Cleantech Market Intelligence
Responding to China’s Monopoly, U.S. Creates Rare Earths Institute
Despite international outcry and an investigation by the World Trade Organization, China still controls at least 95% of the world market for rare earth elements – a group of 17 chemically related elements that are used in a variety of high tech applications including electric vehicles, wind turbine blades, smartphone displays, and missile guidance systems. At the end of 2012, China actually said it would further restrict exports, in defiance of international trade groups and governments of heavy rare-earth using nations, like the United States and Japan.
Responding to the demand for diverse supplies of these strategic elements, the U.S. Department of Energy is establishing a Critical Materials Institute. Based in Ames, Iowa, the new institute, one of five Energy Innovation Hubs set up by DOE around the country, will use a DOE grant of $120 million over 5 years to “develop solutions to the domestic shortages of rare earth metals and other materials critical for U.S. energy security,” according to a statement.
One focus will be to “eliminate the need for materials that are subject to supply disruptions.” Translation: come up with new materials that serve the same purposes as rare earths, but are not controlled by China.
Japanese automakers have scored some early successes in that effort. According to a roundup by Asahi Shimbun, Honda plans to recycle rare earth components from nickel-metal hydride batteries used in hybrid cars, and Panasonic has instituted a similar recycling program for home electric appliances. TDK Corp. has developed a magnet with the rare earth element dysprosium painted onto the surface, rather than blended into the magnetic material itself, achieving the same effect. In possibly the most significant development, in early 2012, Reuters reported that Toyota “has developed a way to make hybrid and electric vehicles without the use of expensive rare earth metals, in which China has a near monopoly.” No specifics were given.
Around 60% of China’s rare earths supply goes to Japan, much of it to the major Japanese automakers.
The growing likelihood of recycling and substitution programs has lessened the possibility of a global rare earths shortage – which the new DOE institute is being created to avoid – and has driven prices for lanthanum, cerium, terbium, and other rare earth elements off their record highs of 2011-2012. That in turn has undermined the strategy of Molycorp, the Denver-based mining company that, in 2011, re-opened the Mountain Pass mine on the Nevada-California border, once the world’s largest supplier of rare earths. Molycorp’s 2010 IPO was among the most successful public offerings of that year, but its stock has plummeted from its early 2012 highs to below $10 a share. Molycorp investors lost some $600 million in market capitalization in 2012, the company’s CEO Mark Smith departed under a cloud, and the company is now the subject of a federal investigation into its public disclosures. Bloomberg News reported in late 2012 that the company is now a likely takeover target – possibly by Chinese interests such as industrial giant Baotou Steel Rare Earth.
All of this turmoil makes the mission of the new Critical Materials Institute murkier, but it doesn’t lessen the need for a U.S. reaction to China’s mercantilist policies regarding its rare earth elements export industry. Proponents of advanced nuclear power also point to another reason to support U.S. efforts to secure a reliable supply of rare earths: many of the elements are found in monazite, an ore that also carries high concentrations of thorium – the radioactive element that could provide a safer, cleaner, and more abundant alternative to uranium for a new generation of nuclear reactors.
The most direct solution to the international rare earths imbroglio, of course, would be to find new supplies that are economical to recover and process. In June, Japanese geologists reported that they had found a huge, previously undiscovered rare earths deposit. The only problem with that is that the deposits are under the ocean, about 1200 miles off the coast of Tokyo.