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Dave Cohen

Dave Cohen

Dave Cohen writes the blog Decline Of The Empire. His commentaries cover a wide variety of subjects, including the American economy & macro-economics, the oil…

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The Brewing Crisis in Rare Earth Elements

As economists focus on the Sacred GDP number, which must remain positive to maintain the statistical recovery myth, there is another crisis brewing in the world of crucial resources. In yesterday's post Energy Consumption And Progress, I alluded to the Age of Resource Competition. Today this competition is most evident in the production of rare earth elements—

There are 17 rare earth elements (REEs). They have names like lanthanum, europium and yttrium. And they're critical to a variety of high-tech products and manufacturing processes, including catalytic converters, petroleum refining, color TV and flat panel displays, permanent magnets, batteries for hybrid and electric vehicles, medical devices, and various defense systems like missiles, jet engines, and satellite components.

About 124,000 metric tons of REEs were produced in 2009, with worldwide demand during this period estimated to be 134,000 metric tons — the difference have been made up from existing stockpiles. By 2012, worldwide demand is expected to reach 180,000 metric tons while mining operations are not expected to keep up with demand in the near term.

This situation is explored in a report published by the Congressional Research Service in late July and recently posted to the Federation of American Scientists' Secrecy News Web site.

[My note: There are 17 rare earth elements (REEs), 15 within the chemical group called lanthanides, plus yttrium and scandium.The lanthanides consist of the following: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium.]

Unfortunately, there isn't much actual competition at the moment because the Chinese produce 97% of REEs worldwide, which puts the United States in a precarious position—

Critical to the discussion is the fact that 97% of rare earth element production is currently controlled by China, where internal demand is rising and interest in exporting these materials is becoming more complicated as China's leaders look to take advantage of their country's market dominance.

Production of rare earth metals
REE production 1950-2000 from the USGS

We learn more from Rare Earth Elements: The Global Supply Chain

Rare earths are moderately abundant in the earth's crust, some even more abundant than copper, lead, gold, and platinum. While more abundant than many other minerals, REE are not concentrated enough to make them easily exploitable economically. The United States was once self-reliant in domestically produced REEs, but over the past 15 years has become 100% reliant on imports, primarily from China, because of lower-cost operations.

There is no rare earth mine production in the United States. U.S.-based Molycorp operates a separation plant at Mountain Pass, CA, and sells the rare earth concentrates and refined products from previously mined above-ground stocks. Neodymium, praseodymium, and lanthanum oxides are produced for further processing but these materials are not turned into rare earth metal in the United States.

Sound bad? Many strategically important processes & products—catalytic converters, petroleum refining, permanent magnets, batteries for hybrid and electric vehicles, medical devices, and various defense systems like missiles, jet engines, and satellite components as named above—require REEs in their construction. Things have gotten so bad that even the Congress has noticed that we're (once again) at the mercy of those wily, untrustworthy Chinese, who won't let the Yuan float.

Congressional representatives have taken notice of what some, like Rep. Mike Coffman (R-CO), are calling a crisis. In May,Coffman introduced a rare earth amendment to the National Defense Authorization Act for Fiscal Year 2011.

"The Department of Defense is facing a near-term shortage of key 'rare earth' materials necessary to support our defense weapon systems, and rare earth magnets are especially critical. ...," he said in a statement. "Today, the United States does not have a manufacturer of neodymium iron boron rare earth magnets, yet they are found in our precision guided munitions, ships, aircraft, and other critical weapons systems.”

What can be done to solve the rare earth elements crisis? We have exactly 3 choices if we're going to maintain Business-As-Usual over the longer term—

1. Find substitutes for REEs or redesign processes & products so these don't require them
2. Find new economically viable REE resources (reserves), preferably somewhere here in the Homeland or in a friendly country (e.g. Australia).
3. Invade China


Option #3 doesn't seem practical, so let's go with the first two. But finding substitutes (or doing redesigns) or finding new REE reserves will—at best—take a very long time to come to fruition. Worse yet, these strategies may fail altogether. That pretty much leaves us up the creek without a paddle.

Uhmm... What would the Rational Optimist do in a situation like this? Of course, there is a 4th option I didn't mention, an option we've got considerable experience with regarding our national debt.

By. Dave Cohen

Dave Cohen writes the blog Decline Of The Empire. His commentaries cover a wide variety of subjects, including the American economy & macro-economics, the oil markets, peak oil, politics & policy, environmental issues and global warming. Dave was writing search engine software before he gave up on the industry in 2005 after 20 years as a software engineer. Dave has a M.A. in theoretical linguistics and was working on a Ph.D. before leaving The University of Texas at Austin in 1985 to do research in Artificial Intelligence. He attended the University of Chicago as an undergraduate.

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  • Anonymous on August 31 2010 said:
    Err, no, sorry, but you've not really understood the problem. Rare earth mines are easy. It's separation of the rare earths, one from each other that is hard.We could, for example, extract rare earths from the coal flue dust from coal fired power stations. Be expensive, sure, but could be done. I could set you up with a plant to do that next week.But that doesn't actually solve the problem, how do we separate the 15, each from each other (Sc and Y are easy)?That's the bit that China has a lock on, the separation, not the ores or the mines.
  • Anonymous on August 31 2010 said:
    Not sure about this Rare Earth spin.Lynas Corporation will start production next year. 15,000 tonne 2011. 30,000 tonne 2012. The US Moly Mountain is firing up.I heard going up to 50,000 tonne in so many years.We (Australia) have a few other Rare Earths developments in the pipeline.The Chinese did go after Lynas, but were told by the government to rack-off.If you are worried about Rare Earths, take a trip down-under.Don't be put off by all the Asians. There only Chinese with US dollars trying to get rid of them.
  • Anonymous on September 01 2010 said:
    I will check out Lynas again. They are trucking the ore from Mt Weld to Fremantle (about800 km) and then shipping to Malaysia for processing. Final product is then sold mainly on forward contracts to the Japs and others.
  • Anonymous on September 01 2010 said:
    Try Arafura, ARU in OZ.regards
  • Anonymous on September 07 2010 said:
    MCP, REE, LYSCF, three Rare Earth stocks that should have the biggest runs.REE is reported to have the lowest cost open pit mine for Rare Earth Elements.
  • Anonymous on September 10 2010 said:
    It appears that western governments have missed the strategic importance of investing in purification plants to separate the REEs from each other ex oxide.One solution to make investment capital available would be to tap into private investor interest by making these commodities exchange tradeable like gold/silver,albeit from current limited stocks in the west.

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