INSIGHT: US energy, refining at risk with rare earth shortages

16 December 2010 17:17  [Source: ICIS news]

By Joe Kamalick

WASHINGTON (ICIS)--The Department of Energy (DOE) warned this week that a broad range of US advanced energy technology developments as well as conventional petroleum refining could be disrupted by a looming shortage of rare earths.

In a focused analysis titled “Critical Materials Strategy”, the department examined in particular the role played by rare earths in manufacturing of key clean energy products such as wind turbines, electric vehicles, photovoltaic cells, fluorescent lighting, high-tech batteries, permanent magnets and thin films.

These product areas were selected for priority attention, said the department, because each relies on critical materials, including rare earths, and global demand for advanced energy technologies and products was expected to accelerate significantly over the next 15 years.

But other energy technologies and process industries also are threatened by a rare earths shortage, including fuel cell chemistry development and manufacturing, nuclear power, magnetic refrigeration and fluid cracking catalysts (FCCs) critical to the petroleum refining process.

The 17 chemical and mineral substances called rare earths also are crucial to the manufacture of weapons and space systems, lasers and fibre optic communications, to name but a few.

Rare earths are not actually rare - most of them are found in almost any soil around the world - but extremely rare are those areas in which these substances can be found in concentrations that make mining them commercially feasible. 

At present, there are only three places in the world where they can be found in such economically viable concentrations: Inner Mongolia in China, in a remote part of Australia, and in Mountain Pass, California.  (Much smaller resources are in India and South Africa.)

The US used to produce all the rare earths it needed up until 2002 or thereabouts when the Mountain Pass rare earths mine was shut down, in part because high federal and state corporate taxes and tough California environmental laws made the mine uncompetitive with much cheaper rare earths mining and production in China.

As a consequence, the department report notes, “More than 95% of current production capacity for rare earth metals is currently in China”.  And according to recent news reports, the Beijing government has begun to restrict or cut off supplies of rare earths to Japan and the US. 

The Chinese also are assessing steep export duties on key rare earths, in violation of World Trade Organisation (WTO) regulations.

In addition, Beijing is more or less forcing foreign-based industries dependent on China’s rare earth supplies to shift manufacturing capacity to the Middle Kingdom in order to have access to those crucial raw materials.

The department’s report also notes that “lead times with respect to new [rare earth] mining operations are long (from 2-10 years)”.

“Thus, the supply response to scarcity may be slow, limiting production of technologies that depend on such [rare earths] mining operations or causing sharp price increases,” the report adds.

“Concentration of production in any supplier creates risks for global markets and creates geopolitical dynamics with the potential to affect other strategic interests of the United States,” the Energy Department analysis says. 

“Geopolitical dynamics affecting strategic US interests” is polite government-speak for “blackmail”.

DOE’s strategy to cope with the geopolitical dynamics that might affect US energy sector technologies, manufacturing and production rests on three pillars, the report says.

• “First, diversified global supply chains and multiple sources of materials are required to manage supply risk. This means taking steps to facilitate extraction, refining and manufacturing here in the United States, as well as encouraging additional supplies around the world.
• “Second, substitutes must be developed. Research leading to material and technology substitutes will improve flexibility to meet the material needs of the clean energy economy.
• “Third, recycling, reuse and more efficient use could significantly lower world demand for critical materials. Research into recycling processes coupled with well-designed policies can help make recycling economically viable over time.”

The growing shortage of rare earths, the developing restrictions on China’s supply and the potential interruption of access could impact the increasing focus by a number of US chemical manufacturers on solar energy component products and technologies and other clean energy manufacturing areas.

In refining, the DOE report notes that fluid catalytic cracking (FCC) catalysts dependent on rare earth elements (REEs) are used to convert heavy oils into more valuable gasoline, distillates and lighter products.

“Rare earth elements are used in FCC catalysts to help control the product selectivity of the catalyst and produce higher yields of more valuable products such as gasoline,” the report says.

“A disruption in REE supply could have a noticeable impact on refinery yields and require capital investments to re-optimize the fluid cracking process for operation without REEs,” the department warns.

The department said that it plans eight different programme and policy directions to avoid a critical shortage of rare earth elements for US manufacturers, refiners and research and development (R&D) sectors.

Among those eight strategy policies are stockpiling, recycling, diplomacy and federal financial assistance and accelerated permitting for domestic production of rare earth elements.

The diplomatic leg would be aimed at edging China back from its increasingly restrictive export policies and, perhaps more importantly, encouraging and helping other nations to develop rare earth resources wherever possible.

In permitting and financing assistance for domestic rare earth mining and production, the Energy Department concedes that it has “no jurisdiction”.

“DOE will work with interagency colleagues and Congress to shape policy tools that strengthen United States strategic capabilities” in rare earth production and global access, the report concludes.

That goal may well be more of a challenge than finding rare earths.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
For chemical sector investments in clean energy products, see Doris de Guzman's ICIS Green Chemicals blog
To discuss issues facing the chemical industry go to ICIS connect

By: Joe Kamalick
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