EVs and renewables drive rare earths resurrection

By IM Staff
Published: Monday, 02 October 2017

In a sector that seemed beyond hope of revival a year ago, prices for rare earths have been on the rise this year, thanks to renewed demand for the minerals from green energy applications, Rose Pengelly, IM Correspondent, finds.

Famously abundant but difficult to extract, rare earths have been the mining industry’s surprise comeback story of 2017, due largely to a revival of interest in electric vehicles (EVs) and renewable energy.

Following a spectacular boom in 2010 and bust in 2012, for the past five years the rare earths industry has been characterised by global oversupply, stagnant-to-declining prices, investment scams, and the gradual disappearance of junior mining companies exploring for the minerals.

This year, however, rare earths prices, which had fallen to levels at which it was barely worth extracting them, have seen a strong recovery – albeit from a historically low base.

China, whose effective monopoly over the world’s access to rare earths and whose decision to halt shipments to Japan in 2010 following a political dispute helped to inflame the supply panic seven years ago, remains by far the biggest global producer of rare earths. 

According to Research and Markets’ "China Mining Sector Report 2017/2018", the country still supplies more than 90% of the rare earths traded globally, although other estimates put this figure at over 80%.

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Onshore wind power is projected to account for a quarter of all new power generation 
capacity additions globally over the next 23 years, according to forecasts by 
Bloomberg New Energy Finance.  
Source: US Fish and Wildlife Service Headquarters’ Photostream, via Flickr

Chinese government-led measures to curb pollution from mineral and basic material processing plants have reduced supply at a time when demand for these products is rising. This confluence of factors has already driven up prices of magnesia, aluminium and steel and have more recently affected rare earths.

But this time around, rising prices have not triggered any trading or political hysteria. Since it became clear that it was not in China’s interest to cut off shipments of rare earths to the rest of the world, the focus has shifted to how society can profit from using these minerals, rather than how easy or difficult it is to source them. 

The main growth market for rare earths is in permanent, high-strength magnets. These are used in the motors of some EVs, wind turbines, consumer electronics and smart phones, the consumption of which is predicted to expand at a healthy rate for the foreseeable future. 

China Northern Rare Earth Hi-Tech Group Co. Ltd, which is the largest producer of rare earths in China and, consequently, the world, has been among the principal beneficiaries of the rebound in rare earths prices. 

Its Shanghai-listed shares have risen by more than 50% this year and in September, the company reported a 258% surge in half-year net profit year-on-year (y-o-y) to Chinese renminbi (RMB) 112m ($13m*). 

China Northern has increased its prices for both oxide and metal forms of neodymium and mixed neodymium/praseodymium (NdPr) every month from January to September (see Table 1).

According to consultancy Adamas Intelligence, neodymium and praseodymium oxides are priced in tandem, which amplifies the effect of price increases.

China Northern also raised its prices for cerium oxide four times in the year to September and three times for lanthanum oxide.

Both cerium and lanthanum are low-value light rare earth elements, which are among the easiest to extract from their ores and are frequently cited as being in chronic oversupply.

By contrast, NdPr products, which are also light elements, have a wide range of applications and are currently among the most valuable rare earth materials traded.

According to China Northern’s first-half results statement, its September sales prices for mixed praseodymium/neodymium, both oxide and metal, were 96% higher than they were in January, while prices for neodymium oxide and metal increased by 88%.

The company’s prices for oxides of lanthanum and cerium rose more modestly over the nine-month period, by 7% and 40%, respectively – but this marked a sharp turnaround from the steadily declining trend in the value of these products over the past six years. 

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The charge of EVs

Anticipated growth in the EV market has already driven up prices of once-niche minerals, including lithium and cobalt, but rare earths had lagged behind – partly due to market scepticism towards the sector after its 2010 spike.

This year, however, figures projecting rising consumption of rare earths by EVs have been backed up by increases in trading volumes and prices for the minerals. Meanwhile, the relative absence of hype has allowed for calm discussion in the media and among academia and analysts about how rare earths are used in new technologies.

Some EV makers use permanent magnet motors, which typically contain NdPr, because they are lighter and more powerful than alternative induction motors, which helps to extend a vehicle’s range.

Analysis by Argonaut Research suggests that the use of magnets in EVs and wind turbines will push up demand for neodymium and praseodymium almost 250% over the next 10 years. 

Rare earths are already widely used as catalysts in internal combustion cars, but Argonaut estimates that EVs use around 1kg more rare earth oxides per unit than petrol and diesel-driven models. 

Global sales of electric vehicles increased by 55% last year to 695,000, with most of these sales taking place in China, according to data from Bloomberg New Energy Finance (BNEF). 

Although this represents just a tiny fraction of the total number of cars sold worldwide in 2016, EVs are forecast to account for more than half of new sales by 2040 when a third of all cars on the road will be electric-powered, according to BNEF forecasts.

Australian rare earths miner Lynas Corp. recently predicted that usage of magnetic rare earths in EVs is expected to grow from around 2,000 tonnes last year to 7,000 tonnes by 2020, and 12,000 tonnes by 2024.

Meanwhile, growth in demand for wind turbines will double the usage of rare earths in this market to 4,000 tonnes by 2024, according to Lynas. BNEF forecasts that onshore wind power will account for a quarter of all new power generation capacity additions globally over the next 23 years.

Lynas is the biggest rare earths miner outside China and was effectively brought to its knees by the collapse in rare earths prices. But, with the help of a few refinancings, the company managed to stay afloat while its US rival, Molycorp Inc., filed for bankruptcy in June 2015. Lynas’ share price rose 160% y-o-y in the year to September.

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Heavy rare earths like yttrium used to command higher
 prices than light rare earths, but these elements have
lost ground to lighter elements like praseodymium
and neodymium which are in demand for EVs and
renewable energy applications.
Source: Rui Costa, via Flickr 

Change in China

Having been dubbed as an unreliable, self-interested supplier of rare earths in 2010 after its government cut off exports to Japan, the shift in attitudes towards China as a source of rare earths in the past year has been palpable. 

Although the country is still widely accused by non-Chinese would-be rare earths producers for flooding the market with unsustainably cheap material produced in environmentally destructive ways using unethically low-cost labour, Chinese companies are now reportedly being approached for long-term agreements to supply overseas carmakers.

The effect of rising demand for rare earths on prices has been boosted by Beijing’s efforts to curb illegal mining, with more than 400 companies inspected in the last year and dozens having been closed down after failing to produce valid permits. 

The environmental impact of mining rare earths has become an increasingly visible global issue, as technology leaders like consumer electronics manufacturer Apple Inc. and EV builder Tesla Motors Inc. have had their sustainability credentials scrutinised.

But allegations about the damaging environmental impact of Chinese rare earth production are also beginning to lose steam, as both companies and the authorities in China have stepped up efforts to clean up the industry.

China Northern, for example, announced in its first-half report that it has invested heavily in desulphurisation technology for both its airborne emissions and wastewater this year.

International observers, including Hong Kong-based research and pressure group China Water Risk, argue that a large chunk of the responsibility for forcing rare earths suppliers to become more sustainable rests with those further down the supply chain. 

"Businesses and governments buying and using rare earths need to be accountable for their purchases and products with rare earths," China Water Risk said in a report last year. 

"They must push for accountability and traceability along the supply chain. Not only should sourcing information of rare earths be recorded, but also the amounts used in products and ideally the amount recycled."

The group also advocates that designers develop clean energy and smart technology with less rare earth requirements or better yet, without any rare earths at all – a move that would be disastrous for China, although China Water Risk admits that engineering out of dependence on rare earths would very likely compromise performance.

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Chinese producers reap benefits

China Northern, which is owned by the Chinese state, reported a slight but firm increase in demand for its products in the first half of this year, which helped to boost its profits.

But the company was eager to stress that one of the main reasons for the improvement in its earnings was that the business situation for Chinese rare earths producers has improved dramatically as a result of a series of recent national rare earth policies.

These policies include efforts to consolidate the industry under six state-owned groups, which is intended to ensure a more disciplined approach to Chinese rare earths supply.

Most Chinese producers have been operating at a loss for the past few years due to low domestic and export prices.

However, the majority of these companies are vertically integrated, meaning that they mine the minerals, separate and smelt them into oxides and metals. This puts them in a strong position to pass on costs through their own supply chain and achieve better margins for their products. 

China Northern did, however, warn that demand for rare earths both domestically and internationally was at risk from weakness in the global economy and said that growth in downstream applications for the minerals remains slow overall.

It also said that rising labour costs and frequent government environmental inspections are likely to affect its profitability this year. 

In southern China, the country’s main medium and heavy rare earths-producing region, prices for most rare earth oxides have increased steadily since April this year (see Table 2). 

China Southern Rare Earth Group Co., one of the largest rare earths companies in southern China, started announcing its prices publicly in April.  

Data from the company show that prices for samarium oxide increased 25% from April to September, while europium oxide prices went up by 29% and those for yttrium oxide by 50%. Only ytterbium and scandium oxide prices dropped over the period, falling by 19% and 57%, respectively. 

Another southern Chinese rare earths company, Xiamen Tungsten Co., reported a 562% increase in net profit y-o-y for the first half of 2017 to RMB 453m ($52.5m), while China Minmetals Rare Earth Co. recorded a 173% rise in profits to RMB 26.4m ($3.1m) over the same period.

But not all producers have so far managed to haul themselves out of the difficulties they faced before rare earths prices started to rebound.

Rising Nonferrous Metals Share Co. posted a 104% increase in profit in the first six months of 2017 but still recorded a loss of RMB 32.3m ($3.7m). 

The company attributed the loss to selling large inventories of rare earth oxides, including dysprosium oxide, at steep discounts in order to clear stocks. Rising is also not a vertically integrated producer and has to buy in its own raw materials, which means its margins are narrower than those of many of its rivals. 

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EVs are credited with driving up demand for a host of once-niche minerals, including
lithium, cobalt and rare earths.
Source: Power Pros, via Flickr 

Borrowed time

Rare earths mining companies are confident that this year’s market recovery is sustainable. They tend to dismiss suggestions that the EV boom may be exaggerated, or that there is a risk rare earths will be displaced by other materials in certain key technologies.

Independent analysts have been mostly reticent or have caveated commentary on rare earths’ rebound with warnings about lurching back into an oversupply situation, especially if China fails to manage its domestic rare earths industry.
For now, however, it appears that rare earths have pulled off an impossible feat in regaining both some of their value and their credibility as a resource worth watching for the future.

*Conversions made September 2017

Ames Laboratory’s rare earths research

Applications such as EVs and renewable energy have caught the attention of media and investors as promising growth markets for rare earths, but both commercial and academic research institutions are working to better understand and exploit the properties of these minerals.

Alex King, director of the Critical Materials Institute (CMI) at Ames Laboratory in Iowa, US, spoke to IM about some of the most significant research currently being undertaken in the field of rare earth materials.

What research is currently under way at Ames Laboratory on rare earth elements?

There are three broad areas of active research on rare earth elements:

(1) A range of fundamental research activities, including work on superconductivity and other, fairly exotic materials behaviour;

(2) CMI is an Energy Innovation Hub led by Ames, but involving three other national labs, seven universities and about a dozen corporations.  It focuses much of its effort on ameliorating shortages of materials that contain rare earth elements, either by enabling new sources, finding alternative materials, or finding better ways to conserve existing supplies;

(3) The Caloricool initiative, established as part of the US Department of Energy’s (DoE) Energy Materials Network and led by Ames Laboratory, is a significant effort to develop new materials that can enable temperature control through magnetic cooling. Many of the materials are rare earth-based.

Ames Laboratory’s Materials Processing Centre is a major enabler of all of this work, in addition to the work of many other researchers at different institutions. Among other things, it provides the purest specimens of rare earth materials available on earth.

How is this research being funded? 

Most of the funding comes from the DoE. A few companies [whose names cannot be disclosed] are also investing in research here.

What are the main challenges that Ames Laboratory’s research are trying to solve?

Our research outlined above corresponds, respectively, to discovery science; alleviating shortages of rare earth materials that impact technologies that use magnets or provide light-emission; and bringing a promising scientific discovery – magnetic refrigeration – to reality as a useable technology.

Do the fluctuating prices of rare earths have any impact on the research?

CMI came into being largely as a result of the massive price spike that affected the rare earths in 2010-11. 

Price fluctuations, however, occur in the short term, while research and development has a longer time-horizon.  We don’t react to price fluctuations; we try to anticipate them and provide options for dealing with them, if and when they occur.

What are the main commercial opportunities for rare earths, currently and in the future?

If Caloricool succeeds in commercialising magnetic refrigeration, it will revolutionise a whole industry – providing big improvements in heating and cooling efficiency, while removing the need for ozone-depleting fluids.

CMI has produced more than 75 inventions, including a new class of aluminium alloys that get their strength from cerium additions, and have many other attractive features. First sales have already occurred and this material promises to generate demand for cerium that is currently overproduced by rare earth mines.

CMI has also invented a means of making magnets by 3D printing, that shows great promise in enabling new, highly efficient electric motor designs that need fewer rare earth elements than current state-of-the-art technologies.


Seabed rare earths exploration

China’s oldest established shipbuilder, state-owned Mawei Shipbuilding Ltd, known for building imperial warships in the 19th Century, is constructing a vessel equipped to trawl the ocean floor for metals and minerals, including rare earths. 

The boat, built to an original design by Canada-headquartered Nautilus Inc., is scheduled to commence deep-sea exploration off the coast of Papua New Guinea in early 2019.

Volcanic fissures between tectonic plates on the floor of the Pacific Ocean contain high concentrations of minerals, which have been eyed for exploration for several years by Japan and South Korea. 

China owns most of the underwater areas deemed prospective for valuable minerals and has been developing technology to explore them since the early 2000s, as part of national security policy.

Chinese companies have three of the 27 licences awarded by the International Seabed Authority (ISA) for deep-sea mining in the Pacific. The ISA is expected to finalise its regulations on mining at the end of 2017, after which licence-holders can move beyond exploration into mining. 

Plans to mine the seabed, put forward by China and other countries and private companies, have met with fierce criticism from environmental groups such as Greenpeace, which argue that manufacturers should be spending money on trying to reduce their consumption of virgin natural resources, rather than on expensive new technologies to exploit new reserves.

Trumped up supply concerns

The spike in rare earths prices in 2010 turned the spotlight on the US’ dependence on Chinese supply, which has become a mounting concern for some of the country’s politicians and was loosely articulated as one of Republican President Donald Trump’s election policies.

In July this year, Trump ordered a review of the country’s defence supply chain as part of a wider investigation on how the US can repatriate manufacturing jobs. His administration claimed that only one company in the US can now repair propellers for the country’s navy submarines, as most of the necessary expertise and resources are now offshore.

In addition to their consumer-facing uses in EVs, wind turbines and electronics, rare earths are also used in military lasers and missiles.

The collapse of Molycorp in 2015 reignited calls for the US to secure non-Chinese rare earths supply, with suggestions including mining in Afghanistan – although many critics regard this as a smoke screen for Trump’s decision to keep US troops in the country to fulfil other foreign policy objectives.