EDITOR: | August 10th, 2016 | 10 Comments

China and rare earths — more developments

| August 10, 2016 | 10 Comments
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“We have not enough influence on rare metal in the world and we didn’t get reasonable profit” – Qinhua Wang, Vice-chairman of the China Non-Ferrous Metals Industry Association, speaking in 2014.

That quote was included (as a wake-up call) in a paper written a couple of months ago for the London-based Royal Society of Chemistry by David Abraham, director of the Technology, Rare and Electronic Materials Centre in Washington, DC. Abrahams’ comments, and some new developments this week, add evidence to the strong case made here in InvestorIntel this week by Jack Lifton: that, essentially, China wants to maintain its rare earth hegemony.

This week we have seen:

  • Fears expressed from South Korea that China could disrupt REE supplies if it takes offence to Seoul’s latest defence policies.
  • News that China is planning to upgrade REE technology.
  • And there are plans for a new crackdown on illegal mining in China.

The point made by Abraham recently was that “while the rest of the world is trying to figure out how to use fewer rare earth materials, China seeks ways to use more”. It is a key point; as China has increased its production of rare earths, innovation in its rare earth industry has evolved, while in the U.S. it has fallen. Abraham makes the very good point that the rare earth market is also at the heart of the Chinese government’s “Made in China 2025” strategy, a plan that focuses on developing green and high tech industries in China. He concludes by saying that anyone who thinks China’s is about to willingly let slip control over rare earths should reflect on the words of Quinhua Wang.

The Korea Times reports this week that Seoul is worried that China may retaliate economically to South Korea’s decision to deploy a U.S. radar system capable of penetrating into Chinese territory. The newspaper noted that Beijing has stopped exports of REE to Japan in 2010 over a territorial dispute.

Then there were two items in China Daily this week.

One quoted Wang Zhonghe, party chief of Baotou in Inner Mongolia, saying the city had set itself the goal of developing “more comprehensive deep processing” of REE to add value. He said by 2017 the city would become the biggest rare earths hydrogen storage and technological research and development base. He complained that China had received poor prices for exporting its rare earths (presumably referring to recent years, not the 2011 bonanza).

A REE transformation fund has so far backed 22 projects, including

  • Industrialization of high-performance REE magnets;
  • Rare earth hydrogen storage;
  • Rare earth polishing powder;
  • Rare earths for magnetic resonance imaging devices;
  • Magnetic refrigeration, and
  • Batteries for new-energy vehicles.

China Daily also published a report from Xinhua saying that, in the 13th Five-Year Plan (2016-2020), the country would be cracking down on illegal mining, processing and sales of rare earths. Now, we have heard this before but dare we assume that the continuing low prices for these elements may finally have concentrated a few minds in Beijing and/or stirred the mining companies in urging more action?

Xinhua reports that government agencies would enhance co-operation, increase inspections and “take a zero-tolerance” approach toward illegal REE mining.

Zhou Changyi, head of the Department of Raw Materials, part of the Ministry of Industry and Information Technology, said the next few years would be an “important period for the overhaul of China’s rare earth industry”, another piece of evidence that China is earnest about boosting this sector.

Here’s an interesting fact in the report: during the 12th Five-Year Plan, 14 illegal REE mines were closed and 28 companies put out of business. More than 36,000 tonnes of REE were seized and fines totaling 230 million yuan ($34.53 million) were imposed.

Meanwhile, back in the mainstream media

No, the passage in italics below was not written back in 2010 when the media was discovering rare earths and trying to (a) understand it themselves and (b) then explain it to their readers or viewers. No, this is a recent blog on the website of the prestigious Foreign Policy magazine:

“Yttrium and praseodymium don’t exactly roll off the tongue, but they’re part of what make smartphones so small, powerful, and bright. These exotic materials are among the planet’s 17 rare-earth elements, and surprisingly, the soft, silvery metals are not at all rare. But they’re found in tiny concentrations, all mixed together, and usually embedded in hard rock, which makes them difficult — and messy — to isolate. In China, which mines 89 percent of global output, toxic wastes from rare-earth facilities have poisoned water, ruined farmlands, and made people sick.”

Give me strength. And on in went in similar vein: about all the technologies that use REE, how China cut off supplies to Japan in 2010, and the problems with illegal mining.

This is a worry: it seems that knowledge of, and discussion about, rare earths and the geopolitical ramifications of Chinese control and lack of Western production, is still confined to a small number of people and websites such as InvestorIntel.


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  • ann bridges

    Thanks for sharing the most recent flurry, Robin. Complex topic, but too important to keep glossing over by mainstream media. Good to know that Foreign Policy is at least keeping track.

    My most interesting tidbit to contribute: another new novel that is a bestseller among military, Ghost Fleet, is set in the not-too-distant future about a US war with China. While the authors’ premise is that the control of REE is behind much of the power that China “surprisingly” wields, they do not go into any detail except a passing reference to key minerals.

    If even these authors, who are defense experts, decline to educate the average person on what rare earths are & the implications for global military and economic control, who will besides you, me and the rest of the “insiders” of the REE industry?

    Please keep sharing the info, and I’ll do the same. Thanks!

    August 10, 2016 - 6:28 PM

  • Tim Ainsworth

    “News that China is planning to upgrade REE technology”

    Actually seems to be rather more than “planning” from what I’m finding:

    In the north:

    “Inner Mongolia Bayan Obo, supported by the National Program Professor Li Mei Inner Mongolia University of Science and Technology presided over the completion of the “mixed light rare earth resources, clean and efficient extraction and application of new technology” task, 2016…………to achieve the green, about to say goodbye has spent 30 years of concentrated sulfuric acid roasting process.”

    “It is understood that the development team has built a 6500 t / year of rare earth ore beneficiation model line, yielding 65% of rare earth concentrates more than 2,800 tons, the yield can reach more than 92%. Within Northern China Rare Earth (Group) Co., Ltd. high-tech two-year plan, will promote the technology in Bayan Obo rare earth beneficiation process. R & D team has also developed a further 65% of high-grade rare earth concentrate smelting new clean technologies, and built a 3,000 tons / year high-grade rare earth concentrate clean and efficient extraction industry demonstration line. This technology can be efficient extraction of rare earths, while achieving associated elements fluorine, phosphorus, thorium, etc. comprehensive recovery process without extracting ammonium bicarbonate, ammonia does not produce waste water, does not produce sulfur dioxide, hydrogen fluoride and other harmful emissions, less waste low production costs.”

    And in the south:

    “Efficient ionic rare earth ore green dip stripping integration technology is the research hospital, Institute of Rare Earth, Professor Huang Wei led the team after 6 years of sharpening successfully developed original technology, it has applied for . 7 patents, including 2 Xiang PCT international patents. And the industry is currently using ammonium sulfate leach – ammonium bicarbonate (oxalic acid) precipitation and technology , compared with less advanced, innovative:
    1 , to simplify the process . The successful development of calcium and magnesium salts leaching -P507 or P507 / P204 coupled centrifugal Enrichment new technology, eliminating the leachate impurity original process, precipitation, calcination, acid-soluble concentrate then purify, filtration and other processes, process shortened 4-5 processes, rare earth leachate continuous large-scale, high efficiency centrifugal crowd than enrichment .
    2 , high efficiency and low consumption . Sulfuric acid leaching solution of rare earth ( REO 0.5-1 G / L ) directly from the production of high efficiency centrifugal Enrichment concentration of rare earth chloride products ( REO 250 G / L or so), the concentration of the solution of rare earth enriched approximately 500 -fold , to achieve single rare earth direct extraction separation process of convergence, rare earth recovery rate of 10% or more; each produce 1t of rare earth (in REO dollars) to save the precipitating agent, cleaning agent material and energy consumption 1 million or so, increase product revenue RE 1 million yuan ( press 10 Wan yuan / tREO dollars), total additional benefit 2 million.
    3 , green . Raffinate oil through low-cost in-situ recovery of the organic phase, the phosphorus content is reduced to 1ppm or less, and the deployment of ore leaching agent after all the recycling, the production process without ammonia emissions, no radioactive slag, solve rare earth separation plant containing acid-soluble radioactivity residue disposal problems.
    Currently, new technologies are in aluminum colored Guangxi Chongzuo Rare Earth Development Co., Ltd. six mine soup embodiment, has built an annual output of 500 Dun REO centrifugal Enrichment production line . With this technology popularization and application, it will have a significant economic, social and environmental benefits.”

    Would appear the Chinese have been investing heavily upstream in clean, and cost efficient, for a number of years already.

    August 13, 2016 - 2:57 AM

  • Jack Lifton

    Tim,
    Thank you for this information. I find it extremely interesting.
    Now that the Chinese RE industry is improving its extraction (and beneficiation, I assume) yields do you have information on whether they are modifying or replacing their solvent extraction based separation systems? There are multiple ways to accelerate SX that have been tried and have been successful at bench scale, and, of course, there are dramatic advances in sepaartion technologies such as continuous ion exchange and molecular recognition technology, which as has been reported here is operating at pilot plant scale (successfully) at IBCAT/Ucore in Utah.
    I doubt that China is ready to scrap its world’s largest SX for REE separation capacity, but if they are trying to increase not only yields but also profits they may be doing so.

    Jack

    August 13, 2016 - 7:34 AM

  • Tim Ainsworth

    Unfortunately Jack nothing so specific, but I will email you the full articles with links, be interesting to see if you can deduce anything further. I have noted other commentary over the last year or so but they may well relate to the same two projects, a little hard to tell via translations.

    Plenty of references also to cleaning up RE production, key point of the new Five Year Plan, but I believe these two projects started construction about two years ago to emulate Lynas & Moly with integrated environmental controls ground up. Clearly indicative.

    Also strong indications the Chinese realise they need to drive down the cost curve, and a big part of that is far more efficient treatment of the ore from the primary stages, waste in extraction from ionic sources is well documented, and all the way down the line.

    Interesting a number of comments refuting the notion RE resources are being depleted or in any way scarce:

    Following the new Five Year Plan there were a number of comments on the abundance of RE resources:

    “China is rich in rare earth resources, we continue to find new rare earth mine, 100years will not be exhausted, it is now an indisputable fact.”

    ac-rei.org.cn/portal.php?mod=view&aid=4815

    ‘First, China’s rare earth resources are very rich, REE complete, with long-term strategic advantage. “China’s rare earth resources, the depletion,” the understanding is unfounded, and it is very harmful; to local conditions, for different characteristics of the North and South of rare earth resources, development and utilization of resources to develop targeted policies; pay special attention to ionic rare earth resources distribution’

    ac-rei.org.cn/portal.php?mod=view&aid=3299

    Perhaps mangled translations, but when you see the same theme repeated, worth note. In support, report they discovered a new 100,000t TREO ionic resource just 12 months ago, very nearly twice the 57,000t identified in hard rock, across multiple patches, incl underground, down to < 0.3%, at Browns Range. And it's located in the same province as their NdFeB manufacturing base:

    en.xinfinance.com/html/Industries/Materials/2015/123379.shtml

    Paradigm change evolving quickly now in the RE space, and it's totally driven top down, witness the price collapse 12 months ago, they don't really care "wot's in the ground", singularly focused on cost effective inputs, sans hype.

    August 14, 2016 - 3:37 AM

  • Jack Lifton

    Tim,

    Thanks very much. I was very recently in China and spoke with both an older (50s) and younger (30s) rare earth trader. Their differences in outlook was striking. The younger one told me that you can never believe the public statements of bureaucrats about resources and the older one said that it would be possible now to sell rare earth technologies or products into China if they were competitive in quality and cost. I definitely got the impression that Chinese rare earth supply chains were looking for technological improvements and that certain parts of those supply chains such as metals and alloys production were open to look at metal products having western quality.
    The problem in the ROW is that its market can only support a first class supply chain with a limited output. Its not clear yet if such a supply chain can be built economically. Its a matter of the right size for EVERY part of the supply chain. China is in a similar boat. Its finding that the right sized extraction facility (matched to market demand) is as necessary as the right sized separation, metal making, and fabricating facilities. The Soviet Era hangover folly of production alone as a measure of success (which assumes ever growing demand) has finally I think been seen for what it is, market ignorance. The Chinese are starting their reforms at the beginning of the process (a very good idea), but they will soon, or already have, entered the period where they need to address separation, purification, and fabrication technologies.
    While all of this goes on ROW mining “analysts” and financial managers just keep repeating the same paradigms of short term compartmentalized
    attempts to solve a problem that does not exist, a fantasy huge increase in demand for rare earths.
    Interestingly enough much better rare earth separation and metal/alloy making technologies already exist in the USA than in China. If there is truly a global marketplace this situation will not last long.

    Jack

    August 14, 2016 - 10:50 AM

  • Bill

    Sounds to me like Lynas LAMP is fast becoming obsolete

    August 15, 2016 - 7:09 AM

  • Jeff Thompson

    Bill,
    None of the new separation techniques have been built at scale yet, and while I am optimistic that the several under development will at some stage in the future reach large scale adoption, in particular the continuous ion exchange/chromatography being worked on via the Texas Mineral Resources K-Tech partnership, that day is many years away. Even once that day comes, it is quite common for different generations of technology to exist economically side by side for many years (witness internal combustion engines versus hybrid engines, or incandescence lights versus fluorescent lights). The LAMP facility will continue to serve Lynas well for decades to come, largely unaffected by the either the success or failure of the new separation techniques being developed.
    Jeff

    August 15, 2016 - 7:27 AM

  • Tim Ainsworth

    Bill, quite obviously you have no concept of scale, or sunk costs in now proven environmental controls.

    Perhaps take a trip back to the heady daze of 2008, when Nd was selling $32kg & Dy $108kg (Mt Weld weighted av $13.52kg/ Baotou $11.08kg) and have a look at the budgeted CoP, a figure that was not promoted past that point, of course Moly came out with one much lower, but one now back in the frame, with some allowance for inflation.

    Reflect a single modular plant capable of better than 25% of China’s LRE production quota. Four or five years back Jack forecast the nightmarish task that Lynas & Moly had undertaken scaling way beyond anything the Chinese had attempted, materials handling, flow & balance control, as well as proving up each individual stage of the process. No pilot will fully prepare any would be peer, each will have an individual set of issues to solve, and many will be inter-related.

    However, based off the June QR reasonable assumption Lynas has done it, at least got the beast under control @ 90% nominal volumes, and given ROW demand continues at anything like current growth rates, 2017 should start to demonstrate just how far past the theoretical “nameplate” 22ktpa they can ramp it.

    Even a cursory glance at Chinese producers H1 losses, without even factoring the heavy State subsidies, would demonstrate just how competitive LAMP is already, still well short of optimum.

    Jack correctly identified the task, now we need to evaluate the reward.

    Incidentally, with a $13.52kg “basket” Feb 2008 Lynas mkt cap was A$700M with A$80M net cash, Mt Weld a patch of desert & LAMP a swamp, vs Aug 2016 A$250M.

    Go figure.

    August 15, 2016 - 6:02 PM

  • Tim Ainsworth

    Jack, that makes a huge amount of good sense on multiple levels.

    We should NEVER think of “China” in the singular, so much variation at multiple levels of Govt & industry, and must admit I hadn’t even considered generational attitudes in the mix. Hard to place a piece in the jigsaw puzzle without at least a couple of credible cross references, and you always have to be prepared to ditch a concept, ROW industry is almost equally opaque.

    Dialogue of the last year or so does suggest a concerted effort at Chinese rationalisation, and perhaps a strong signal of resolve might be the refusal of the State to pay producer’s asking prices into storage, reputedly some 20/30% apart on price, no longer prepared to be customer of last resort, rewarding bad behaviour. Which of course in the past has just encouraged producers to go produce some more.

    Not sure Lynas has any difficulty with limited supply chains, firstly it is extremely well positioned into ROW catalyst mkt, by far the largest, and its magnetics stream would appear to be displacing previous supply as much as adding to it, witness contracted sales into China for one.

    Second point would be, just how far, and how quickly, have ROW supply chains expanded off a level playing field in a bare 12 months to warrant Chinese H1 export volumes rising nearly 10kt, 23,214t over 13,881t or 67% YoY?

    While you isolate US tech, I’ll suggest the period of high prices have sponsored a globalised effort to identify which RE carry the greater economic benefit, and where, and then how to employ them most cost effectively. Aside from low prices, equalised prices have been like Spring rain.

    August 15, 2016 - 6:50 PM

  • David Mortimer.

    UCORE in Alaska is of great importance and should be treated so by the US government along with other HRE mines on US soil ..

    August 17, 2016 - 1:16 PM