EDITOR: | July 26th, 2013 | 19 Comments

Kingsnorth believes Rare Earth Element demand and prices to increase

| July 26, 2013 | 19 Comments
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DudleyKingsnorth2Dudley Kingsnorth, a professor at the Centre for Research in Energy and Minerals Economics appointed at Curtin University in Perth, Australia and an analyst at the Industrial Minerals Company of Australia (IMCOA), delivered a presentation at the AusIMM 2013 Critical Minerals Conference in Perth, Australia in June. He suggested that global demand for rare earths could increase to 160 thousand tons in 2016 and 200-240,000 tons in 2020 (compared to 110 thousand tons in 2012 and the historical high in 2010, 133 thousand tons). Moreover, Kingsnorth said that he expects the average market price for REE in the long-term to increase to USD$ 50-70/kg, while 2013 averages have been in the range of USD$ 30-40/kg (TREO – while lower than prices in 2012, they are almost triple the prices of 2008). Interestingly, the increase value of rare earths comes at a time when gold prices have experienced a roller coaster ride, notwithstanding the substantial fluctuations owing to continuing economic uncertainty. The New York Times has described Kingsnorth’s analysis as an industry benchmark.

The key elements of Kingsnorth’s projected increase up to the year 2016 are neodymium, dysprosium, europium and cerium, all of which are needed for automation technology as well as polishing powders, FCC catalysts, wind turbines and hybrid vehicles. Kingsnorth does not deviate from other forecasts or analyses, however, which see demand exceeding supply for such elements as cerium, lanthanum (for nickel-metal hydride batteries) and higher demand than supply for neodymium, terbium, dysprosium, europium and yttrium.

One of the drivers of demand, as noted above will be automation technology, which will require a combined use of different elements. Servo motors need neodymium and dysprosium and the latter element will be highly critical elements in the future use of REE permanent magnets. For the time being, dysprosium, which is a heavy rare earth, will keep demand focused on China. That said, in the present and near future, rare earths have only been produced in four countries. China, Kingsnorth believes, will be less strict with quotas (even if it will continue to overhaul the sector) but it will also continue to push the value-added side of the industry. In recent months, 23 illegal rare earth mines as well as almost 60 processing plants were shut down in China.

This means that, as China continues to tighten regulations and consolidate the supply side, there will be fewer rare earths available for export, raising actual availability concerns about supply that will go well beyond the concerns of the World Trade Organization.  China produced about 120,000 tons in 2009 and another 35,000 tons, unofficially, accounting for 95% of the global market. The other producers were Russia, India and the United States. For 2015, Kingsnorth estimates the global supply of rare earths to be in the order of 195000-210000 tons. Despite the various new projects that are expected to come online, the major producers in 2016 – outside of China – will be Mountain Pass (Molycorp), Mt Weld (Lynas Corp) , Indian Rare Earths (IRE and Toyota Tsusho) and Kazakhstan (SARECO and Sumitomo). Kingsnorth sees recycling as also contributing to supply, while Great Western’s Steenkapskraal mine in South Africa and Alkane’s Mt. Dubbo project in Australia should enter production stage by that time as well.

As for demand, China will continue to dominate with a share of 60%, while the remaining 40% will be split half for the rest of Asia – including Japan – and the other half in the United States and Europe. The demand pattern will not change substantially in the coming years, however, Kingsnorth suggests that demand amount will increase by 48% and much of the increase will be supplied by deposits outside China. While, he doesn’t say so explicitly, Kingsnorth has implied that there is reason for optimism when it comes to the future of those emerging rare earth projects that have been struggling with rollercoaster markets over the past year. The higher demand will certainly require the development of new mining projects outside of China, especially as Beijing has put a stop to the exploration of new rare earths properties and mining licenses. These measures have already shown results. Prices for various rare earths go have started to rise again. Should the offer remain scarce, further price increases can be expected even over the course of 2013.


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Comments

  • Veritas Bob

    Demand exceeding supply for Cerium and Lanthanum? Puhhlease. Unless maybe cerium-based magnets http://arpa-e.energy.gov/?q=arpa-e-projects/cerium-based-magnets really take off … and even then.

    July 26, 2013 - 8:17 PM

  • Sunnyvale

    Thanks for the article. I hope that is not a pix of Mr. Kingsnorth in the new Lynas plant. Some of the pipe joins look pretty rusted.

    July 27, 2013 - 1:13 AM

  • Joeri Van hee

    a couple of days ago a reporter wrote about the big turnaround in the rare eart stockmarkets, it already seems to be slowing down, I really hate people who tell lies to a hardworking public who wants to read usefull reports on the rare earth market. How can you seriously invest everytime some guy comes along and promises heaven on earth. I more like Jack Lifton’s article, who at least knows what he is talking about.

    July 27, 2013 - 7:44 AM

  • Tim Ainsworth

    Alessandro,
    Re your statement: “……Kingsnorth does not deviate from other forecasts or analyses, however, which see demand exceeding supply for such elements as cerium ……”, has Kingsnorth changed his position since April 12 Berlin where he forecast Ce 2016 demand 60-70kt and supply 75-85kt, presumably confirmed in Nov 12 HK where he forecast LRE 2016 demand 145kt against supply 165kt?
    Pretty much every analysis I’ve seen predict Ce in oversupply for the foreseeable future, including JPM’s latest research forecasting Ce 2016 demand at 34kt v supply 63kt resulting in 29kt oversupply. With Baotou, Moly & Lynas all producing nearly 50% Ce ROM this is an important issue re the economics of all existing and potential LRE producers.
    Can you confirm that Kingsnorth has reversed his early forecasts and now calling for Ce demand to exceed supply 2016?

    July 27, 2013 - 3:24 PM

  • Dudley Kingsnorth

    A few points of clarification/correction to Alessandro’s otherwise correct article:
    1. I forecast demand in 2016 of 160,000t REO (60-65% China) and supply of 180-210,000t REO (60-65% China), with a surplus of cerium and no deficit of dysprosium (due to new technology), but very limited supply from ROW.
    2. I forecast demand in 2020 of 200-240,000t REO (60-65% China) and supply of 240-280,000t REO with a surplus of cerium, but diminishing as I believe that the increased availability at reasonably priced cerium will drive new applications.
    3. Given that both Lynas and Molycorp required 12 months for detailed design and advanced procurement followed by 2+ years of construction and start-up; backed-up with technology experience of +50 years i.e. 3+ years after project commitment, I do not see another major light rare earths project in production in 2016, maybe 2017/18.
    4. Given the latent capacity at Mountain Pass and Mt Weld, plus their possession of proven technology they will be the major ROW producers for the foreseeable future. So, summing up given the ongoing requirement for diversity there is unlikely to be more than one new ROW light rare earths in production in 2020.
    5. The ROW production/supply of heavy rare earths remains an issue. It is the focus of a lot of activity. The importance of proven technology as back-up to a development by a junior cannot be under-estimated. A small project with proven reserves and the appropriate technology partner could be in production in 2016/17
    6. As I have often said in the past 2 years I do not believe that there will be more than 7 or 8 ROW major rare earths producers in 2020, which means of the 300 odd ‘potential’ new projects listed by TMR very few are likely to succeed – a success rate of 1-2%!!.

    July 28, 2013 - 9:48 PM

    • Veritas Bob

      Professor Kingsnorth,

      You have corrected Alessandro’s statement regarding demand exceeding supply for Cerium, but did not explicitly clarify the situation regarding Lanthanum. Could you please do so? Thanks.

      July 28, 2013 - 11:18 PM

      • Dudley Kingsnorth

        This is a tricky question. As you are aware, the main applications for lanthanum are in fcc catalysts and LaNiH batteries. In time, I believe that LaNiH batteries are likely to be replaced by Li-ion batteries; however, given the uncertainties created by a recent number of apparent failures of Li-ion batteries (in larger equipment) this could be later rather than sooner. If it takes a long time before Li-ion batteries are accepted then this could lead to supplies of lanthanum being tight. Today, I do not believe that anyone can confidently give a timetable for the general acceptance of Li-ion batteries, hence the equivocation on my part on the future demand/supply balance for lanthanum. From my reading it appears that Li-ion batteries may not make a significant impact on La demand for batteries until 2016/17, possibly 2018.

        July 29, 2013 - 9:38 AM

        • Tim Ainsworth

          Dudley, any thoughts on increased La demand in FCC to match the growth in heavier shale oil production?

          “In order to increase the activity of Y-zeolite with high silica content, U.S. Pat. No. 4,840,724 discloses a method to increase the rare-earth content of ultra-stable Y-zeolite by rare-earth ion exchange.”

          “The RE2O3 content of REHY zeolite was increased to about 6˜16% by weight and the RE2O3 content of REY zeolite was increased to about 8˜20% by weight”

          http://www.google.com/patents/US7514385

          July 29, 2013 - 6:33 PM

          • Tim Ainsworth

            Note that Con K. commented in Moly’s last Q report that they “could place all the La they could produce”, presumably US FCC. Will be interesting to see if this is maintained at higher production levels, profitably.

            July 29, 2013 - 6:53 PM

        • David Mortimer

          What do you think of Stans Energy in Kyrygstan ? Do you think if they get over their court issues with a chinese company trying to steal it that they can become a player in the heavy rare earth market?

          July 29, 2013 - 7:35 PM

    • Tim Ainsworth

      Dudley, many thnx for the clarification. Presumably Ce will make up a large portion of the 30kt odd surplus, and present something of an economic challenge to LRE producers. Perhaps Moly/Univar may have some answers with the resurrection of Sorbx as a potential bulk application?
      The really interesting forecast is ROW demand growing to circa 60kt in 2016 given it is extremely difficult to get a baseline on current demand after a very disruptive couple of years. Presumably you are expressing confidence both in latent demand and the ability of ROW to redevelop the middle supply chain.
      Greatly encouraging and will be equally interesting to watch developments.

      July 29, 2013 - 5:48 AM

  • hackenzac

    “no deficit of dysprosium due to new technology” That’s a bit of an outlier prediction wise. I assume that you mean better recovery technologies within China and not so much substitution technology by end users.

    July 29, 2013 - 11:47 AM

    • Gareth Hatch

      @Hackenzac: I won’t purport to speak for Prof. Kingsnorth, but I am going to assume that he is factoring in three trends:

      1) The increased use of Nd-Fe-B magnet grades that require less Dy to do the same job as conventional grades, because of the way that the Dy is put into the magnet material, via grain-bondary diffusion processes;

      2) An overall “re-sharpening of the pencil” by magnet and motor designers, who are figuring out ways to reduce the temperatures that magnets experience in devices (thus facilitating the use of grades which contain less Dy), and are using different topologies of devices which use less Nd-Fe-B per unit, and / or reduce the magnitude of de-magnetizing fields experienced by the magnets, thus again facilitating the use of grades that contain less Dy; and

      3) A shift towards the use of polymer-bonded magnet material grades (most notably produced by Molycorp Magnequench and Aichi Steel) that require no Dy at all, and yet which can still operate at reasonably significant temperatures, because of the advanced microstructure that develops in such materials.

      July 29, 2013 - 1:36 PM

      • Tim Ainsworth

        Pure speculation Gareth but I imagine improved economics in Nd-Fe-B magnets would encourage broader usage? Perhaps offsetting some of the volume loss for Dy but also increasing the use of Nd/Pr, given stable prices/supply?

        July 29, 2013 - 6:05 PM

        • Gareth Hatch

          TIm: I would say that we’ll get back on track to the 8-10%+ annual growth in Nd-Fe-B magnet usage soon, which we were seeing prior to the pricing shenanigans. Also, aside for potential increases in demand from the market as a whole for Nd + Pr, on a unit mass basis, any reduction in Dy is typically balanced with a commensurate increase in Nd + Pr. While the monetary value of these REEs is quite different, it does provide additional demand.

          July 29, 2013 - 6:32 PM

          • Tim Ainsworth

            And balance to general ROM, therefore the economics of existing producers. Hopefully another indicator of a more stable market developing, as you suggest.

            July 29, 2013 - 6:42 PM

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  • Bill Keenes

    Would like to see an update on rare earth price projection and supply demand projection from professor Kingsnorth

    March 29, 2015 - 3:33 AM

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