Are Rare Earth Elements Rare? NO, but some are rarer than others!
Posted by | Michael Ratcliffe
Our most famous metal, gold, is far rarer than any rare earth! When gold is found, it’s in concentrated deposits, nuggets, or veins. Rare earth elements (REEs), on the other hand, are spread around the earth’s crust with very few high concentration deposits. When they are found, they are nearly always bound chemically with other minerals making their extraction difficult and expensive, especially since some can be radioactive. Therefore, it’s the large deposits that are rare, not these soft heavy metals themselves. This is especially true for the two REEs critical for high-quality electric vehicles (EVs) magnets – dysprosium (Dy) and terbium (Tb). However, there is one place on earth where there is a freak, massive concentration of these heavy REEs, Inner Mongolia. As a result, mother nature has given China an effective monopoly which can all too easily be turned into an economic and political sledgehammer.
Historical Context and Development
The discovery of REEs goes back to the late 18th century when they were first discovered in Sweden. By 1900, all 17 REEs had been identified and added into the periodic table. Other deposits had been found in Russia, and Norway and over the 20th century, small concentrations were found all over the world, but the major discovery was Mongolia. This was found by luck in 1927 in a government mapping of iron ore deposits as part of the National Geological Survey. Samples were sent to Beijing for analysis, and the rest is history.
It is important to understand that REEs fall into two groups – light and heavy. Both have very different properties due to their internal atomic structures. The resulting properties of heavy, or HREEs, give them high value in many products utilizing their unique electron properties from color TVs in the 1960s, to magnets in the 1980s, and EVs and robotics in the 2000s.
The issue with HREEs is they are far more difficult to refine than light REEs and also far less abundant. The massive deposits of HREEs found in Mongolia accounts for nearly 90% of the known extractable deposits. So, if any REEs deserve the title of “rare”, it is HREEs.
China has been openly aware of the economic power of its monopoly over REES for many years. Back in 2010, Japan detained a Chinese fishing boat captain near the Senkaku-Diaoyu Islands. The China claimed these islands were theirs and the captain had every right to be fishing there. China’s response was to immediately impose an unofficial embargo on REEs to Japan. This was quickly resolved politically with the captain being released and normality returning in two months.
Action and Reaction
In the intervening 15 years, the demand for HREEs has only grown stronger as the world has increasingly become dominated by technology and electrons. The probability that, if pushed, China would play its HREE card again is, therefore, nearly 100%.
Manufacturers in the West and Japan have not been blind to this threat and have been considering strategies to minimize the impact of China’s monopoly. For instance, they have been trying to:
- Develop magnet alloys, processes and end-products that minimize or eliminate Dy or Tb
- Focus on products that minimize the need for high quality magnets, like hybrids
- Find ways of substituting LREEs for HREEs
- Build supply flexibility into supply chains to minimize targeted Chinese export bans
- Maximize recycling
- Maximize stockpiling Dy and Tb to handle short-term supply issues
- Shift to long-term sources of Dy and Tb outside of China
- Do deals with Chinese auto manufactures, like BYD or Geely, who have open access the Mongolian HREEs
However, no magic solution has been found to date and managing multiple strategic options is something that traditional manufacturers find very difficult.
In this swirl of uncertainty, the one thing that seems certain is that companies with a critical reliance on HREEs must have strategic contingency plans. They need to work through options like those above and decide which ones need to focus on. This will mean developing scenarios and assigning probabilities to each, plus developing a monitoring system that can update these probabilities and, hence, what should be the best strategic focus of the company.
We, in Fuld, have tools that can help, such as Scenario Planning, Early Warning Systems and Strategy Workshops. Please contact us if you would like more details … DON’T WAIT!
China and Monopoly Power
Tags: Automotive, Business & Industry Research, Competitive Strategy, competitive strategy consulting, Disruption, Energy, Innovation, Market Insights, Scenario Planning, Strategic Planning
