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Rare earths to ride price see-saw for foreseeable future

10th July 2015

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

  

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The general mood in the rare earths industry is cautiously optimistic, owing to the Chinese market opening up and the increased use of the elements in the automotive sector and in renewable energy.

According to independent mining consultancy Core Consultant’s ‘Rare Earths Monthly Report’, which looks at trends in the industry, electric vehicles (EVs) production has more than doubled in less than a year and it is estimated that 740 000 vehicles are being driven globally. “Those countries with strong consumer incentives have enjoyed higher growth rates.”

The outlook for plug-in electric vehicles (PEV’s) is strong, the report notes, adding that in the US, the compound yearly growth rate is expected to be between 14.7% and 18.6% until 2024, while Canada’s yearly sales are expected to increase to over 90 000 units from current levels of 74 000 units.

“Whether this growth places increased demand on neodymium remains a question, as there are companies, such as Hitachi, which are overcoming the need for neodymium magnets, or NdFeB, through the use of ferritic magnets as a substitute,” it notes.

The report also warns that many new EV’s mainly use lithium ion (Li-ion) batteries, which negates the rare earths requirement.

“Nissan, which has the largest market share, has been able to reduce the rare earths requirement in its motors by 40% and is phasing out the use of dysprosium,” it states.

Meanwhile, with Africa set to show the highest growth rate in wind power generation and plans to take the continent’s wind capacity from 2.54 GW in 2014 to 12 GW by 2040, the region’s neodymium requirement is expected to increase by 6% a year.

“On the buyer side, as well as the producer side, people are looking more and more at what is really in the rare earths mix [and how they can use it],” German holding company Tantalus Rare Earths CEO Thomas Hoyer told Mining Weekly during a telephone interview.

A South African Story
With the local economy facing two years of energy blackouts, owing to the continued delays in the expansion of its power stations, as well as continued maintenance issues and the failures of the existing infrastructure, the local rare earths economy could be further bolstered by the country’s increased investments in renewable-energy projects.

This was reiterated by Mineral Resources Minister Advocate Ngoako Ramatlhodi, who, at the opening of State-owned mineral and metallurgical innovation company Mintek’s R60-million rare earths solvent extraction pilot plant, noted that the importance of rare-earth elements in the modern economy cannot be overemphasided, owing to the rapidly increasing use of the materials in modern technologies, particularly in the manufacturing of clean technologies and military equipment.

Core Consultants’ report highlights that, based on Africa’s wind energy projects, the continent’s rare earths demand is expected to increase from the current 54 t to 255 t by 2040. South Africa’s own Renewable Energy Independent Power Producer Procurement Programme targets 1 850 MW from onshore wind projects.

“As such, there is major development and investment in alternative energy projects. Sub-Saharan Africa as a whole aims to develop 12 GW of wind power capacity by 2040, recognising windpower as a cheap and reliable source of energy. Seven gigawatts of this wind capacity is expected to be added in South Africa,” the report highlights.

The Eastern Cape, best known for its strong winds, is developing a 3 000 MWh/y generation project for a consideration of R7.5-billion. In addition, a R3.5-billion project is expected to go online later this year, with a generation capacity of 342 MW.

Meanwhile, Mintek technology division GM Alan McKenzie said at the launch of the pilot plant that Southern Africa possesses significant rare-earth element deposits, highlighting that South Africa alone had over a one-million tons of known rare-earth element deposits.

He added that the plant had the potential to assist South Africa in growing its rare-earth element sector, as, unlike conventional refineries, it could process ore and chemical concentrates from multiple mines. This would enable mines, particularly those owned by junior miners, to combine their resources to establish one processing facility to be shared among them.

In a report, titled ‘A 21st Century Scramble: South Africa, China and the Rare Earth Metals Industry’, author Nicholas Jepson notes that South Africa is one of the more promising possible locations for a reinvigorated rare earths industry and that the establishment of rare earths separation plants may position the country as a future regional hub for processing rare-earth ores mined elsewhere in Africa, but that the country has to be careful in terms of the environmental impact this sort of mining holds.

“Rare-earths-producing regions in China have been devastated by mining and processing operations that have generated acidic waste water, harmful gases, contaminated groundwater and radioactive tailings. Avoiding such deleterious effects in South Africa will be a major challenge,” he states.

Market Perspective
Hoyer noted that it was “very hard” to get official data on rare earths, as they were dominated by Chinese production, as China was not only the largest producer, accounting for about 95% of global production, but also, by far, the largest user. He explained that rare earths are often placed in one basket, but that the company was “lucky enough” to have a magnetic rare earths deposit, with strong buyers.

“For China, rare earths are important, not only from a mining [perspective], but billions and billions in revenue came from the applications of rare earths,” Hoyer notes.

Jepson notes that having forced almost all competitors out of the industry through deployment of the familiar Chinese competitive advantages of low labour and environmental costs, China had the lion’s share of the world’s rare earths mining.

“It enjoys similar dominance at all points of the supply chain up to the manufacturing stage,” Jepson says. However, in his 2012 report, he cites that frantic efforts to restart production outside China were under way, with the “West waking up” to the importance of rare earths.

Now, with China having been forced by the World Trade Organisation to do away with its formal invoicing system and supply constraints – the Chinese government’s efforts to further control the sector – the playing field could possibly level again.

However, Core Consultants in May indicated that China would implement a tax on light rare earths. In June, the Chinese Ministry of Finance revealed that all Inner Mongolia’s light-rare-earth material would incur an 11.5% tax – the uppermost tax limit.

“Tax rates of the heavy/medium rare earths will be charged at 27% and light rare earths from Sichuan and Shandong provinces will incur a tax of 9.5% and 7.5% respectively,” the report states.

China is also embarking on a strategy of consolidation to exert more control over rare earths supply and prices, with the Chinese government finalising six conglomerates to control the market.

The announcement, released by the Ministry of Land and Resources, also indicated that the full-year mining production quota would remain at 105 000 t, unchanged from 2014.

For this reason, the Core Consultants report highlights that prices have been falling. “Traders had hoped that the Chinese sales resource tax would lift prices, but it is evident that this has yet to gain traction. Further, demand from end-users has been weak, particularly in the phosphor, auto catalyst and permanent magnet markets, which has affected terbium, lanthanum and neodymium prices respectively,” it states.

Outside China, Hoyer notes, much more money is being spent on research and development (R&D) to find substitutes for rare earths than money being spent on looking at R&D on the applications of rare earths.

Canada is incentivising exploration companies through the provision of tax credits on all exploration expenses. However, the country acknowledges that its incentive schemes fall shy of its Australian and US counterparts and is therefore revisiting its government initiatives.

“Over the last few months, the Canadian government has focused its attention on developing its rare-earth resources. China has now turned its attention to foreign assets in order to secure material for its burgeoning magnet market,” the Core Consultants report highlights.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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