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Are Rare Earth Metals at Risk?

If the clean energy economy takes off, then access to rare earth metals needed for electric vehicle batteries and wind turbines is critical. And China is the primary source.

A new report, Pike Research’s “Rare Earth Metals in the Cleantech Industry,” examines some key issues related to the materials, which the Chinese appear to have a stranglehold on current world supply.

While segments of the clean energy industry object to trade practices that have led to a formal complaint before the World Trade Organization, the rare earth metals issues has gotten less attention. That may not be the case much longer, as demand for the materials is expected to skyrocket and access may be constrained.

China’s monopoly over the global rare earth metals market has come under increased international scrutiny following recent efforts on the part of the Chinese government aimed at consolidating its domestic rare earth metal industry.  Accounting for 97 percent of worldwide rare earth metal production, China’s new export quotas, introduced in July 2010, have seen prices for rare earths skyrocket, the report says.

“The short term picture for rare earth metals in the clean technology industry will be characterized by a significant supply risk brought about by China’s strict new export quotas,” says research analyst Euan Sadden.  “This will almost certainly influence the adoption and commercialization of certain technologies across the cleantech industry.  That said, there are a number of positive initiatives that offer the potential for alleviation of this risk in the longer term.”

Rare earth metals have been identified as a troubling area of potential risk for a number of prominent clean energy technologies including wind turbines, electric vehicles, fuel cells, and energy efficient lighting.

According to the Pike Research report, demand for rare earths in the cleantech industry will reach 12,920 tons per year by 2017, up from approximately 9,000 tons annually in 2011, which could place an increased strain on global supply for these emerging applications.

Rare earth metals demand will be the highest for utilization in the manufacture of nickel metal hydride (NiMH) batteries for hybrid vehicles, followed by wind turbines.  Among the eight rare earth metals covered in the study, Pike forecasts that demand will be greatest for yttrium (6,088 tons annually by 2017), followed by cerium (2,441 tons) and lanthanum (1,867 tons).  The need for other rare earth metals such as neodymium, praseodymium, europium, terbium, and dysprosium will be somewhat smaller, but still significant portions of the overall mix.

Potential sources of alternative supplies do exist and markets are responding to the high price climate. Mining projects outside of China, like in Mountain pass, California, are coming online. Other companies, particularly in Japan, are exploring the viability of recycling rare earth materials and developing technologies that require less of them.

At any rate, the supply risks are real and the cleantech industry needs to find ways to respond.

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