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Five Rare Earths Crucial for Clean Energy Seen in Short Supply

Limited supplies of five rare-earth minerals pose a threat to increasing use of clean-energy technologies such as wind turbines and solar panels, a U.S. Energy Department report found.

The substances -- dysprosium, terbium, europium, neodymium and yttrium -- face potential shortages until 2015, according to the report, which reiterates concerns identified a year ago.

The 2011 report studied 16 elements and related materials, including nickel and manganese, which are used to make batteries. The analysis of so-called critical elements began after rare-earth prices jumped following imposition of export restrictions in 2010 by China, the world’s major producer.

“Diversifying the global supply chain is key,” David Sandalow, assistant secretary for policy and international affairs at the Energy Department, said today in Washington. “Developing substitutes is also key.”

Demand for rare-earth materials has grown more rapidly than that for commodity metals such as steel, he said.

Rare earths became a political and legislative issue after China moved to reduce export quotas in July 2010 by 40 percent. The country accounts for 95 percent of rare-earth production, according to the Energy Department.

Source: Lynas Corp.

Mount Weld in Western Australia, the richest known deposit of rare earths in the world according to Lynas Corp. Close

Mount Weld in Western Australia, the richest known deposit of rare earths in the world... Read More

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Source: Lynas Corp.

Mount Weld in Western Australia, the richest known deposit of rare earths in the world according to Lynas Corp.

The Chinese government said late last month it was leaving the export limits unchanged, and more production from companies including Greenwood Village, Colorado-based Molycorp Inc. (MCP) may ease some supply concerns.

Falling Prices

While prices of rare earths fell in the second half of 2011, they remain volatile, leading some companies to search for ways to consider reducing reliance on the minerals, the Energy Department said.

The department is also researching how to use rare-earths more efficiently, including through recycling, and to increase production in the U.S. The department’s Advanced Research Projects Agency--Energy has given about $31.6 million to 14 research projects to study ways to reduce or eliminate use of rare-earth elements.

In Congress, at least a dozen bills have been introduced supporting development of a domestic rare-earth industry, including through U.S. loan guarantees, according to the Energy Department report. None of the measures has passed.

“The biggest challenge is a permitting system that has historically taken multiple years to go from exploration to production,” Daniel McGroarty, president of Lonoke, Arkansas- based U.S. Rare Earths Inc. (UREE), said in an interview.

The company has claims in Colorado, Montana and Idaho, he said.

Worldwide Demand

The five minerals most at risk of supply disruptions are used to make wind turbines, solar panels, electric car batteries and energy-efficient lights, according to the report. A 2007 law requiring the phase-out of incandescent light bulbs may increase demand for terbium, europium and yttrium, used in compact fluorescent bulbs that comply with higher efficiency standards, according to the report.

“While these materials are generally used in low volumes relative to other resources, the anticipated deployment of clean-energy technologies could substantially increase worldwide demand,” the report said.

Smaller mining companies have difficulty raising the $100 million to $1 billion it takes to open a rare-earth ore mine, while global mining companies are often not interested because of the relatively small size of the $3 billion market and its unpredictability, the report said.

The report also recommends greater emphasis on education and job training.

“Strengthening the U.S. position across the supply chain requires a capable workforce,” the report said.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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