Rare Earths – Will New Supply Ease Availability Concerns?
LONDON, November 16, 2011 /PRNewswire/ –
Roskill Information Services
Rare Earths and Yttrium: Market outlook to 2015 (14th edition)
The rare earths industry is at a turning point, new sources of supply
from mines outside China are coming on stream, the industry in China is
coming under more effective control with increased corporate consolidation
led by state controlled enterprises, and a re-evaluation of the way in which
rare earths are used is taking place, following a year of unprecedented high
Changing pattern of supply
In 2011, China is estimated to account for 94% of world supply, with
most of the remainder coming from Russia and the USA. By 2015, the rest of
the world will account for just over a quarter of world supply and this
proportion is likely to increase further over the five years to 2020.
Since 2006, Chinese government controls on output, such as mining
licences and quotas, have become more effective. In 2011, further controls
were introduced and all companies mining rare earths will now be required to
show that they have mandatory production plans, appropriate planning
permission, environmental certification and safety licences. In addition,
companies exceeding the production quota can have their licence to operate
revoked. In 2011, the Chinese government also introduced tighter controls on
emissions from processing plants, which came into force on 1st October.
In order to ensure that measures to control output and reduce emissions
are realised, a process of consolidation of control of production has taken
place since 2007. Baotou Rare Earth controls the flow of concentrates from
the Baiyun Obo mine in Inner Mongolia and will control most of the cracking
and separation capacity by the end of 2011. In the south of China, the
location of key heavy rare earth deposits, a number of companies have been
involved in the consolidation process including China Minmetals, Chinalco,
and Guangdong Rising Nonferrous Metals.
The structure of the rare earth industry is changing, not only in terms
of the development of resources outside China, but also in the determination
of companies both inside and outside China to become fully integrated into
downstream products such as magnets and phosphors. There will continue to be
a role for merchant producers supplying separated oxides, but it will be
less prominent than in the past.
Chinese demand key to growth over last five years
Global demand for rare earths grew at 5%py between 2005 and 2010,
although the market shrank in 2009, in line with the global economic
downturn, which had a marked negative impact on demand in the rest of the
world. Growth in demand in China was much higher, running at 11%py and the
country now accounts for 70% of world demand. Estimated total demand in 2010
was 125,000t REO.
Consumption of rare earths in the rest of the world declined by nearly
4%py between 2005 and 2010. The decline was partly due to the impact of the
recession but also reflected the increasing volume of downstream processing
within China and the tightening export quota.
Magnets account for increasing proportion of market
In terms of volume, magnets accounted for around 27% of total demand in
2010, compared with just 13% in 2000. It is also by far the most valuable
sector, accounting for around 47% of the total gross value in 2010. High
rates of growth over the last 20 years have been driven by increased demand
for hard disc drives, personal audio equipment and small electric motors in
some cars. Some of the predicted growth for magnets to 2015 will come from
the use of permanent magnet motors in wind turbines and HEVs.
Metallurgical applications, which include the use of rare earths in
nickel metal hydride (NiMH) batteries as well as their use as an additive in
steel and magnesium, accounted for around 19% of global demand in 2010. NiMH
batteries have shown the highest rates of growth in this sector over the
last decade, initially driven by demand from portable electronic equipment
and then from the use of these batteries in HEV power systems.
LREEs are used in the manufacture of fluid catalytic cracking catalysts
(FCCs) and autocatalysts, which together account for around 16% of global
demand. FCCs are the main application for lower value LREEs and this sector
has seen significant changes in 2011, as Chinese export prices soared.
Manufacturers responded by developing alternative formulations using
reduced, or even zero, levels of rare earths.
The development of flat screen displays has had an adverse impact on the
use of cerium oxide as a glass additive and in polishing powders. However,
burgeoning demand for flat screens in smart phones and tablets has partially
offset the reduced unit consumption of polishing powder per screen. Slurry
efficiency has been improved in the polishing process and recycling used
where appropriate, with a concomitant fall in the consumption of cerium
Phosphors and pigments account for just over 6% of the total volume of
the rare earths used, but nearly 15% by value. Phosphors are the main market
for europium and terbium, both high value HREEs, as well as yttrium. The
main factor driving growth to 2015 will be the spread of legislation
designed to phase out incandescent bulbs, resulting in their replacement by
compact fluorescent lamps, all of which require the use of rare earth
In the decade to May 2010, price fluctuations for rare earth oxides were
nearly all contained within a band of 300%, but from June 2010, prices began
to soar. Prices for lower cost LREEs were particularly affected by the
clampdown on Chinese export quota in mid-2010. Between May 2010 and August
2011 the fob China price for cerium oxide increased by nearly 3,000% and
that for lanthanum oxide by 2,300%.
Chinese internal prices for neodymium oxide increased eightfold between
May 2010 and August 2011, reflecting a shortage of REEs for magnets within
China. The high prices prevailing in this period resulted in a concentrated
effort to find alternatives to NdFeB magnets in high intensity applications,
such as permanent magnet motors for wind turbines and hybrid electric
vehicles (HEVs), both within China and in the ROW.
At the start of Q4 2011, there were downward corrections to the prices
for all rare earth oxides. Buyers had reacted to rising export prices by
staying away from the market and Chinese exports tumbled through the first
nine months of the year.
Industries in the rest of the world have responded to high prices by
reformulating their product (FCC catalysts), reducing unit consumption
(polishing powders), seeking alternative technologies (induction motors
instead of permanent magnet motors) and researching opportunities for
recycling the rare earth content of batteries, magnets and lamps.
Chinese supply is forecast to increase by around 8%py between 2011 and
2015 to 145,000t REO, but this increase in output will mainly serve to
supply the growing demand for rare earths in China’s manufacturing industry.
Export quotas are unlikely to be eased over the next four years, so supply
to meet growth in demand in the rest of the world will have to come from
outside China. Supply from mines outside China will increase by 70%py to
2015. These new projects are rich in light rare earths, including neodymium,
but will contribute relatively little to the global supply of HREEs.
Overall demand for rare earths is forecast to grow at 7-9%py to 2015.
Predicted growth rates might have been stronger but for the fall in global
GDP from 3.9% in 2010 to an expected 3.1% in 2011 and the impact of high
prices on some applications in 2010/2011. Growth in the demand for neodymium
and dysprosium in the manufacture of magnets will continue to be strong and
could result in a supply deficit in 2015. Questions about the availability
of REEs for magnets, and any prolonged period of high prices could limit the
use of NdFeB magnets in permanent magnet motors in HEVs, EVs and wind
Rare Earths and Yttrium: Market outlook to 2015, 14th edition is
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