recent dynamics in the rare-earth ector · –example: ban on incandescent light bulbs –drive for...

Recent Dynamics in the Rare-Earth Sector

Gareth P Hatch, PhD Founding Principal

Technology Metals Research, LLC Carpentersville, Illinois, USA

AMM 6th Annual Aerospace Materials Conference

April 24-25, 2012 – Hyatt Regency Pittsburgh International Airport, Pittsburgh, Pennsylvania, USA

Overview

• Introduction

• Applications & End Uses

• Rare-Earth Demand

• Rare-Earth Supply

• Supply & Demand Issues

• The Effects of Chinese Export Quotas

• The WTO Rare-Earth Trade Dispute

• Future Sources of Rare-Earth Supply

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Disclaimer

The information contained in this presentation is for general educational purposes only. Certain information herein is based on third-party data that is believed to be reliable, but whose accuracy is not guaranteed. It may also contain statements that could constitute forward-looking statements, describing expectations, opinions or guidance that are not statements of fact.

This presentation is provided on an “as is” basis, and neither Technology Metals Research, LLC (TMR) nor the author make representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the information, data or charts contained herein, for any purpose. Use of such information is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy and timeliness. Any reliance placed on such information is therefore strictly at the risk of the user.

In no event will TMR or the author be held liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this presentation or the information contained within it.

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Overview

• Introduction








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Introduction

• Rare earths are enablers

• These elements exhibit special physical, electronic, magnetic, catalytic and optical properties

• They can have a profound effect on the ultimate performance of complex engineered systems

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Sources: IUPAC, TMR

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Sources: IUPAC, TMR

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Introduction

Lanthanum Europium Erbium Cerium Gadolinium Thulium

Praseodymium Terbium Ytterbium Neodymium Dysprosium Lutetium Samarium Holmium Yttrium

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• Rare earth sub-groups defined by:

– Electronic structure of the individual elements

– Contents of intermediate concentrates during processing

• Not used by everyone in the rare-earth industry

– A significant degree of promotion & hype in this sector…

Introduction

Introduction

• Abbreviations:

– REE: rare-earth element

– REO: rare-earth oxide

– LREE / LREO: light REE / light REO

– MREE / MREO: medium REE / medium REO

– HREE / HREO: heavy REE / heavy REO

– TREE / TREO: total REE / total REO

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Introduction

• Most HREEs are rarer than LREEs / MREEs

• Generally more valuable

• May be enriched in “challenging” minerals

– Some have not been processed commercially before

• Not all HREEs have been studied in-depth

– Availability of high-purity samples only relatively recent

– Few commercial uses for the more obscure HREEs

– Chicken-and-egg situation?

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Overview

• Introduction








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Applications & End Uses

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• Technology process enablers

– Uses that help in the production of other technologies

– Rare earths do not stay with the ultimate end product

• Technology building blocks

– Uses in components that go into devices and systems

– Rare earths are contained in the ultimate end product

Applications & End Uses: Process Enablers

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• Fluid cracking catalysts (FCCs)

– Used in the petroleum refining industry

– Help to convert crude oil ➞ gasoline, diesel, kerosene etc.

– Use of REEs (primarily La) increases production yields


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• SOx reduction additives

– Used to prevent release of SO2 and SO3 (SOx) in FCC units

– Release of SOx is associated with acid rain

– Uses Ce as an oxidation catalyst


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• Automotive catalytic convertors

– Used to reduce pollution and emissions for vehicles

– Primarily Ce (La, Nd) + platinum-group metals (PGMs)

– Uses Ce oxide as catalyst – reduces quantity of PGMs


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• Polishing powders:

– Used for glass, mirrors, TVs, displays and silicon wafers

– Primarily Ce (La, Nd) oxides in fine powder form

– REOs react with surface of glass to form softer layer

Applications & End Uses: Building Blocks

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• REEs used in technology building blocks:

– REE components ➞ sub-assemblies ➞ systems

– High $ value ➞ higher $$ value ➞ highest $$$ value

– Small amounts of REEs are critical to ultimate end use


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• Permanent magnets:

– Very strong magnets produced from REE-based alloys

– REEs “channel” the magnetism of other metals (Fe, Co)

– Sm for Sm-Co alloys; Nd, Pr, Dy for Nd-Fe-B alloys

– Nd-Fe-B + Dy increases resistance to demagnetization


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• Permanent magnets:

– Incorporated into electrical motors and generators

– Also used for sensors, loudspeakers, couplings etc.

– Probably THE key driver in the REE sector


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• High-performance ceramics:

– Y oxide added to zirconia to increase toughness (YSZ)

– Cracks get arrested by phase changes in the ceramic


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• Thermal barrier coatings:

– Applied to protects superalloy turbine blades

– YSZ used as ceramic top coat – v. low thermal conductivity


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• Phosphors:

– Phosphor materials glow after exposure to electrons or UV

– Used in LCD & plasma displays

– Used in compact fluorescent lamps (CFLs) & white LEDs

– Eu, Y, Tb (Ce, La) commonly used – color fine-tuned


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• Energy storage batteries:

– Ni-metal-hydride cells, based on light REE alloys

– Ni combined with La (Ce, Pr, Nd)


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• Glass additives

– Reduce UV light penetration

– Remove undesirable colors or add desirable ones

– Increase refractive index of lenses

– Mostly Ce (La) oxides – others for specific colors

Overview

• Introduction








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Rare-Earth Demand

• Growing economies use increasing amounts of REEs

• New technologies typically incorporate REEs

• Clean technology driving much of forecasted growth

– Electric vehicles

– Next-generation wind turbines

• Some regulatory drivers too

– Example: ban on incandescent light bulbs

– Drive for more energy-efficient appliances and devices

• Key driver for new exploration projects

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Rare-Earth Demand

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Sources: IMCOA, TMR

Rare-Earth Demand

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Source: IMCOA

End Use China USA Japan & SE Asia

Others Total Market Share

Permanent Magnets 16,500 500 3,500 500 21,000 20%

Metal Alloys 15,000 1,000 4,000 1,000 21,000 20%

Catalysts 11,000 5,000 2,000 2,000 20,000 19%

Polishing Powders 10,500 750 2,000 750 14,000 13%

Phosphors 5,000 500 2,000 500 8,000 8%

Glass Additives 5,500 750 1,000 750 8,000 8%

Ceramics 3,000 1,500 2,000 500 7,000 7%

Other 3,500 500 1,500 500 6,000 5%

Total Demand 70,000 10,500 18,000 6,500 105,000 100%

Market Share 68% 10% 16% 6% 100%

Forecast for global rare-earth demand in 2011 (t REO ± 15%)

Market share numbers may not add to 100% due to rounding.

Rare-Earth Demand

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Source: IMCOA

End Use China USA Japan & SE Asia

Others Total Market Share

Permanent Magnets 28,000 2,000 4,500 1,500 36,000 23%

Metal Alloys 23,000 2,000 3,000 2,000 30,000 19%

Catalysts 15,500 5,500 2,500 1,500 25,000 16%

Polishing Powders 13,000 2,000 2,000 1,000 18,000 11%

Phosphors 8,500 750 2000 750 12,000 8%

Glass Additives 7,000 1,000 1,000 1,000 10,000 6%

Ceramics 4,000 2,250 2,500 1,250 10,000 6%

Other 5,000 8,000 4,000 2,000 19,000 12%

Total Demand 104,000 23,500 21,500 11,000 160,000 100%

Market Share 65% 15% 13% 7% 100%

Forecast for global rare-earth demand in 2016 (t REO ± 20%)

Market share numbers may not add to 100% due to rounding.

Overview

• Introduction








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Rare-Earth Supply

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Sources: IMCOA, TMR estimates

Rare-Earth Supply

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Overview

• Introduction








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Supply & Demand Issues

• REEs are chemically similar to each other, thus:

– They are always found together

– They are difficult to separate from each other

– Complex processing routes

• Significant capex & opex for processing facilities

• Demand dynamics for one, indirectly affects them all

– Supplies of Y are affected by availability of the rest

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Sources: US Department of Energy, TMR


• Demand profile of each REE vs. natural occurrence:

– Ratio Dy : Pr + Nd ≈ 1:50 – 1:2 for permanent magnets

– Ratio Dy : Pr + Nd ≈ 1:100 – 1:50 in typical LREE minerals

• Hence the need for HREE-enriched mineral deposits

– BUT: new commercial hydrometallurgy methods needed

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• Some REEs will be in surplus while others in deficit

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CeO2 Nd2O3 Eu2O3 Tb4O7 Dy2O3 Y2O3

Demand @ 150-170 ktpa TREO

60-70 kt 25-30 kt 625-725 t 450-550 t 1.5-1.8 kt 12-14 kt

Supply @ 180-210 ktpa TREO

75-85 kt 30-35 kt 450-550 t 300-400 t 1.3-1.6 kt 9-11 kt

Forecast for global supply and demand for selected rare earths in 2016

Source: IMCOA


• March 2012 US Department of Defense report:

– Mandated by FY2011 National Defense Authorization Act

– Asked to study REE supply vs. demand for US defense apps

– Looked at 7 REEs

– Conclusion: only Y will be a problem in 2013

– Conclusion: Dy & Er borderline

– Conclusion: Eu, Gd, Nd & Pr – no problem

– (What about Sm??)

– Findings widely criticized by REE industry & Congress

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Overview

• Introduction








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• China now produces ~95% of total world supply

• Lower costs in China collapsed rest of supply base

– Lower environmental standards

– LREEs a byproduct of iron-ore mining @ Bayun Obo

• In recent years, China has imposed export quotas

• Ostensibly to remediate environmental issues

• BUT: production quotas have not decreased

• Clearly “encouraged” re-location and investment

• Little controversy until July 2010

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The Effects of Chinese Export Quotas


• July 2010: China announces 40% ↓↓ over prior year

• Main impact: huge price increases for LREOs exports

• Major disparity between domestic & export pricing

– Traders imposed a “quota surcharge” on each unit of quota

– Stories of required minimum prices before exports allowed

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• Sep 2010 China vs. Japan fiasco creates more tension

– Japan arrests Chinese fishing trawler captain

– Close to disputed islands

– Alleged embargo of rare earths by China against Japan

• Prices start to increase for HREOs too

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• Inflection point in Feb 2011 for domestic China prices

– Internal speculation / stockpiling / hoarding

– Siphoning to black market for export - arbitrage

– Rumors of set-aside programs & preferences

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• All prices have decreased since Summer 2011

– Significant reduction in volumes of official exports

– Some degree of demand destruction

– Trader concerns about new official invoicing system • Needed to liquidate existing inventories ahead of implementation

• May have led to internal inventory build up

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Sources: Metal Pages, TMR


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Source: TMR estimates based on Metal-Pages.com prices


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Source: TMR estimates based on Metal-Pages.com prices


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• Significant impetus to reduce material intensity

– The amount of material used per component / unit

• FCC producers have reduced La usage

• Polishing-powder producers have reduced Ce usage

• Magnet producers want to reduce Dy usage

– Either by reducing magnet size, or switching grades

• Toyota & Nissan – “we’ll use induction motors”

• Japan Feb 8, 2012: “reduce rare-earth usage”

– 5 billion yen over next 2 years to fund research


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• In some cases: permanent demand destruction?

• Reflected in significantly lower exports from China

• La & Ce products constitute 70-80% of exports

– Biggest impact on reduced overall exports in 2011

Year 2008 2009 2010 2011

Quota Issued (t) 47,449 50,145 30,258 30,246

Quota Used (t)* 31,255 28,440 23,371 16,860

Excess (t) 16,194 21,705 6,887 13,386

Utilization 66% 57% 77% 56%

* rare-earth oxides only – other materials may constitute approx. 2-3 ktpa

Sources: Chinese Ministry of Commerce / Chinese US Embassy/ Asian Metal


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• Projected total of 31,130 t of exports in 2012

• Separate allocations for LRE and M/HRE products

• Some allocations were provisional only

– Requires passing environmental inspections by July 2012

2009 2010 2011 2012e

Sub-group H1 H2 H1 H2 H1 H2 H1 H2p

Domestic 15,043 18,257 16,304 6,208 10,762 12,221 17,926 TBD

Foreign JV 6,685 10,160 5,978 1,768 3,746 3,517 6,978 TBD

Sub-total 21,728 28,417 22,282 7,976 14,508 15,738 24,904 6,226

TOTAL 50,145 30,258 30,246 31,130

Source: Chinese Ministry of Commerce

Chinese Rare-Earth Export-Quota Allocations (t rare earths)

Overview

• Introduction








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The WTO Rare-Earth Trade Dispute

• March 13, 2012: USA, EU & Japan initiate WTO action

– File simultaneous complaints against China

– Related to exports of rare earths, tungsten & molybdenum

– Formally requested consultations with China

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• Complaints relate to wide variety of REE products

• The WTO complainants allege:

– Unfair treatment of foreign entities via export restrictions

– Discriminatory commercial operating rules within China

– The setting of unofficial minimum export prices

– Overall lack of transparency concerning implementation

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• Initial Chinese response:

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Source: Global Times


• Initial Chinese response:

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Source: China Daily


• GATT Article XX - General Exceptions: – Allows for exceptions under certain circumstances – Cannot be “a disguised restriction on international trade”

• Chinese likely to cite at least two exceptions: – Measures “(b) necessary to protect human, animal or plant

life or health” – Measures “(g) relating to the conservation of exhaustible

natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption”

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• Measures “(b) necessary to protect human, animal or plant life or health”

– Relates to environmental protection & pollution control

– Previous RE mining in China has caused significant environmental damage

– BUT: difficult to see how destination of final products affects practices used to get them out of the ground

– Would be more effective if overall production was affected

– In practice, only export restrictions are in place

– BUT such practices not explicitly prohibited in the clause

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• Measures “(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption”

– LREE deposits in northern China - hundreds of years of mine life

– HREE deposits in southern China may have 5-20 years of mine life only

– Good argument could be made in the case of HREEs

– This latter argument could be reason for 2012 quota split

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• Measures “(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption”

– Regardless of previous parameters – clause explicitly indicates that measures taken with respect to foreign consumers are only valid if also applied to domestic consumers too…

– Could be a technicality – but a potentially significant one

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• Similar recent case:

– Export restrictions on bauxite, coke and other materials

– Concluded in February 2012

– China lost the case

– Officially no use of precedents in WTO, but…

• Will be years before the issues are resolved

• Could be a moot point by then

• BUT – I Am Not A (WTO) Lawyer…

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Overview

• Introduction








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Future Sources of Rare-Earth Supply

• TMR focus: projects with defined mineral resources

– Estimates compliant to NI 43-101 or JORC Code

– Much more accurate than US Geological Survey or others

– Project data evaluated by independent “Qualified Persons”

– Good way to separate “the wheat from the chaff”

• Currently 35 REE projects on the TMR Index

– All but one have an NI-43-101 / JORC compliant estimate

– Full list is available at www.RareEarths.org

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68 Sources: TMR, company reports



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Y

88.906


• Numerous potential new sources of supply

• Most companies plan to produce REE concentrates

• Key challenge: how to then SEPARATE the REEs

– NO independent separation facilities outside of China

– Very few other such facilities either

– A potential bottleneck for the industry

• Solution: creation of centralized separation facilities

– Innovation Metals plans to provide low-cost tolling

– Goal: to help the nascent non-Chinese industry to succeed

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Thank You

Gareth P Hatch, PhD

Founding Principal

Technology Metals Research, LLC

Feel free to get in touch:

[email protected]

www.techmetalsresearch.com

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recent dynamics in the rare-earth ector · –example: ban on incandescent light bulbs –drive for...

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