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Rare earths: rising prices, hidden costs

Will our search for environmentally-friendly energy end up damaging the environment? It could be so. An article in the Guardian this week (03 February 2014, describes the threat of pollution from mining rare earth metals, among whose applications are the powerful magnets used in wind turbines and electric car motors. They are also vital raw materials in other high-tech manufactured products from catalysts to optical fibers.

Rare earth metals are not actually all that rare, but finding ore bodies with high enough concentrations to mine them economically is difficult. Also, extracting and purifying the metals leaves waste products that include strong acids and the radioactive elements that often occur alongside the rare earths themselves. Where the industry is not properly regulated, environmental consequences can be severe.

China has around half of the known global reserves of rare earths. From the mid-1980s onwards, its laxly-controlled mining sector increased production, with exports positively encouraged, until China was supplying 95% of the world’s rare earths. The government’s attitude was that as oil is to the Middle East, so rare earths are to China.

Much of the production was from the mine and processing plants at Bayan Obo and Baotau in Inner Mongolia, and illegal mining was also rife. This drive for supremacy in production left global prices so low that former rare earth producers like the US could not compete. It also left mining areas with vast quantities of toxic waste.

China has recently started to toughen up its control of the industry. It now imposes export quotas, with the amount companies are permitted to export tied to their environmental performance. It is also consolidating the highly fragmented industry into a small number of state-owned corporations. With supply restricted, a price rise was inevitable. Sure enough, by 2011, some rare earths were selling at 20 times their price a couple of years earlier. Prices have fallen since then but are still high compared to historic levels.

In response to unprecedented prices in 2010 and 2011, alternative reserves are being exploited. In particular, the Mountain Pass mine in the US, which owner Molycorp had re-opened in December 2010, was contributing a significant quantity to global rare earth production by 2012. This mine had been the world’s largest source of rare earths from the mid-1960s until China’s rise to dominance. Australia and India also boosted their production levels. The result was that whereas China supplied 95% of the world’s rare earths in 2011, by 2012 its share was 86%. In fact, this may not be of great concern to the Chinese government. With a stated aim of moving from low-cost manufacturing to becoming a global innovation leader, it will be happy to keep rare earths within its borders, using them as inputs to its own renewable energy and other high-tech products.

Going forward, this trend should continue, with Canada and Greenland, for example, likely to be contributing significantly, and reserves also observed in Malawi, Namibia, and South Africa, Kazakhstan and Afghanistan, and Vietnam and Laos. While stringent environmental regulations should keep pollution in check in developed economies, the presence of rare earth deposits in developing economies may concern local communities if the scramble for these resources means that their environment is damaged.

To find out more about the rare earth industry, read Rare earths: responding to China’s monopoly

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