures [to
secure their access to rare earths], such as collaborating with
suppliers of raw materials and [automotive component] parts,"
"It is a fact that rare earth elements are
scientifically unique and useful, but concerns over their
supply and prices may outweigh their importance to car makers,"
Kozawa said it was difficult to estimate the
exact usage of rare earths per car owing to variations in
technology between models and manufacturers, but that Japanese
car makers, which include Toyota and Mitsubishi, were among the
world’s major consumers of the minerals.
The heavy rare earth dysprosium is used to make
magnets for car motors and an average car contains more than
100 of these magnets, Kozawa said, although not all car models
rely on rare earths-based magnet technology.
One precautionary measure pursued by automakers
has been investment in active research and development into
dysprosium-free magnets. Some of the experiments taking place
in the US, Korea and Europe are yielding "technically feasible"
alternatives, according to Kozawa.
Another major automotive application for rare
earths is catalysts, which control vehicle emissions by turning
harmful pollutants in exhaust gases into less toxic substances.
Since the introduction of catalytic converters into cars in the
1970s, this market has grown rapidly and remains a significant
consumer of the light rare earths, cerium and lanthanum.
According to data compiled by Roskill Information
Service, the autocatalyst market consumed around 9,000 tonnes
rare earths in 2013, of which between 80% and 90% was made up
of cerium, lanthanum and neodymium.
Need for stable pricing
Second on the priority list for car makers is raw
material price stability, Kozawa said. As a factor generally
linked to security of supply, rare earths prices skyrocketed in
2011 after China cut its rare earths export quota by 40% at the
end of 2010.
This resulted in a near 4,000% increase in the
price of cerium which, according to Roskill analyst Suzanne
Shaw, sent shockwaves through industries like catalyst
manufacturing which were used to paying low prices for rare
"[Catalyst makers] could not sustain these price
rises and many simply stopped buying," Shaw told delegates.
She added that while prices have come down
significantly from their 2011 peaks, the value of cerium and
lanthanum (currently priced ataround $4-5/kg) remain around 30%
higher than their 2011 levels - something that many downstream
markets, including autocatalysts, are refusing to tolerate.
Roskill estimates that there are market surpluses
of 40-45,000 tonnes for lanthanum and 90-95,000 tonnes of
cerium in the market today and that buying standoffs buy key
purchasing sectors is exacerbating this oversupply.
Kozawa said that automakers are beginning to
weigh up the performance benefits of using rare earths and the
need to meet stricter environmental regulations against the
supply risks and their consequent cost impact on downstream
He said that MERI/J’s analysis of
the industry suggested that specific consumption of some light
rare earths by the auto industry and other markets would not
recover to the volumes seen before the 2011 price spikes.
He added that even a bullish outlook for the
industry did not allow room for rare earths price rises, saying
that prices would need to be stable and concerns about supply
and market volatility would need to be resolved for demand to
Rare earths news review
New supply still needed, says
Rare earths miners need to be aware of efforts to
substitute and reduce specific consumption of rare earths, but
the emergence of more suppliers outside China will be a net
benefit for the industry, Geoff Bedford, CEO of Colorado,
US-based Molycorp Inc. told
delegates at the 10th International Rare Earths
Conference in Singapore.
"New supply outside China will lead to a little
more security and a little more visibility in the supply
chain," Bedford said.
Bedford added that anxiety from downstream rare
earths consumers was less about price volatility than
visibility in the market.
"Our customers come to us and say that their
business models can accommodate higher prices, but what they
can’t accommodate is significant insecurity," he
Molycorp announced a
third quarter loss of $105.2m at the start of November and 7%
decline in sales year-on-year (y-o-y), to 3,356 tonnes. The
company also said that average selling prices had fallen by
10.3% y-o-y, to $36.93/kg.
In September, the company closed a $400m
financing deal with Oaktree Capital Management, of which $250m
was immediately available to the company.
The remaining $150m can be accessed until 30
April 2016, contingent upon Molycorp achieving consolidated
adjusted EBITDA* of not less than $20m and production volumes
of at least 4,000 tonnes rare earth oxides per quarter, for two
consecutive fiscal quarters.
*Earnings before interest, taxes,
depreciation and amortisation.
China pursues further rare earths
China’s Ministry of Industry and
Information Technology (MIIT) announced in November that it is
discussing consolidation plans received by three rare earths
The details of the plans submitted by China
Minmetals Corp., Ganzhou Rare Earth Group Co. and Rising
Nonferrous Metals Co. were not disclosed, but industry rumours
said that Ganzhou Rare Earth Group intends to cooperate with
Jinpanxi Rare Earth Group Co. - a consortium of six rare earth
firms in Sichuan province.
MIIT also announced that it is considering
revising rules introducing some changes to China’s
rare earths export policies next year.
The government is planning to introduce
management regulations, revisions about domestic output ceiling
rules, different management of heavy and light rare earths and
raise resource taxes on ion-adsorption clays.
**Conversion made November 2014
Sumitomo begins production at Kazakh
Japan’s Sumitomo Corp. has
commenced test production of rare earth elements in its joint
venture with Kazatomprom, the national atomic energy company of
In a statement sent to IM, a
spokesperson for Sumitomo in Tokyo confirmed: "Currently, we
are producing a small amount of rare earth materials on a trial
basis since this June, and we are now making preparations to go
into commercial production."
Exports to Japan had been due to start in 2013,
suggesting that the project is at present behind schedule.
The two companies set up Summit Atom Rare Earth
Co. LLP (SARECO) in 2010 to recover rare earth elements within
residues from Kazatomprom’s uranium mines.