China Expands rare-earth mineral Embargo to US

Overheal

No that I knew there was one to begin with mind you

http://www.nytimes.com/2010/10/20/business/global/20rare.html?_r=1&pagewanted=all

“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities.
They said Chinese customs officials imposed the broader restrictions on Monday morning, hours after a top Chinese official summoned international news media Sunday night to denounce United States trade actions.
China mines 95 percent of the world’s rare earth elements, which have broad commercial and military applications, and are vital to the manufacture of products as diverse as cellphones, large wind turbines and guided missiles. Any curtailment of Chinese supplies of rare earths is likely to be greeted with alarm in Western capitals, particularly because Western companies are believed to keep much smaller stockpiles of rare earths than Japanese companies.

Despite a widely confirmed suspension of rare earth shipments from China to Japan, now nearly a month old, Beijing has continued to deny that any embargo exists.
Industry executives and analysts have interpreted that official denial as a way to wield an undeclared trade weapon without creating a policy trail that could make it easier for other countries to bring a case against China at the World Trade Organization.
So far, China seems to be taking a similar approach in expanding the embargo to the West.

China reduced in July its export quota for rare earths for the second half of the year by 72 percent. Exporters had only six weeks’ of quotas left when China imposed its unannounced embargo on shipments to Japan.

Troubled to see how this plays out. And whether it sparks another Cold War against Communism/Flavor of the Week. Or if the WTO can sort out the mess.

Inscrutable

Hi Overheal,

Interesting developments indeed, the last thing the world needs is a trade war. I posted a short blog post about this to energydispatches.com. I'll cross post it here:

"The Rare Earth Crisis' Implications for Green Technology"

In the past couple of weeks China has shown a disconcerting trigger happiness to enter into resource diplomacy. On September 8th Japan detained a Chinese fishing boat captain after the boat strayed into disputed waters in the East China Sea and rammed a Japanese patrol boat. China demanded his release and threw the toys out of the pram when he was detained for two weeks. When Japan refused to release him, they cut off shipments of rare earth elements, which are used in many aspects of Japanese industry. Japan promptly released the captain.

Then, on Monday, the New York Times reported that China has embargoed the export of rare earth elements to the US and Europe. The ostensible catalyst was when American trade officials announced on Friday that they would investigate whether China was violating World Trade Organisation rules by subsidising its clean energy exports and limiting clean energy imports.

The bans on exports are unofficial because unofficial embargoes are more difficult to prosecute in front of the WTO. The China representative of the US Chamber of Commerce said “If it’s true, it’s disturbing news to say the least”.

Rare earth elements comprise 17 chemically similar metals, of which about 97% come from China. China did not always have a monopoly on their production, as Figure 1 shows. The US was a major producer, however due to China flooding the market with cheap rare earths (due to low wages and environmental standards), US mines shut down.



China has for many years implemented a quota on the export of raw REEs. It seeks to have technology companies, which often require REEs, to locate in China so that (i) it can gain access to IP by mandating Chinese partners with foreign companies and (ii) it can gain the value add and jobs which such technology offers. The export quota was dramatically lowered this year, and the recent embargo comes on top of that. The current embargoes do not limit the export of products containing REE which are produced in China.



The 17 REEs can be divided into ‘light’ and ‘heavy’ elements. The heavy REEs dysprosium and terbium are the most resource constrained and apply to the following green technologies: EVs, Wind turbines and CFLs.

Neodymium Magnets: Wind and EVs

EVs

Most EVs and hybrids, including the Prius and Leaf use neodymium-iron-boron magnets in their brushless motors. Dysprosium is added to increase the resistance to demagnetisation at high temperatures (intrinsic coercivity). Placing about 5% by weight Dy in the grain boundaries of the magnet can raise the allowable in-service temperatures from around 80C to 200C, which is necessary for use in EVs. Japanese researchers have recently come up with a way to increase the coercivity of neo magnets without dysprosium.

Furthermore, despite what almost all articles on REEs suggest, neodymium magnets are not “essential” for EVs. They are more compact and more efficient than their induction or ferrite motor counterparts. But if an REE (also known as lanthanides) shortage arises, however, they are not going to stop EVs:

“GM’s Bly said access to lanthanides is not a zero-sum issue.

“There are other materials available, but you might lose a couple percent of efficiency,” Bly said. “It’s not as though if you don’t get this, you get nothing. A couple points of efficiency are measurable, but it will not hamper the ability of electric machines or motors to propagate very rapidly.”

Neodymium Magnets: Wind

Using gearless wind turbines allow manufacturers to dispense with the gearbox and reduce the number of parts by up to 50%. This leads to much reduced maintenance and installation costs, which are important for offshore wind turbines where weather service windows are often narrow. The UK testing of offshore DFIGs revealed that about 10% of the LCOE can be attributed just to servicing the gearbox of offshore wind turbines. This has led the CTO of Siemens to state that wind with neo magnets are “the future”. Nearly all manufacturers plan to offer gearless wind turbines in the coming years, however at present only a tiny fraction employ neodymium magnets.

While it’s unclear if Siemens’ turbines contain dysprosium, Vestas’ upcoming turbines are said to by the NYT. The difficulty with dysprosium for both wind turbines and EVs is that it’s very rarely found in appreciable concentrations. Annual production is some 1,400 tonnes, 99% of which comes from China, and the prospects for large dysprosium deposits outside of China are not great. If wind manufacturers move their production to China, they will be forced to hand over valuable manufacturing know-how to Chinese companies, something they are loth to do.

CFLs: Rare Earth Phosphors

CFLs generate light by passing an electric current through mercury. The resulting UV radiation strikes REE phosphors which absorb the UV and emit the visible light we see. Terbium is required for the red phosphor. Global terbium production last year was around 300 tonnes, all from China, and prospects for which outside of China are not great. CFLs do not have to contain rare earths, they can use halophosphors instead. An efficiency penalty of about 18% is incurred along with a significant decrease in the quality of the light.

There isn’t an IEA for rare earths, however some mining companies and consultants have projected the supply and demand balance for the rare earths in 2014. Figure 3 shows that they nearly all think dysprosium and terbium will be in significantly short supply:



The result isn’t going to be TEOTWAWKI, but it may require some retooling of production lines to utilise, as one REE consultant calls them, “old technologies”.

I’ve posted a longer (20 pages) review of REEs here. As Figure 1 shows, there are certainly REE accumulations outside China. There are some 190 REE mining companies outside China at various stages of development. However REE mining is dirty and requires lots of capital. Only a few mines have gathered that capital. With this latest kerfuffle, that should be easier to access, especially if governments step in with loan guarantees or if tech companies recognise their vulnerability and buyout junior miners to “secure their upstream”. Indeed, one Irish guy, James Kenny, is about to IPO on the Toronto stock exchange to get money to develop a large (15% of current supply/year) mine in South Africa. In addition, Germany has just announced that they will be raising the issue of REEs at the G8 and G20 summits.