Navigant Research Blog

Despite Rival Efforts, China’s Rare Earths Monopoly Persists

Madeline Bergner — February 11, 2015

Last month, the Chinese Ministry of Commerce announced that it would remove export quotas and other restrictions on rare earth minerals as a result of a 2013 World Trade Organization (WTO) ruling. The case, brought by the United States and other trade partners, asserted that China’s export quotas violated trade rules. China has limited rare earths exports since 2010, when the Chinese government imposed a strict export quota on rare earth elements. At that time, China held approximately 95% of the world’s supply of rare earth elements. The predicted shortage caused prices to skyrocket, and in just 12 months, the cost of some materials used in lighting saw increases of 500% up to more than 2,000%.

Rare earths are a group of 17 metallic elements that are used in a variety of energy technologies, including electric vehicles and lighting. Although they are found in many countries, mining is not economically viable except in concentrated deposits. As a result, industry entrants such as U.S.-based Molycorp, Inc. have been largely unsuccessful at gaining a significant market share. Some experts claim that there is actually a worldwide surplus in rare earths—but that China’s control over market prices and supply is where the real threat lies.

Role in Lighting

In 2013, my colleague Richard Martin blogged about a new research lab called the Critical Materials Institute (CMI). This lab, created by the U.S. Department of Energy, is dedicated to averting supply crunches of rare earth elements. In its first year, CMI produced 11 inventions, all of which aim to improve extraction processes and recycling techniques to assure the availability of rare earths and other energy technology materials.

Phosphors are used in LEDs to convert the blue light produced by high-intensity LED chips into the white light demanded by lighting applications. To accomplish this conversion, the phosphors are mixed with various rare earth elements.

Another effort to ease the supply crunch is the European Union (EU)-funded NEWLED project, launched in early 2013, that seeks to develop LEDs with reduced or eliminated amounts of phosphor.  A number of techniques exist to create white LEDs without phosphors, though none have yet matched phosphor-based LEDs in cost. The use of rare earths in lighting applications has actually declined as part of the shift to LEDs, which use less rare earth materials than fluorescent lamps.

Easing Restrictions

In an attempt to counteract China’s market position, rare earth startups have been popping up across the United States, as well as in Australia, Sweden, and Brazil. These startups hope to break China’s monopoly rare earth materials, but this effort will likely take several decades, at least, due to the economic viability and technological challenges of extraction. Additionally, in both 2011 and 2013, Japan announced the discovery of massive deposits of rare earths on the ocean floor, but has indicated no movement to develop or extract these resources.

Another option that is gaining traction is recycling rare earth materials from used products. At this time, recycling materials is just as expensive as mining the elements, but researchers across the globe are working to improve the recycling process. In particular, fluorescent bulbs are a promising candidate for recycling, and some companies have begun to recover the rare earth materials from these bulbs.

Unfortunately, some experts believe the end of China’s quota will have little practical effect on the market and that Chinese suppliers will retain control over the supply chain of rare earth materials. This concern is compounded by the fact that no other countries currently have well-established rare earths mining operations.

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