EDITOR: | November 30th, 2015 | 40 Comments

Lifton on Kingsnorth and the global rare earth market

| November 30, 2015 | 40 Comments
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2015-12_Dudley_Kingsnorth_slide5My colleague, Professor Dudley Kingsnorth, now of Curtin University in Perth, Australia, is arguably the world’s most experienced; up-to-date; and knowledgeable expert in the global rare earths’ markets. To me therefore his keynote address to the Roskill Conference on Rare Earths, two weeks ago in Singapore, was a definitive analysis of the current situation in the global rare earths’ markets. I believe that he and I are very much in agreement on most of the issues in those markets, and on how we got to where we are today. Prof Kingsnorth and I were, I think, both a bit surprised, although he to a lesser extent than I, that we agreed on which non-Chinese rare earth juniors were the best and were most likely to succeed. Both of us heartily agreed that the other had finally come to his senses on that topic.

I think that in order to have a discussion about the global rare earths’ markets we need first to determine exactly what or which problem(s) we are trying to investigate and understand. Perhaps it is best thought of as “What specific question(s) are we trying to answer?”

For me the ultimate question is “How can I make sure that non-Chinese industrial manufacturers have a secure supply of the rare earths forms that they need that are critical for their products at prices that over a reasonable term will ensure that those products are competitive in their chosen markets?”

For almost all of my readers on InvestorIntel this is an abstract goal, or a statement of the obvious. Most of the readers of InvestorIntel are not procurement officers for global1000 corporations but short term investors who want informed stock tips; they want to know which, if any, of the dwindling opportunities among the junior rare earths “miners” shares are currently the best bet to see a near-term price increase? These small investors are particularly frustrated by the current paucity of “analysis” due to the fact that the herd of “financial analysts” has moved on to their next best target for hot air blasts as their short-sighted uninformed and, in many cases, stupid stuff about the rare earths’ markets has failed to pan out well enough to keep them in consulting gigs.

I am not a financial analyst. Nor do I do not smugly spout “efficient market” theory or judge the relative management or accounting skills of geologists running exploration ventures as sole causes for success or failure. If I need a personal label I call myself a subject matter specialist, and if pressed I admit that the subject matter of which I speak is “the global technology metals supply chain.” First, by chance, and then by choice I have worked in this subject matter area all of my working life, 53 years.

Professor Kingsnorth is also a subject matter expert and has two advantages over me. One is that he has been the hands-on manager of a mining venture (the company that is today called Lynas) and that through his personal marketing skills as well as his published work he has attained both a reputation and a university professorship that allows him to continue to do extensive research and maintain a data base now as a primary career. Alas, for me, I am envious because no one has asked me to do the same, even though I frequently drop verbal hints at the Starbucks near the University of Michigan’s business school that I sure would like to be an adjunct there.

Putting the sole (above stated) entry on my bucket list aside let’s return to the unspoken “question” that both Dudley Kingsnorth and I think needs answering. It is “Given the Chinese near monopoly in the supply of rare earths, is the current Chinese monopsony (the ability to control price through being the sole or overwhelmingly largest purchaser of a good or service) of demand inevitably to continue, and, if so, is this really bad for the rest of the [rare earths producing and using} world economy?” This is a complex question, I know, but what the hell it’s the real question in the air. And it’s a moral and {geo}political question, so the answer is not set in stone, and even more troubling is the fact that the answer is usually colored by one’s political and moral beliefs.

First the trivial stuff: Monopolists and monopsonists have it in common that their actions actually set the prices for those commodities of which they control the supply and/or demand. Sorry, efficient market theorists, but the global rare earths market is neither efficient nor free. It is for good or ill controlled today by the central planners of the economy of the Peoples Republic of China (PRC). I think that this state of affairs has come about more by the actions of the non-Chinese rare earths markets than by any nefarious planning by bureaucrats marching to a theoretical (Marxist-Leninist-Maoist-Dengist…) tune. But that is irrelevant because no matter what the cause we are living with the result and no individuals can change that by “discovering” yet another “root cause” or postulating any conspiracy. We need to deal with the “fact” that China completely dominates the global rare earths supply chain.

Conspiracy theorists please note that when the Chinese march towards dominance of the global rare earths’ markets began there were no military uses for the rare earths other than for pyrotechnic ammunition (tracer bullets/shells) which the tactics of the Peoples Liberation Army do not require in any case. The buildup of the rare earths supply chain was due to a lucky guess by China’s pre-eminent leader (in my opinion) of the last 2000 years or so, Deng Xiaoping. As Professor Kingsnorth emphasized in his talk the rare earths markets 35 years ago (Yes. 35 years!) when the Chinese entered the market was around 2-3% (!) of what it is today. One might even say that there would be no global rare earths markets if it had not been for the Chinese (I am saying this. Professor Kingsnorth neither said nor implied it as far as I can remember).

My preamble is finished, so at this point let me describe for you my understanding of what Professor Kingsnorth said in Singapore. I am not going to quote him; I am going to, I hope, paraphrase what he said, and I’m sure that if I stray too far from his meaning he will send us his comments and corrections. I am going to refer to him as “Dudley” for the rest of this essay, because that is easier for me to type than “Professor Kingsnorth.”

First of all Dudley and I agree that China has not only the largest proportion of the total global rare earth resources in production but also the most extensively developed total supply chain for rare earths , and perhaps most important of all the overwhelming majority of rare earths R&D on the planet implemented by the largest group of scientists and engineers devoted to rare earths studies and manufacturing on the planet. I personally believe that 90-95% of all rare earth R&D today takes place in China.

Thus it is clear that the rare earths industry is much more important to China than it could ever be, or ever has been, in any other nation.

Dudley emphasized in his keynote speech that the large percentage of illegal mining and refining in China is primarily driven by the growing demand for Pr/Nd for use in manufacturing rare earth permanent magnets. He pointed out that this is obvious from supply/demand data provided by the Chinese industry itself. For 2015 the estimated Chinese domestic demand for Pr/Nd for magnets alone is 30-35,000 tons yet the production quota is capped at 20,000 tons. Thus, he pointed out that, the driver for continuing illegal production appears to be the government itself or at least its inaction.

He reaffirmed what I had also noted in March 2013 at a conference in Ganzhou at which I spoke. The Chinese, he said, have approached the ISO (International Standards Organization) to suggest (and promote) the formation of a technical committee to establish some rare earth standards. The Chinese objective seems to be on standards for ores and concentrates, which would help to maintain their (the Chinese industry’s dominance, but such an approach opens a window of opportunity, Dudley suggests, to work with China to establish environmental and OHS standards, which standards could well mark beginning of the restriction of illegal activities.

On a local level Chinese bureaucrats and party officials are conflicted about the definition of “illegal mining and refining” especially as it impacts (negatively) the core directive of the Chinese Communist Party, which is to provide jobs for everyone and to lift all of China out of poverty and towards a shared prosperity.

Dudley emphasized, and I think this point cannot be emphasized enough that China has for the first time begun forecasting its domestic demand for rare earths and identifying areas of growth (in China) for rare earths useage. The increasing demand thus projected by the Chinese themselves shows a dramatic need to increase overall production and improve mining and refining efficiency. These last factors will require getting illegal and polluting production under strict control. This means, I believe, that it is most likely not possible for China to be both self-sufficient and manage health and safety issues. Thus there is a market for non-Chinese production, and I think, refining and fabricating. This market will not need light rare earths so much as mid-range and heavy rare earths. But even so the increasing growth of the Chinese domestic consumer market for rare earth enabled components for consumer goods means that there will always be a need for light rare earths production outside of China as well as a critical need for heavy rare earths produced outside of China not just for the Chinese market but to support independent markets in Europe, the Americas, and India where a baseline of self-sufficiency  is seen as critical at least for security purposes.

Dudley and I agree that the necessary diversity of rare earths production outside of China by 2020 strongly implies that the world needs production from Alkane, Northern Minerals, Peak Resources, and Rare Element Resources. We did not discuss any other juniors, but I want to add Texas Rare Earths, Ucore, and Tasman to the list.

Chinese domestic costs are rising rapidly as the Chinese standard of living improves. This means the right-sized junior rare earth ventures outside of China can be profitable.

The Chinese domestic rare earths markets are on a significant uptrend. For the rest of the world its time to maintain at least a foothold. The window is closing.


Jack Lifton

Editor:

Jack Lifton is the Sr. Editor for InvestorIntel Corp. and is the CEO for Jack Lifton, LLC. He is also a consultant, author, and lecturer ... <Read more about Jack Lifton>


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Comments

  • Tracy Weslosky

    Jack – welcome home. I know you have been travelling quite a bit, and am anxious for an InvestorIntel video interview with you…and Dudley…

    Have just sent Dudley a note asking for a photo of him presenting at Roskill and plan on asking Arafura’s Gavin Lockyer and Ian Chalmers of Alkane what they thought of his presentation titled: titled: “The Global Rare Earths Industry Today – Plagued by Illegal Production in China”.

    November 30, 2015 - 11:43 AM

  • Jeff Thompson

    Yes, seeing what our own company goes through each time we must undergo an ISO audit, or related regulatory requirements for RoHS and “conflict minerals”, I think that could definitely shed some light on the complete lack of environmental oversight on much of the rare earth supply chain as it exists today. This would hopefully lead those larger companies who use rare earths and/or the relevant government agencies, to realize the potential of the cleaner separation techniques in development.

    November 30, 2015 - 3:50 PM

  • Jack Lifton

    Jeff,
    I completely agree with you. The Chinese rare earth industry has an enormous vested interest in traditional processing, so it is very resistant to changing process chemistry. But pressure from customers to guarantee clean/green processing might just be the catalyst that the Chinese need. Of course foreign competition to them by competitive operations would also be a good driver. A company such as Apple which trumpets its commitment to clean tech/green tech should be embarrassed to do so when it comes to rare earths. Maybe companies such as Apple will wake up to their hypocrisy soon enough to kick start a sustainable challenge to Chinese dominance here, but it is really up to customers to exert pressure on them, and for this a public awareness is necessary that doesn’t know exist.

    Jack

    November 30, 2015 - 5:54 PM

  • Tim Ainsworth

    The dapper Dr from Rohstoff Alliance was pretty relaxed about it all. When questioned by George Baulk as to why German industry didn’t reject “illegal” product in favour of legal production his response was that it would be difficult as it could impact Purchasing Officer’s incentive programs.

    Cheap, now, good.

    If German industry is not capable of creating middle management incentive schemes around LT sustainability bring on the next supply shock.

    November 30, 2015 - 7:10 PM

  • David

    Very insightful article Jack and I think your observations and analysis is spot on. Thank you for sharing.

    The next few years is going to be very exciting in the are earth space as hopefully a number of the junior explorers you mention get into production and start providing some real competition and incentives to the Chinese to provide green/clean processing.

    Tim your comment is also relevant; but I am surprised you have made reference to George Bauk given you are so negative about NTU in another public forum…..

    December 1, 2015 - 1:41 AM

  • Alex

    Dadly wrote at his Report (Supply)
    2010- ROW 5000 t
    2011 – ROW 6000 t
    2012- ROW 8000 t
    2013 – ROW 12 000 t
    2014 ROW 15 750 t
    2015 ROW 23 000 t
    In Lynas Report published at InvestorIntel – 3 000 t only produced in 2015
    Molycorp also 3000 t and stoped now.
    How it can be 23 000 t ?

    December 1, 2015 - 1:53 AM

  • Paul Belton

    Jack, thank you for your encouraging insight. May I ask why, given its size, you did not mention Rare Earth Minerals in your ‘juniors’ list of significant contenders?

    December 1, 2015 - 3:46 AM

  • Tim Ainsworth

    Simple, GB had the courage to ask the Q everyone in the room was thinking. Suggest a degree of frustration, no doubt from time spent downstream recently.

    What would be interesting is if Jack or Tracy could ask Dudley’s permission
    to publish his 2015 Demand/Supply data by REO. Quite a contrast to many popular predictions.

    December 1, 2015 - 4:57 AM

  • JACK LIFTON

    Tim,

    Dudley specifically gave permission for me to.use that slide. I will ask Tracy to add it to my article.

    Jack

    December 1, 2015 - 6:04 AM

  • Tim Ainsworth

    Great Jack, while NOTHING is totally definitive in this business Dudley’s data out of China is probably as good as it gets ATM.

    One interesting point of discussion might be what is the difference between “illegal” production & legal other than a piece of paper called a production quota?

    Speaking of which, H1 2016 can’t be too far away?

    December 1, 2015 - 7:06 AM

  • Jeff Thompson

    What’s ironic is as we discuss this here in a vacuum, virtually every world leader, including the Chinese and Indian premiers, have converged in Paris to talk about general worldwide pollution reduction. Most of the focus will be on things like phasing out coal-fired electricity plants. What are the odds that the historically very dirty rare earth production will have any sort of visibility? Zero? Perhaps if the large technology company leaders who are also in attendance in Paris or who are monitoring remotely back at home were also aware of how unclean the sourcing of many of their rare earth dependent products were, beyond just high visibility things like lead and mercury reduction, one of them would take an interest in the growing body of cleaner alternatives out there, to break away from China’s dominance in the field and apparent willingness to allow the environmentally damaging “illegal” production to continue.

    December 1, 2015 - 8:41 AM

  • Paul Delaney

    Jack, have you revisited the situation with Search Minerals (SMY.V)? If not perhaps you should reassess them. As far as I can tell they have a better orebody and overall situation than most of the companies you list, but I’d have to review your list again myself. Worked as a senior geologist with SMY, being directly involved with the discovery and delineation of the Foxtrot deposit and other discoveries. Positive metallurgy, PEA, moving on to a pilot plant for more testing, more discoveries.

    December 1, 2015 - 2:19 PM

  • mark

    Dear all, I attended this conference. I come from an investment banking background. Some of the companies you mention above require over $1bn of CAPEX to get off the ground. This may of been possible 5 years ago but I am not confident of companies raising this money in current markets. I fear most will be stalled at PFS stage……..You are starting to see signs of this already with funding packages stalling.

    December 1, 2015 - 6:02 PM

  • Gautam

    Hi Jack, Thank you for this very interesting article and insight. Would appreciate similar thoughts on the ecosystem required to bring the ore body, from the listed miners, to the market place as usable end product. If mining does happen outside China and the material has to go back to China to be processed, the problem still exists.

    December 1, 2015 - 7:33 PM

  • Jeff Thompson

    Mark,
    I agree with you for the capexes that are north of $1billion, however there are good low capex alternatives out there. Take a look at Texas Rare Earth’s plans for a $293 million capex to get into full-scale heavy rare earth production as detailed in the revised PEA on their website, or their scaled-back plan to get into targeted heavy rare earth production at reduced capex of $90 million as detailed in:
    http://investorintel.wpengine.com/technology-metals-intel/trer-plans-lower-capex-usd-100-million-round-top-heavy-rare-earths-project/
    Other companies also have strong cases to make, but TRER’s looks the most compelling to me from a risk/reward tradeoff perspective, especially with the added dimension of the uranium offtake agreement already in place, the potential for scandium and lithium, and the clean separation technology their joint venture with K-Tech is pursuing for their recent DOD/DLA contract.
    Regards,
    Jeff Thompson

    December 1, 2015 - 7:34 PM

  • Tim Ainsworth

    Gautam, in one neat para you have summed the big black hole in the ROW RE space, difficult to find many/any cohesive thoughts, or as Steve Jobs put it “joining the dots”.

    December 1, 2015 - 7:48 PM

  • john

    Hi Jack, I agree with Paul, there are some very good juniors out there that you may have missed. A good example is Crossland Strategic Metals Limited.

    December 1, 2015 - 10:18 PM

  • Christopher M Smith

    Jack, you consider yourself as an “independent” world expert on RE. How are you able to write an article with”Global RE Market” in its title and manage to avoid any mention of the only company outside China that is producing ie Lynas. Is it sour grapes since the company is not American ? or what is it ? It is not at all clear that in the current economic environment any of the companies you do mention will survive.

    December 2, 2015 - 3:24 AM

  • Jean-Claude

    The figures for REO production are always subject to changes! Do we have reliable estimates for 2014? In their January 2015 report the USGS list the following figures:
    – USA 7000 (probably largely exagerated)
    – Australia 2500
    – India 3000
    – Russia 2500
    – Thailand 1100
    – Others 400
    That’s a total of 16500 (more reasonably 13-14000 if USA production is corrected), which is reasonably well in line with Dudley’s figure. But what about 2015? Can we get more details?

    Regading Jack’s assay, yes, I think Lynas should have been cited, as well as recycling. Do we have estimates for that? in Europe, phosphor recycling is producing about 1500-2000 t REO per year presently, to be regularly increased and magnet recycling in Japan/USA/China is probably producing much more?

    December 2, 2015 - 4:02 AM

  • Alex

    Thailand ?
    There are some Pilot Plants at Laos and Vietnam but they just processing REO Carbonate from Malasia, Russia, or China
    It can not be considered as production because they use existing ROW supply chain materials.
    India can not processing yet REO carbonate they can produce polishing poweders only , sometimes from Chinese material.

    December 2, 2015 - 5:12 AM

  • Jack Lifton

    All,
    I am focusing on juniors in development, and the readers at IIR are sophisticated enough to know that Lynas is not a junior. Also, Lynas does not produce or have plans to get into the production of individual SEGs and HREEs, as far as Amanda Lacaze has repeatedly said, until Lynas is a stable going concern with regular quarterly profits.
    I just was in Europe and spoke with both the industrialists directly involved in recycling and the bureaucrats and academics who are supporting it. Today there is little or NO recycling of phosphors to recover rare earths or yttrium in Europe. THE LOW PRICE OF EUROPIUM HAS MADE SUCH EFFORTS NON-PROFITABLE! Also, although the recycling of rare earth magnet scrap is being looked at and tested in several European countries and is the subject of a serious project by the EU THERE IS NO RARE EARTH PERMANENT MAGNET RECYCLING IN EUROPE ON A COMMERCIAL BASIS AT THIS TIME!!!!. The Chinese say that in 2014 they recycled 20,000 tons of rare earth permanent magnets legally. The Japanese probably did some 2000-4000 tons in Japan and Viet Nam.
    Finally, Amanda Lacaze stated that Lynas produced 9000 tons of products in 2014, not 3000 as some on this list believe. Adding the “missing” 6000 tons to Jean-Claude’s calculation brings it in line with the 23,000 ton ESTIMATE.
    If you want to rely on promotional bs intended to push share prices then you may do so, but please don’t cite such hype as data.
    I have not “vetted” every junior rare earth venture in the world, but I try to get to the good ones. I surely may have missed some, but I doubt that I have missed too many that are as far along in development so as to need only capital to go forward. I did not fly 10,700 miles to Singapore as a tourist, and I will be going to Brazil, Japan, China, and Sri Lanka early next year to discuss processing technologies; the financing of projects; and to see some projects that I have not previously visited. I am loathe to comment upon or make judgements of projects if I have not seen them and spoken with the management personally.

    Jack

    December 2, 2015 - 8:10 AM

  • Tracy Weslosky

    Good morning Jack – I have just received yet another call from an investor of Search Minerals asking me why you have excluded them. Frankly, I told them I was surprised by another company or two that you excluded, including the one that forwarded Dudley’s PowerPoint for you to review….and yes – I will get Slide 5 added next (smile)!

    So I asked one investor to send me some notes for you on why you need to integrate Search into your list. A fan of their management in particular myself (@GregAndrewsSMY) — here is what I received:
    The strengths of our project as we see it:

    • Innovative, patent-pending Metallurgy process has been simplified, pilot plant is being completed.
    • In-house metallurgical and geological expertise – Dr. Dreisinger and Dr. Miller
    • Anticipated low capital and operating costs (PEA to be released late December 2015)
    • Resource has the Critical Rare Earths for the future (Dy, Nd, Pr, Eu,Tb, Y), with potential to add to resource from up to 20 other prospects
    • Existing infrastructure near deposit and processing plant – eliminates significant capital costs
    • Non-disruptive production to the supply chain – 1,000 tonne per day of ore treated will produce approximately 3,000 tonne Mixed Rare Earth Oxides per annum.
    • Strong Federal and Provincial government support
    • Strong relations with Aboriginal and Local communities
    • Experienced management team and working Board of Directors aligned with Shareholder interest (>25% ownership)

    Having just been to an aboriginal event in Toronto in the last 2 weeks, I must confess that this is indeed more of a selling point than some may appreciate. Thanks again Jack!

    December 2, 2015 - 9:49 AM

  • Tracy Weslosky

    Jack – slide 5 has been added.

    December 2, 2015 - 9:59 AM

  • Janet

    I really appreciate the valuable information that you are providing here Ms. Weslosky and really learned a lot from Mr. Lifton`s article …. of course I now have more research to do. The information on Search Minerals was very helpful.

    December 2, 2015 - 1:18 PM

  • Tim Ainsworth

    The IMCOA data I was referring to is on page 21 “Forecast Demand and Supply for Individual Rare Earths in 2015”.

    Probably the best summation of the current state of play available ATM. If we can’t get a grip on reality what point looking forward?

    December 2, 2015 - 3:41 PM

  • Jack Lifton

    Tim,

    Dudley explicitly gave permission only for the above chart to be used. He would have to authorize the use of the chart of which you speak.

    Jack

    December 2, 2015 - 4:33 PM

  • R V Richardson

    Jack, the title of your essay includes the words ‘…the global rare earth market.’
    You then say: ‘For me the ultimate question is “How can I make sure that non-Chinese industrial manufacturers have a secure supply of the rare earths forms that they need that are critical for their products at prices that over a reasonable term will ensure that those products are competitive in their chosen markets?” ‘

    You then cover in detail the predominant position of China in currently controlling the world market for rare earths and their pricing, including the excellent example of setting a national quota for NdPr that seems to deliberately promote corrupt production and ‘smuggling’, probably by some major producers.

    But you then make no mention of the recent history of the ONLY TWO non-Chinese RE miners and producers, one now in Ch 11 bankruptcy and the other now building up the billion dollar largest RE processing plant in the world toward full 22,000 tonnes pa output! So I find it passing strange that you then conclude by saying:

    ‘Dudley and I agree that the necessary diversity of rare earths production outside of China by 2020 strongly implies that the world needs production from …… – and you then name several companies that are not only NOT currently producing REs, as far as I can determine, but which face enormous challenges in attracting funding to bring them to where Lynas was about five years ago?

    December 2, 2015 - 5:52 PM

  • Jack Lifton

    It’s “diversity” of rare earths produced outside of China that’s most important. Lynas, or Indian Rare Earths, or, perhaps, a world class miner such as BHP, VALE, or Rio can produce all of the light rare earths anyone will ever need. The problem is SEGs and HREEs. That’s why I promote the juniors who I think can produce them outside of China.

    December 2, 2015 - 7:28 PM

  • Tim Ainsworth

    Jack, interesting to reflect your comments against Dudley Kingsnorth’s 2015 Supply/Demand data, with the additional filter of 2015 production quotas.

    LRE Demand 134,770t
    Supply 156,200t
    Quota 87,100t

    SEG/HRE Demand 11,227t
    Supply 21,700t
    Quota 17,900t

    From those numbers we see SEG/HRE not only circa 200% OVERsupplied ATM but falling nearly 40% UNDER anticipated production quotas.

    Drill down further and we find the nominal “CREO” Eu, Tb & Dy OVERsupplied by 280%, 190% & 215%.

    Hardly need to elaborate on the phosphors demand trajectory but worth noting JL Mag’s (component of the Sth 9ktpa HRE quota) projection of a 50% decline in Dy demand 2014/2019, supported by 65% of their NdFeB grades being Dy Free or Lite, very much in line with earlier data from Showa Denko, Sanyo Denki, et al.

    With China SEG/HRE dramatically OVERsupplied into shrinking demand segments, clearly reflected in current pricing, I cannot understand how you can make a rational case to “promote the juniors who I think can produce them outside of China.”, particularly when ROW lacks the MSC to turn them into anything useful.

    Total current demand 1500tpa at an average value a little over $200kg = $300Mpa, far less than the CapEx for most of the fantasies.

    LRE situation warrants separate analysis.

    January 1, 2016 - 7:02 AM

  • Jeff Thompson

    Thanks for the data, Tim. Oversupply ratio looks pretty rough for heavy rare earths at the moment. Looks like the printing presses were left on autopilot for too long.

    What would be instructive to see (but I know data is probably not easily available at this resolution level) would be historical demand data for each year from something like 1990s (or earliest year available) through 2015 broken down element by element, particularly Nd and Dy, so that we can get a long term perspective on which elements have been experiencing purely monotonic increases, which elements are in monotonic declines, and which are oscillating through peaks and valleys as they are both engineered out of old applications and engineered into new applications.

    Particularly relevant would be, for those elements with oscillating year-by-year demand, to see the average period of time between local minimums and local maximums in demand, to establish a sense more broadly of how “useful” to all fields of engineering/industry the physical properties of that particular element have been historically, are now today, or could be in future. The amount of peaks and valleys in the year-by-year demand data would help determine which elements, by virtue of their inherent properties, are likely to find acceptance in future applications, versus those that are in true secular decline.

    January 1, 2016 - 9:12 AM

  • Jack Lifton

    Tim,

    The biggest difference between your world view and mine is that I believe that globalization has been a chimera.
    Global1000 industry will not ever (again) put its eggs in one rare earth basket. Even the idea went against the grain here in the USA where an alternate vendor is always given 5-25% of the business to ensure continuity and the leveling effect it has on the prices of the majority vendor.
    Even as we have this difference of opinion the Japanese and the Indians are pouring hundreds of millions of dollars into developing non Chinese rare earth sources. The problem in and with the USA is that its demand and its related employment are trivial in the overall picture of rare earth demand.
    Watch though for the lithium supply monster to rear up and bite the battery makers you know where as the lithium boom-bust cycle is now energized (excuse the pun) by the building momentum for EVs and HEVs.
    We’re never going to agree, I know, but
    Happy New Year

    Jack

    January 1, 2016 - 10:01 AM

  • Tim Ainsworth

    Same Jack.

    Doubt globalisation, rather economic benefit is clearly sub CoP.

    Particularly NdFeB, ROW innovation has engineered around tyranny of supply.

    January 1, 2016 - 10:21 AM

  • Jack Lifton

    Jeff,

    I wish I had the data sets you have delineated. If you find any of them please let me know.

    Jack

    January 1, 2016 - 11:45 AM

  • Jeff Thompson

    Will most certainly post it here if I can discover any of that data, Jack.
    Jeff

    January 1, 2016 - 6:20 PM

  • Tim Ainsworth

    Jack, US response to HRE lies here:

    “General Electric (GE), Lawrence Livermore National Laboratory (LLNL), and Oak Ridge National Laboratory (ORNL) have created new kinds of fluorescent-lighting phosphors that use far less rare-earth elements than current technology. Rare-earth elements are hard to come by and the United States has access to a limited amount of rare-earth elements and relies on imports.”

    http://www.laserfocusworld.com/articles/2015/10/new-fluorescent-lighting-phosphors-consume-far-less-rare-earths.html

    “Experiments performed at Ames Laboratory by post-doctoral researcher Arjun Pathak, and Mahmud Khan (now at Miami University) demonstrated that the cerium-containing alloy’s intrinsic coercivity–the ability of a magnetic material to resist demagnetization–far exceeds that of dysprosium-containing magnets at high temperatures. The materials are at least 20 to 40 percent cheaper than the dysprosium-containing magnets.
    “This is quite exciting result; we found that this material works better than anything out there at temperatures above 150° C,” said Gschneidner. “It’s an important consideration for high-temperature applications.” ”

    “The research was supported by the U.S. Department of Energy’s ARPA-E REACT program (Advanced Research Projects Agency-Energy-Rare Earth Alternatives in Critical Technologies) which develops cost-effective alternatives to rare earths, the naturally occurring minerals with unique magnetic properties that are used in electric vehicle (EV) motors, and wind generators. The REACT projects identify low-cost and abundant replacement materials for rare earths while encouraging existing technologies to use them more efficiently.”

    https://www.ameslab.gov/news/news-releases/ames-laboratory-scientists-create-cheaper-magnetic-material-cars-wind-turbines

    Whether Ce/Co is more or less effective than GBD, low CO2, etc, is moot, point is US innovation has worked around the tyranny of HRE and basically rendered them non economic relative to CoP.

    GL ever building a US MSC to put them BACK into CFL or NdFeB, all else incremental ATM.

    Yet the US is the largest importer of Chinese La (circa 8ktpa) into FCC, particularly heavy shale oils, despite Mt Pass containing 33% La/50% Ce. How is this so?

    Presumably autocat to Detroit, via global MSC, would be somewhat similar.

    Congressional Research report Dec 2013, using IMCOA 2011 data, shows US Rare Earth Demand by Application 2010:

    60% catalysts vs global 20%
    3.3% magnets vs global 21%
    3.3% phosphors vs global 7%

    SB interesting to see if their 2015 forecast plays out:

    43% catalysts vs global 15.5%
    13% magnets vs global 26%
    4% phosphors vs global 6%

    Despite Mt Pass US certainly the King of imported catalyst, can’t really determine any other critical mass warranting an attempt at economic import substitution. Moly even had to cart their NdPr off to China to turn it into something useful.

    https://fas.org/sgp/crs/natsec/R41347.pdf

    January 1, 2016 - 11:46 PM

  • Tim Ainsworth

    Jack, US response to HRE lies here:

    “General Electric (GE), Lawrence Livermore National Laboratory (LLNL), and Oak Ridge National Laboratory (ORNL) have created new kinds of fluorescent-lighting phosphors that use far less rare-earth elements than current technology. Rare-earth elements are hard to come by and the United States has access to a limited amount of rare-earth elements and relies on imports.”

    laserfocusworld.com/articles/2015/10/new-fluorescent-lighting-phosphors-consume-far-less-rare-earths.html

    “Experiments performed at Ames Laboratory by post-doctoral researcher Arjun Pathak, and Mahmud Khan (now at Miami University) demonstrated that the cerium-containing alloy’s intrinsic coercivity–the ability of a magnetic material to resist demagnetization–far exceeds that of dysprosium-containing magnets at high temperatures. The materials are at least 20 to 40 percent cheaper than the dysprosium-containing magnets.
    “This is quite exciting result; we found that this material works better than anything out there at temperatures above 150° C,” said Gschneidner. “It’s an important consideration for high-temperature applications.” ”

    “The research was supported by the U.S. Department of Energy’s ARPA-E REACT program (Advanced Research Projects Agency-Energy-Rare Earth Alternatives in Critical Technologies) which develops cost-effective alternatives to rare earths, the naturally occurring minerals with unique magnetic properties that are used in electric vehicle (EV) motors, and wind generators. The REACT projects identify low-cost and abundant replacement materials for rare earths while encouraging existing technologies to use them more efficiently.”

    ameslab.gov/news/news-releases/ames-laboratory-scientists-create-cheaper-magnetic-material-cars-wind-turbines

    Whether Ce/Co is more or less effective than GBD, low CO2, etc, is moot, point is US innovation has worked around the tyranny of HRE and basically rendered them non economic relative to CoP.

    GL ever building a US MSC to put them BACK into CFL or NdFeB, all else incremental ATM.

    Yet the US is the largest importer of Chinese La (circa 8ktpa) into FCC, particularly heavy shale oils, despite Mt Pass containing 33% La/50% Ce. How is this so?

    Presumably autocat to Detroit, via global MSC, would be somewhat similar.

    Congressional Research report Dec 2013, using IMCOA 2011 data, shows US Rare Earth Demand by Application 2010:

    60% catalysts vs global 20%
    3.3% magnets vs global 21%
    3.3% phosphors vs global 7%

    SB interesting to see if their 2015 forecast plays out:

    43% catalysts vs global 15.5%
    13% magnets vs global 26%
    4% phosphors vs global 6%

    Despite Mt Pass US certainly the King of imported catalyst, can’t really determine any other critical mass warranting an attempt at economic import substitution. Moly even had to cart their NdPr off to China to turn it into something useful.

    fas.org/sgp/crs/natsec/R41347.pdf

    January 1, 2016 - 11:48 PM

  • Jack Lifton

    Tim,

    With regard to FCC, fluid cracking catalyst: It is clear that Molycorp could not compete on price, and that in any case its own production quality at Mountain Pass was frequently unacceptable and HAD to be shipped overseas. Ultimately the company seems to have given up on domestic (American processing) and simply sent mixed concentrates to China and Estonia for processing even to get at the Pr/Nd.
    As far as “cerium” containing alumina wash coats for making automotive exhaust emission catalytic converters, the largest manufacturing site for that in the world is Solvay’s Larochelle, France,where 2 dozen varieties of such wash coats are blended to order.
    Tim, If you were a procurement officer at BASF-Engelhard or Johnson-Matthey, or Umicore (Europe’s largest manufacturer of automotive catalytic converters) would you switch vendors to a high priced, irregular quality, inexperienced vendor? If so, please tell me why? If you were the purchasing agent at WR Grace or Albemarle (The other two of the US FCC troika, which includes BASF) would you switch from Chinese material imported into and processed in the USA- to preserve trade secrets-since China only in the last few years has begun to produce FCC even for its own use, and would you switch to an untested, inexperienced, firm with a faltering primary processing plant?
    It’s not just price, which seems to have been Molycorp’s sole target and holy grail, it’s quality, service, on time delivery, and a track record that makes a top tier vendor.
    You cannot achieve those goals by pumping and dumping stock.
    If someone-not Ames-licenses their technology and economically mass produces magnet alloys and then a magnet maker puts them into the PPAP, the production product approval process, and if after 2-3 years they are competitive then there will be a new use for cerium in rare earth permanent magnets. Lab results are frequently used to pump share prices, but the unglamorous and lengthy industrial approval processes seem unknown to those in the junior mining industry and seem never to be taken into consideration in their business models.
    I note that in the middle of this “oversupply” debate the Ganzhou Rare Earth trade group has raised prices for SEGs and HREES by 8-9%.

    Happy New Year

    Jack

    January 2, 2016 - 7:38 AM

  • Tim Ainsworth

    Jack, you stated: “I note that in the middle of this “oversupply” debate the Ganzhou Rare Earth trade group has raised prices for SEGs and HREES by 8-9%.”

    Since the announcement of the new concentrate tax Ganzhou RE have made a number of such declarations but if you follow the Asian Metal reports they always clarify the underlying CASH price:

    “BEIJING Asian Metal 30 Oct 15 – Although Ganzhou Rare Earth Industry Association raised their offers for ion rare earth concentrate by around RMB10,000t USD1,572t to RMB180,000-190,000t USD28,302-29,874t by cash payment on October 27th, the market prices for the material remain stable at RMB100,000-110,000t USD16,509-17,296t by cash payment, unchanged compared with those of one weeks ago. Most separation plants halted production in July or August and have no intention to resume production in the coming two weeks. Thus, the market saw limited buying activities over the past four days”

    Appears Ganzhou can hang out whatever price it likes, it is in no position to influence the real underlying market. Lack of pricing power is most commonly associated with either excess supply or declining demand, in this instance abundant evidence suggesting both.

    January 7, 2016 - 12:26 AM

  • Rafi

    Like.

    January 10, 2016 - 8:38 AM

  • Jeff Thompson

    Rereading this article, one of the better recent rare earth articles, and the excellent commentary that follows it (both for technical content and for a civil tone, which should not be underestimated as it keeps discussions from being prematurely stifled), I am left pondering the implications of one of the statistics referenced in the article.

    Is it possible that the estimate referenced near the end of the article for last year’s Chinese domestic Pr/Nd demand of 30,000-35,000 tons, with a 20,000 ton quota placed on it, might be part of the reason for the oversupply in heavy rare earths? Understanding that more efficient usage/reduced content in permanent magnets is also a big part of the reason, but if the quota for Pr/Nd is so far below the domestic demand in China alone, and off-the-books “illegal” production is making up the difference, are the heavy rare earths being oversupplied as a byproduct of the race to keep up with the growing and above-quota Pr/Nd demand? Is there a meaningful amount of overlap co-mining that is occurring that can mean that trying to fill an unmet demand/low quota in Pr/Nd can lead oversupply of Dy/Tb? What’s the point of having a quota anyway?

    Thanks for any thoughts on the variables involved.
    Jeff

    January 18, 2016 - 8:16 PM

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