BY ARJUN GOVIND
The future of rare earth elements in industry
What are rare earth elements?
Rare earth elements (REEs) are a set of 17 elements: the fifteen lanthanide elements as well as two others – scandium and yttrium. The phrase “rare earth” might be a bit of a misnomer. REEs are fairly abundant in the earth’s crust; some are more prevalent than gold and platinum, and a select few more than copper and lead. That being said, the reason that the price of REEs like lutetium and europium far surpass that of precious metals like gold and platinum is because of the former’s difficulty to mine. Despite their abundance in the earth’s crust, the low concentration of REEs in rock deposits made and tedious refinement process made them, until recently, economically unviable. However, with REEs becoming increasingly associated with industries from security to renewable energy, from magnets to polishing compounds, studies estimate that the demand for REEs will increase by an average of 5.6% annually. However, ventures in this sector demand prudence. Molycorp, for instance, was a venture founded in 2010 that sold rare earth oxides, the most common way for REEs to be traded, and other rare earth concentrates. Despite its initial success and skyrocketing stock price in 2011, Molycorp filed for Chapter 11 bankruptcy about a month ago, with its stock being valued at a mere $0.35 a share.
REEs in Industry
Needless to say, the demand for REEs are based largely on the demand for derivative products. Among myriad applications of REEs, there are two industries in particular that stand out- defense and renewable energy. Considering the case of the United States, scientific organizations have found that certain rare earth metals are vital to national security. Estimates indicate that the Department of Defense’s consumption of rare earth metals comprises approximately 5% of the domestic consumption there. In particular, magnets formed by alloys of REEs hold particular promise. Samarium cobalt (SmCo) magnets, for instance, retain their magnetic strength at high temperatures and is used in technologies from precision-guided missiles to aircraft. Notwithstanding that, with the exception of small amounts of yttrium, rare earth metals are not included as a part of the United States’ strategic materials stockpile for national security purposes.. The United States Magnet Materials Association, a coalition of companies spanning medical, aerospace and electronic industries, have recently begun focusing on the supply chain of rare earth elements; they even made a six-point plan to address an “impending rare earth crisis” in 2010.
REE magnets play a crucial role with regard to the renewable energy sector too, especially in the field of wind energy. Fang Junshi, the head of the coal department of the National Energy Administration (China), estimates that China shall have 100 gigawatts of wind power by 2020. Mark Smith, the former CEO of Molycorp, estimates that, in some applications, around two tons of rare earth magnets (specifically neodymium iron boron or NdFeB magnets) are present in the permanent magnet generator on the top of the turbine. Neodymium, an REE, makes up 28% of those magnets.
Distribution and Market for REEs
Rare earth metals are distributed unevenly across the world. China has by far the largest reserve of REEs; they have accounted for at least 90% of the world’s REE supply since the 1980s. Interestingly, China is also the leading consumer of these elements, accounting for around 65% of the total demand. Prices in this market are particularly volatile owing to supply restrictions from China, the leading supplier of REEs. As such, manufacturers dependent on a constant supply of REEs are currently looking for resources outside China, such as firms that operate like Molycorp. Assuming historical growth, the total demand for REEs is projected to be around 5.6% per year. Under such assumptions, demand for Rare Earth Oxides (one of the most common ways to trade REEs) is set to rise to around 210,000 tons in 2025, which is double its demand of 105,000 tonnes in 2011.Considering the vast implications of these elements in industry, the prospect of possessing a reserve of such metals certainly merits consideration at the very least. Noting the volatility of its price following the variances in supply from China, if REEs are to become such an integral part of industries as crucial as defense and energy, a steady and streamlined supply chain is an important prerequisite.
Arjun Govind is an Intern at the Takshashila Institution. He is in 11th grade at The International School Bangalore.