The Bayon Obo mining district in northwest China contains the largest known rare earths deposits on earth. China, the world’s largest producer of REE, draws 70% of its output from this district.
GLOBAL STAKEHOLDERS IN THE RARE EARTHS METALS BUSINESS—PRODUCERS, BUYERS AND THE ENVIRONMENT—WILL BENEFIT FROM COOPERATION IN SOLVING SUPPLY AND DEMAND ISSUES
By Magnus Ericsson
Is the veil of secrecy being slowly lifted from Chinese rare earths? One indication of improved transparency is Dreamsea 2014, the first Conference on Development of Rare Earths-Mining, Extraction, Separation and Application held in Baotou, Inner Mongolia, in mid-July. It is one of only a few international conferences held in China on rare earths in recent years and was co-organized by the Inner Mongolia Technical University, the Key Laboratory of Integrated Exploitation of Bayan Obo Multimetal Resources and Swerea MEFOS (Sweden).
During the conference, researchers and experts from all parts of the world-with experience in all phases of the rare earth metals (REM) value chain—discussed the scientific possibilities and geopolitical implications of REM’s expanding use in a growing number of fields. Topics included diminishing the environmental impact of REM extraction, improving the methods of recycling, and alloying of steel to create UHSCs based on these metals.
Baotou is the unofficial world center for REM primary production and research. It is located about 100 km from the Bayan Obo iron mine, the world’s largest REM mine. The deposit was discovered by the distinguished Chinese geologist Ding Daoheng under a Sino-Swedish Expedition in northwest China in 1927, led by the famous Swedish geographer and explorer, Sven Hedin. This discovery closes the loop back to the 18th century when REM elements were first discovered by Swedish metallurgists just outside Stockholm.
REM production from Bayon Obo started in the late 1950s when the Baotou Iron and Steel Co. (Baogang) was established to use both the iron and rare earth content of the ore. Baogang is now a major Chinese steel producer with more than 15 million metric tons per year (mt/y) steel capacity, in addition to dominating world production of REM. The importance of REM was prophetically highlighted in the 1970s when Chinese Premier Deng Xiao Ping stated, “Saudi Arabia has its oil—China its rare earths.” Undoubtedly, he was not aware of how correct his prophecy would turn out to be and, at the time, nobody in the rest of the world paid any real attention to it.
Rare earths were first produced commercially in the 1880s, from mining of the rare earth thorium phosphate mineral monazite in Sweden and Norway. Brazil produced monazite as early as 1887–1911. From 1965 to 1985, production was dominated by the United States—the so-called “Mountain Pass Era” named for the Molycorp REM mine in California. Due to tough competition from China, Molycorp ceased production from that operation around 2000.
Many REM ores contain the radioactive metal thorium, which could be used in nuclear weapons. This led to a large project in Taiwan, funded by the American military, to develop the monazite deposits found on the southwestern shore of the island. This project created a strong basis for understanding REM market significance in Taiwan; in fact, from 1984 to 1991, Taiwan had production capacity of 500 mt/y of monazite. With the increasing environmental pressures on mining in the 1980s, production in the U.S., Australia and elsewhere gradually faded as the limited scale of the REM market discouraged investment in the necessary equipment and processes. With more lax regulations in China, however, production continued and Chinese producers have dominated the world market since the late 1990s. (It is interesting to note that the magnesium industry underwent a similar experience, with gradually increased Chinese control of an entire market.) In 2013, 50% to 60% of the global production of REM (130,000–140000 mt) originated from the Bayan Obo mine; the rest came from about 15 smaller mines working ion adsorption—type and bastnaesite deposits in southern China.
REM export restrictions in China began in 2010, and REM-related activity has increased around the world, including the reopening of the Mountain Pass mine in California and Lynas Corp.’s Mount Weld in Western Australia. However, a drastic price drop in past months has slowed the pace of these activities.
During the conference, attention was called to the limited present and future global demand for REM—in total, only about 150,000–200,000 mt/y—compared with nickel, for example, which has 10 times higher global demand; or copper (100 X) and iron ore (1,000 X). Although difficult to calculate, the value of a mined REM product is miniscule compared with that of major metals. The value of global copper productionis $106 billion; the equivalent REM value is more difficult to estimate but is definitely less than $2 billion at the mine stage.
The global spotlight turned to REM in 2010 with the progress of applications of rare earth elements and rare earth oxides (REE/REO) in high-tech industries such as the renewable energy sector, automotive and military applications. (It should be noted that the U.S. military has never put as much emphasis on REM as they have on other strategic metals.) Major usages include permanent magnets, polishing powder, catalysts, lighting, metal alloys and glass—although in most applications, REM content is extremely low. For instance, in a fluorescent tube there is about 4.5 g of phosphor (containing 40% REO), while neodymium content is 0.07% by weight and 0.029% by value in a laptop computer.
However, criticality of REM supply became a political concern. In Europe, Japan and the U.S., efforts were begun to reduce the risk of China potentially using REM as a political tool; for example, when China introduced an export quota system, the price of rare earths shot up: cerium oxide price rose to $150/kg from $10/kg; yttrium, another of the light rare earths, followed a similar path, while dysprosium oxide skyrocketed from $100/kg to $2,500/kg and neodymium oxide from $25/kg to $375/kg. These spikes subsided almost as quickly as they increased, and the prices of light rare earths are roughly at pre-peak levels. However, heavy rare earth prices are still higher than they were in 2010, although not at peak levels: dysprosium was selling for less than $500/kg and neodymium between $50–$60/kg in early 2014.
To ensure supply stability, far-reaching programs to identify REM deposits throughout Europe (EURARE) and elsewhere in the world (Jogmec) were started. REM recycling is being studied in projects sponsored by the European Commission and other organizations. At the same time, the industry has become much more relaxed about the supply situation. Traditionally, rare earths accounted for such a small part of total production costs that manufacturers paid little attention to minimizing/optimizing REM content in their products. That attitude has changed and in many applications usage has been reduced to a third of what it was previously. In addition, the “rare earths” are not rare and various deposits have been discovered around the world. If all REM projects in the pipeline were to come to fruition, the level of overcapacity would be enormous. Thirdly, prices have fallen, but Chinese producers continue to sell in spite of this.
In recent years, the Chinese government has strengthened its grip on the REM sector and concentrated most production into Baogang Rare Earth, a subsidiary of the state-controlled steel company. Extensive research programs to reduce environmental effects of radioactive thorium and other harmful substances used in the production of REM have been started. These projects also aim to better utilize the full content of the Bayan Obo ores. Undoubtedly, production costs will increase, but usable output from the same amount of ore will grow.
In Japan, novel metallurgical methods to recycle REM have been developed and tested in full scale. They will, however, not be economically feasible in the near- or mid-term future. Systems to recycle light tubes have been successfully employed in Taiwan, but the overall conclusion is that the cost of recovery by recycling will be higher than those of primary production for many years to come. Given the huge number of REM deposits now identified globally, recent surveys indicate that China now has only one-third of global resources. It seems that the market has already solved the most pressing supply/demand imbalances.
Nevertheless, there is a continued need for transparency; secrecy about production levels and other details of Chinese production only serves speculative interests. In order not to waste financial resources and allow researchers to focus on more pressing sustainability problems, a healthy balance between primary and secondary production should be allowed to develop without the short-term politicizing that is shaping the market today.
It will be in the interest of both the Chinese environment and the valid security of supply concerns raised by buyers of REM to cooperate in solving the issues together rather than separating them. The world market for REM will only have room for a handful of global primary producers. Rather than focusing efforts on REM only, analysis should be broadened to study the supply security of both China and the West as far as metal resources are concerned. The rare earths offer solutions to many of mankind’s problems-too many to be quibbled about.
Magnus Ericsson, a frequent contributor to E&MJ, is a consulting professor in mineral economics at Luleå University of Technology, Sweden.