EDITOR: | June 2nd, 2019

Expert Alastair Neill on the impact of a U.S. rare earths ban

| June 02, 2019 | No Comments
image_pdfimage_print

A lot has been discussed during the current trade war between China and the USA and the possible ban of rare earths to the USA. If the ban comes the impact on the USA will depend on how far downstream China takes the ban.

If it is limited to rare earth oxides, salts and metal there will be some impact but mostly on catalyst manufacturers. In looking at the export numbers from China 2016 to 2018 (Argus Media) the largest volume is Lanthanum oxide. In 2016 the volume was 9,223 tonnes dropping to 7,273 in 2017 and 5,677 last year. Most of this volume would go to producers of FCC (fluid cat cracking) catalyst which is used in petroleum refining. I do not believe the drop is due to a fall in demand but likely a shift in purchasing from the Lynas operation in Malaysia. At the rated capacity of 22,000 TPY Lynas can produce around 5,600 TPY, which explains the drop in exports of Lanthanum oxide from China. Assuming the drop is all due to Lynas replacing Chinese supply Lynas could supply about 40% of the remaining volume. What it does indicate is that even Lynas cannot supply all the needs of the FCC industry in the USA. During the soaring prices of 2010-2012 the industry developed alternative catalysts which may not be as effective but an option during an extended ban. Another option would be to buy FCC catalyst from China, as this would likely not be affected, and blend into their own products. Obviously if MP Materials starts their separation, as planned, next year, at Mountain Pass they could cover the differential.

The second largest volume imported by the USA from China is Cerium carbonate. It has grown from 815 tonnes in 2016 to over 2,150 tonnes in 2018. A majority of this likely is going to three way catalyst (TWC) for automobile catalysts. Lynas could supply this amount easily but the question is whether they are qualified on the formulations. This is a lengthy process and can take years so this could be an issue. Some of the material would go to styrene catalyst production and again it would depend on whether Lynas is already qualified.

The remaining volumes in 2018 of any note are Neodymium oxide at just under 40 tonnes and 58 tonnes of Praseodymium oxide. Small amounts that could be sourced from stocks outside China or from Lynas as they are starting to separate these two elements.

Also a lot has been made of the potential impact of rare earths on the US military. If the ban is on rare earth elements the direct impact will be minimal. If however the ban is extended to components with rare earth elements the implications become more severe. Given President Xi’s visit to a magnet factory in southern China the indications are that this would be front of mind for the Chinese. The visit by Xi was no accident. Rare Earth magnets or even more importantly components with rare earth magnets will have an immediate impact in automotive, electronic, and consumer products. This also would directly impact the military that buys components for a wide range of uses across all branches of the US forces.

Having lived in China and worked with them for almost 25 years they take a long term view, especially now that Xi has no term limit. Trump however has a very short view. Next year’s election. What Trump also fails to recognize is that the Chinese will need to save face in any settlement. The same thing Bush had to learn when the US spy plane had to do an emergency landing in Hainan island after an altercation with a Chinese fighter. It was not until the US apologized for an authorized landing were the crew and plane returned to the USA. So it will be interesting to see how this trade war evolves and resolves.


Alastair Neill

Editor:

Alastair Neill is the President of Trinity Management, a consulting company specializing in business development activities in rare earths, specialty metals and startup of technology-based ... <Read more about Alastair Neill>


Copyright © 2019 InvestorIntel Corp. All rights reserved. More & Disclaimer »


Leave a Reply

Your email address will not be published. Required fields are marked *