Development & Aid, Environment, Tierramerica

Rare Metals Could Trigger Next Trade War

MEXICO CITY, Jun 22 2009 (IPS) - China beat the United States to the punch and has cornered production of rare metals used in environmentally friendly technologies that the world needs to curb climate-changing pollution.

Used in electric car motors and wind turbines, neodymium, a “rare earth metal”, is at the epicenter of the race between wealthy and emerging nations to create green technologies, while poorer countries appear to be relegated to spectators.

The production of neodymium and wide range of uses reflect the quiet competition over raw materials in the area of green technologies.

José Luis Giordano, associate professor of engineering at Chile's University of Talca, noted in an interview that there is a battle between the United States, China and Japan over neodymium, samarium and praseodymium, over ceramic superconductors, and for alternatives to these materials, still in the experimental stages.

These elements belong to Group 15 of rare metals whose unique properties — like their great magnetic capacities and resistance to high temperatures — make them indispensable for a wide range of new technologies that the world needs urgently to confront global problems like climate change.

Magnets made from neodymium help generate energy in electric vehicles and the rotation of wind turbines.

China and the United States are the world's leading producers of neodymium, but the Asian giant is also a powerhouse when it comes to manufacturing green technologies.

In the early 1990s, rare materials that China produced at low cost, like neodymium, became abundant on the mining market, and prices fell from 11,700 dollars per ton in 1992 to 7,430 in 1996, or from about 12 dollars to 7.4 dollars per kilo.

Because of China's influence, the market volume jumped from 40,000 tons annually to 125,000 tons in a few short years.

In 2006, nearly the entire world production of these minerals — 137,000 tons — came from China. But in recent years, China has reduced its exports in order to feed its own industries. That trend pushed up international neodymium prices to 60 dollars per kilo in 2007.

Global demand is expected to surpass 200,000 tons per year in 2014, with China holding most of the supply.

Independent consultant Jack Lifton, who specializes in supplies of nonferrous strategic metals, said a U.S.-China trade dispute over neodymium production could be just over the horizon.

In a presentation to U.S. lawmakers on Jan. 29, Mark Smith, director of Molycorp Minerals, acknowledged that limited manufacturing capacity had created a gap and that although the United States has the knowledge it has lost the necessary infrastructure.

Molycorp owns Mountain Pass mine in the western U.S. state of California, the richest in neodymium outside China and which could supply more of the mineral.

The history of business development around neodymium shows how China has imposed its conditions. In 1982, the U.S.-based General Motors, Sumitomo Special Metals and the Chinese Academy of Sciences invented a magnet made from neodymium, boron and iron. In 1986 they put it on the market through a new division of GM known as Magnequench.

The Chinese companies China National Nonferrous Metals, San Huan and Sextant MQI Equity Holdings bought Magnequench in September 1995.

Then, Neo Material Technologies arose from the 1997 merger of Canada's AMR with Magnequench. The new company is based in Canada, with production centers in China and Thailand.

In May, two Chinese companies invested in two Australian mining companies, Lynas and Arafura (acquiring half plus one of the shares of the former and 25 percent of the latter) that are beginning operations to extract and, in the case of Lynas refine, large volumes of rare metals.

Lifton believes that China will not allow western nations to purchase neodymium for future delivery outside of their territories nor for domestic use in China if it is for export.

This means the Asian nation could harden its strategy to acquire companies abroad and that the industrial powers and developing countries would have to seek other suppliers of green technologies.

Smith predicted that if the United States does not renew its capacities, in the best case it will become a source of raw materials for China's production and not a manufacturer itself of advanced clean technology.

So far there are no viable alternatives to the rare metals. Substitution of neodymium is possible in wind turbines. The rare metal reduces the weight of the magnet mechanism, which will be heavier using other metals. Heavier turbines need stronger bases, which implies fortified concrete and higher costs.

Neodymium magnets have a magnetic force nine times stronger than conventional magnets.

The most similar alternatives, but even more expensive, are made from samarium and cobalt or from samarium, praseodymium, cobalt and iron, Chilean expert Giordano said.

In this field, “if there is not a priority and incentive for basic technological research and development, including with natural reserves, one is condemned to being an importer,” he said. “Countries aren't wealthy from their natural resources, but rather for having invested in research and development.”

Lifton, meanwhile, noted that it is likely there will be more economic advances in both magnets and batteries, due to the limits of neodymium and lithium supplies, and that there could be a return to steel and aluminum if demand for those technologies keeps growing.

Research has been under way since 1987 on semiconductors and ultraconductors of electricity, made from polymers, but none has been produced on a massive scale. They are characterized by their high capacity to transmit energy, durability and heat resistance.

Unless production of green technologies is supported outside China by new mining in North America, Africa and Australia, the only place to manufacture them will be China, predicts Lifton, adding that if China decides not to export those rare metals, there won't be any other place to obtain them.

*This story is part of a series of features on sustainable development by IPS – Inter Press Service and IFEJ – International Federation of Environmental Journalists, for the Alliance of Communicators for Sustainable Development (www.complusalliance.org).