With Hybrids and Electric Vehicles, U.S. Risks Switching Dependency From One Foreign Commodity - Crude Oil - To Another - the Rare Earths - Expert Warns

With Hybrids and Electric Vehicles, U.S. Risks Switching Dependency From One Foreign Commodity - Crude Oil - To Another - the Rare Earths - Expert Warns

By Scott Doggett April 19, 2010

By Scott Doggett, Contributing Editor

As Robert Bryce tells it, the United States is on the road to trade its reliance on one type of import critical to transportation - oil - for reliance on another - the lathanides.

Worse, he says, is that while the global market for the crude oil used to fuel most cars and trucks today contains dozens of suppliers and includes some of our closest allies, one country controls the lathanides  market - and that country routinely tramples rights most Americans hold dearly, such as freedom of speech, freedom of assembly and the rights of the accused.

Addressing journalists at the 2010 Toyota Sustainable Mobility Seminar in La Jolla, Calif., last week, the author of "Power Hungry: The Myths of 'Green' Energy and the Real Fuels of the Future" (PublicAffairs; 2010) introduced some in the room to the lanthanides - the so-called "green elements" on the periodic table.

As you'll recall from Chemistry 101, the lanthanides are rare-earth ores, oxides, metals and alloys that are essential commodities in nearly all of the technologies that are seen as solutions to our energy challenges, from wind turbines to hybrid cars to solar panels, computers and batteries.

According to Bryce, China controls 95-100 percent of the present global market in lanthanides.

Indeed, a U.S. Government Accounting Office report titled "Rare Earth Materials in the Defense Supply Chain" and published on April 1 said "most rare earth material processing now occurs in China. In 2009, China produced about 97 percent of rare earth oxides."

Moreover, the report stated:

• According to industry data, refined rare-earth metals are almost exclusively available from China.
• The United States has the expertise but lacks the manufacturing assets and facilities to refine oxides to metals.
• The United States is not currently producing neodymium iron boron permanent magnets and has only one samarium cobalt magnet producer.
• According to government and industry data, the future availability of materials from some rare earth elements (including neodymium, dysprosium and terbium) is largely controlled by Chinese suppliers.
• China's dominant position in the rare-earths market gives it market power, which could affect global rare earth supply and prices.
• China has adopted domestic production quotas on rare-earth materials and decreased its export quotas, which increases prices in all of the world's rare earth materials markets.
• China increased export taxes on all rare-earth materials to a range of 15 to 25 percent, which increases the cost of doing business of for non-Chinese competitors.

In other words, the latest U.S. government information on the  lanthanides strongly supports everything Bryce said at the seminar, and nearly all of that was unnerving.

There was one bright spot in Bryce's speech (as well as in the GAO report, as the GAO graphic at right shows; click to enlarge): Vast reserves of rare earths do exist in the United States.

Unfortunately, those reserves are completely untapped and it will take years to mine them. The GAO report says rare-earths deposits in the U.S. and other countries could be mined by 2014.

That's an optimistic and potentially misleading assessment, according to Bryce. "At the moment, the only hope for the United States when it comes to domestic lanthanide production appears to be Molycorp Minerals, which owns America's only operable rare-earths mine," he said.

The mine, located near Mountain Pass, Calif., was taken out of production years ago when cheap Chinese exports of rare earths made it uneconomic. It was sold to a group of private investors, including Goldman Sachs, in 2008. The mining outfit was purchased from Chevron, which took control of Molycorp when it bought Unocal. (By the way, the other suitor for Unocal was the Chinese National Offshore Oil Company.)

According to Bryce, Molycorp has begun processing some of the ore that was stockpiled a couple of years ago, but the company says it won't be able to resume mining operations until 2011 or 2012. Even if the Molycorp mine can return to full output, "company officials believe it will only be able to capture perhaps 15 percent of the world market," Bryce said.

Meanwhile, China is doing all it can to control the market in rare earths, Bryce said. The country has roughly a thousand doctorate-level scientists working on technologies related to the mining and separation of rare-earth elements as well as on ways to turn those elements into salable products, he said.

At the same time, China is cutting its exports of those materials, has raised export taxes on some of the rare earths and has prohibited foreign companies from investing in China's rare-earth mining and processing sector, he said. Regular readers of Green Car Advisor may recall that last summer we reported on China's moves to tighten control on the mining and export of  rare earths.

Additionally, China is placing orders with several countries that have promising rare-earths reserves, he said.

Bryce isn't the only person to speak out on the threat China's near-monopoly poses to countries that produce vehicles that require rare earths. Last May, an official at Japan's Ministry of Economy, Trade, and Industry told The Times of London that "all green technology depends on rare-earth metals and all global trade in rare earth depends on China."

Bryce wrapped up his remarks by stating that while environmentalists and others in the U.S. and other countries are yearning for a hybrid/electric, no-carbon future, the reality is that that vision depends mightily on the lathanides. That means mining, he said, and China controls nearly all of the world's existing mines that produce lanthanides.

"These facts demonstrate the need to accept the interconnectedness of the global economy," Bryce said. "Simply trading one type of strategic commodity import (such as oil) for another (lanthanides and lithium) makes little sense. The reality is that the U.S. will continue to depend on the global marketplace to obtain the commodities it needs."

Scott Doggett:  is an AutoObserver.com Associate Editor.