Rare-Earths Supply Will Fall Short of Demand to 2014, Lynas Says

Global supplies of rare-earth elements will fall short of demand, which will grow by an average of 9 percent annually to the year 2014, Lynas Corp. said yesterday.

Total demand for the group of elements, used in products such as industrial magnets, flat-screen TVs, and military weapons systems, is likely to grow to 190,100 metric tons in 2014, from an expected 136,100 tons this year, Lynas, a Sydney- based, rare-earths developer, said in a presentation.

Global supply will grow only to 170,000 tons by 2014, according to Lynas’s estimates. The projected supply shortfall may lead to higher prices because users need the elements, which can’t be easily replaced, Eric Noyrez, chief operating officer of Lynas said in an interview at the Critical and Rare Metals Summit III in Washington yesterday.

“You’re not going to stop using rare-earth materials because the price is going up,” he said.

Prices for the metals have increased since China, producer of more than 90 percent of the world’s rare earths, reduced its second-half export quota for the minerals by 72 percent in July. It is now further restricting exports, according to industry participants.

The price of lanthanum oxide, used in hybrid-car batteries among other applications, has risen to $50 a kilogram, an almost sevenfold increase compared with the second quarter this year, according to Lynas’s website.

U.S. Defense Needs

The U.S. Government Accountability Office, the investigative arm of Congress, warned in April of “vulnerabilities” for the military because of the lack of domestic suppliers of rare-earth materials used in weapons systems, such as missiles and radar. The Pentagon is studying how to secure future supplies of materials, and its report is due to Congress this month.

Noyrez said Lynas’s A$550 million ($545 million) Mount Weld rare-earths project in Australia, due to go into operation next year, will be able to fully meet the U.S. Defense Department’s needs.

“The quantities are extremely small,” he said of the Pentagon’s requirements.

Lynas estimates the military would need about 10 tons to 20 tons of rare-earth materials for its weapons systems, Noyrez said.“Fixing that for them would not take too much time,” he said.

While the elements aren’t as rare in nature as the name implies, they are difficult to find in profitable concentrations, expensive for Western producers to extract and often laced with radioactive elements. China has come to dominate the market because it has been able to produce the elements more cheaply and with fewer environmental restrictions than its competitors.

China’s recent toughening of environmental standards has led to a closure of many producers, leading to a tightening of supply as well as higher production costs, Lynas said.

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