Archive

Archive for October, 2013

Managing supply risks of rare earths

October 15, 2013 1 comment

By Ruggero Golini, Filippo Valoncini, Jury  Gualandris

Since the Nineties, rare earths have gained an important role in the World technological development because of their use in the so called green technologies (check our previous posts here and here).

Despite their name, these elements are not so rare; indeed, they are about 200 times more available than gold. Nevertheless, there are only few places on earth where the extraction with today’s technologies is profitable.

In the last decade, China became the monopolist in the sector of rare earth by extracting about 95% of the World total production. In the last years, with the rapid development emerging country economies, the global demand of rare earths rose dramatically bringing  to an incredible increase in prices (some elements between 300% and 4000%). Many of the processing stages of the value chain are located in China. China produces more than the 95% of the rare earth oxides, about 90% of the alloys and 75% of Neodymium magnets. Furthermore, many Chinese companies develop high technology products exploiting these materials. Furthermore, the Chinese government has defined policies in terms of export quotas, incentives, customs and external investments. As a consequence of these policies,  in the 2005-2009 period exports decreased by 20% down to 50,000 tons. Until 2015 they could be reduced to 35,000 tons.

Because of that, some issue in the global supply chain has emerged.

In 2011, the US Department of Energy (DOE) identified the level of criticality of the most common rare earths in the short and long term. The list shown in the figure represents the short term situation, while arrows describe how the situation will change in the future. The rank is derived according to supply risks (that includes: basic availability; competing technology demand; political, regulatory  and social factors; codependence on other markets; producer diversity) and importance to clean energy technologies (that includes: clean energy demand, substitutability limitations….). Interestingly the two variables are quite correlated, that is, the most important materials are at the same time subject to higher supply risks.

Short and medium term the level of criticality of the most common rare earths
(adapted from US Department of Energy, 2011)

As we can see from the table, the situation is not going to get significantly better in the future and companies should therefore develop specific risk management strategies.

For instance, as reported by the US Department of Energy (DOE) report, Toyota followed two strategies. First of all, it tried to secure its supply of rare earths (used for hybrid and electric vehicles) by establishing a task force to monitor the risks and partnerships with few selected suppliers. Moreover, Toyota is trying to reduce the dependency on rare earths by redesigning the products, for instance, electric motors.

Sources

http://www.greenreport.it/_new/index.php?page=default&id=14067

Rare Earth Elements: The Global Supply Chain, Marc Humphries September 30, 2010

Study on Rare Earths and Their Recycling, Final Report for The Greens/EFA Group in the European Parliament, Oko Institut e.V., January 2011

Critical Materials Strategy, U.S. DEPARTMENT OF ENERGY, December 2011

Advertisements
%d bloggers like this: