Rare is going Rarest

We rarely hear any news about the rare earth elements. People trading in the commodity market also don’t consider it to be a profitable business area. China, the biggest exporter of rare earth elements contributes about 95% of global supply. These elements play quite an important role in the technology industry. From Smart phone to Laptop, Energy generation to Telecommunication, Military equipments to Aerospace equipments and Medical equipments to Hybrid cars, the role of 17 rare elements is enormous. China has threatened the world by reducing and disrupting the supply and demand equation. In most of the industries there is no substitutes are available which automatically increase the importance of these elements in sustaining modern lifestyle.

According to Lynas Corp, the industry is expected to grow at a rate of 9%. The global demand for rare earth elements is expected to rise 190,100 metric tons in 2014 whereas the global supply would be estimated to be 170,000 metric ton per year. So there will be a huge difference in the supply and demand which would lead to rise in prices.

In 2009, the Chinese government announced that it will restructure the rare earth mining industry citing environmental issues. China imposed export quotas on rare earths which forced many companies across the globe to move their production to China. Also, Prices of rare elements have drastically increased after China limited the number of companies licensed to sell them abroad.

The importance of China for rare elements came to picture in 2010 when Japan said that China will temporarily cut exports of these elements. In 2011, China has set up an export quota of 31,000 metric tons but the actual export was only 18,600 tons. In current year, China has exported only 5,000 metric tons of rare earth elements and expected to export 10,000 tons which would be around one-third of the total export quota.

In March 2012, United States jointly with Japan and European Union filed a case against China in World Trade Organization for restricting supply and manipulating prices of rare elements. In July 2012, WTO formed a special group to investigate the issue. As per rule, WTO allows countries to take essential steps to protect their resources and environments. If WTO is persuaded by China’s argument, the case filed by these countries will be dismissed.

Unlike Gold, Silver and other precious metals, rare elements are not exchange traded. Due to this China’s rare earth market is obscure and elements are sold in the private market which makes it hard to monitor and track the prices. China decided to establish a global authoritative pricing index for rare earth elements to increase its pricing power over the rare resources. On August 09, 2012, the REHT launched the physical trading platform. This trading platform comprises of ten domestic rare earth firms & institutions with a total investment of CNY 100 million (CNY 10 million each). The platform will be operated by the rare earth producers, which produce about 88% of the China's annual rare earth output. China is aiming to enhance its global influence in rare metal pricing by cutting down 20% of the rare elements production by implementing new rules. It is predicted that this will boost China’s pricing power over the rare earth element.

As per U.S Geological survey report, China owns about 55 million tonnes (about 50% of the total reserves) followed by Russia with 19 tonnes and United States' 13 tonnes. India is second largest supplier of the rare earth elements however its production contributes only meager part in global supply. In 2010, Production in India was 2700 metric tons as compared to 130000 metric tons of China. India is also trying to make a road for himself through increasing production and exploring new mines. India is building a new rare earth processing unit having a capacity of 11000 metric ton. However, it is nowhere in comparison to China and would not be able to meet global demand but this would be helpful to meet the country’s own demand in this volatile situation.

Recently, South Korean news service reported that North Korea has up to 20 million tons of rare elements which worth around $ 6 trillion. If this estimate is correct, then North Korea would become the major player of rare earth element supplier. China and South Korea both showed interest to exploit this situation and wanted to develop mines in North Korea.

US Company Molycorp which used to be a major supplier of rare earth metal, started to explore in Malaysia and US. Japan and Vietnam also want to enter in the rare metal industry. They established a joint research center following an agreement on rare earth cooperation. Also, Some Japanese companies developed rare earth mining in Vietnam, Kazakhstan, and Brazil.

The recent developments for getting more rare metals are not promising to achieve the total future needs. Some manufacturers are trying to develop technology for recovering and recycling rare-earth metals from the old smart phones, laptops and other consumer home appliances, but awareness for such initiatives are very less. A great support is required from consumers for successful implementation of such programs. In developed countries a very few percentage of people contribute in recycling and this count further go down in the developing countries.

Many companies may try to go for R&D mode to find substitute but in current scenario it looks very difficult. If in near future no major discovery of rare earth metals takes place, it would further lead to the increase of prices and hence increase the monopoly of China. This could be a major setback in the technology industry which highly relies on these elements.

Rare earth elements are essential for sustainability initiatives in transportation and renewable energy sectors and for their impact on climate change research. Following are some of them:

· Wind turbine generators
· Electric vehicle motors
· Energy-efficient lighting and many more

Rare earth metals thus have become extremely essential for a low carbon future.

Tejas Chaudhari
Ashish Verma

Article originally published in ROOTS Magazine of SOIL (School of Inspired Leadership)

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