Green Elements Scarcity: Will They Cause You to Spend More “Green?”

Emerson’s Eric Kuebler, a metals & mining industry manager for the Fisher Valve team, shares his thoughts on the global outlook of rare earth metals.

Green elements, better known as rare earth materials, are critical to enabling and furthering the many Green energy and high tech applications of our future. These applications include, but are not limited to, our hybrid cars, wind turbines, cell phones, and even the display materials in your LCD television.

But are rare earth metals really that rare?

In all actuality, no. Rare earth metals are relatively abundant elements found in the Earth crust. According to the United States Geological Service (USGS), there are many elements that are scarcer than the green elements. However, if you are outside of China, this may not be the case.

Today, over 95% of the world’s rare earths are produced and manufactured by China. This is largely due to China’s low cost processing. Not only is China the largest producer, but they account for over 60% of the world’s consumption by tonnage, and will represent 70% of global consumption by early 2012.

Demand for these elements are projected to grow as rapidly as the technologies that use them. We will likely see impending supply constraints that hold back their growth. This is largely because the Chinese government recognizes the strategic nature of its rare earth deposits, and has subsequently put restrictive export quotas around rare earth elements. This makes it difficult for non-domestic manufacturers of high-tech materials and products to build or expand factories anywhere except in China. Tighter supply, higher prices, steep taxes as much as 25%, and other export controls imposed keep non-domestic companies’ products from being cost competitive. Given this, more and more companies are moving their production to China to take advantage of the cheap supply, despite concern over trade secret security.

As exports of materials and further restrictions on rare earth materials occur over time, we will likely see changes in the way companies obtain this commodity.

Take Molycorp Minerals’ Mountain Pass mine in California. This 1.4 billion year old deposit is the richest source of rare earth resources in the United States, and is the only producer of rare-earth metals outside of China. Now with appropriate funding, this mine has restarted to address the current global supply chain issue.

Even without current restrictions and with the revival of the U.S. mine, worldwide supply of green element products could soon fall short of demand. For instance, because rare earths make such excellent magnets, researchers have put little effort since the early 1980’s into improving them or developing other materials that could do the job. As there are no practical alternatives to these metals in many critical applications including hybrid cars and wind turbines, and because inventing substitutes will take years, the environmental movement will likely not make the progress once projected.

In the end, it’s possible that the lack of green element supply will end up costing consumers more to obtain the goods and technologies on which we are becoming increasingly reliant.

Posted Tuesday, September 27th, 2011 under Metals, Mining, Minerals.

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