Posting in Energy
Enjoy your cell phone and the anti-lock brakes in your car? One U.S. company is gearing up to wrest control away from China and start producing rare earth elements found in most modern-day devices.
Molycorp has begun a sequential start-up of its $895 million rare earth manufacturing facility -- a milestone in a long, capital-intensive plan to restart the Mountain Pass mine in California and wrest market control away from China.
Why does this matter? Rare earth metals are used in just about every modern-day and cleantech device including hybrid cars, cell phones, laptops and numerous defense technologies. In other words, these 17 elements are critically important for the high-tech industry -- and the consumers who enjoy their anti-lock brakes and smartphones. And while rare earths can be found all over the world, China produces 97 percent of them.
Molycorp's aptly named Project Phoenix rare earth mine and manufacturing facility is not running at full capacity. The company is producing 2,800 short tons of fresh rare earth ore per day and expects to reach full production by April 1. Molycorp says it's still on track to hit an annual rate of 19,050 metric tons of rare earth oxide --all of which already has a buyer -- by the end of the third quarter. A Molycorp exec told me their next goal will be to double annual production by the end 2013 of the year. (Note: I previously noted end of 2013, a figure provided and since corrected by the company.)
The company has a mine-to-magnets end goal. Which means it wants to mine rare earths; process them into oxides; and then convert them into metals, alloys and high-powered neodymium-based magnets and samarium cobalt magnets, which are used in wind turbines, hybrid and electric vehicles, among other products. The photo to the right is an ore crusher.
Check out the video below for a closer look at the operation.
To be clear, the U.S. didn't run out of rare earth minerals. Companies stopped mining rare earths by 2003, opting instead to buy them on the cheap from China -- and a monopoly was born. Ever the opportunist, China has taken full advantage of its control of the rare earth market. China curbed exports of rare earths several years ago and has maintained quotas ever since.
False starts and the power of panic
Molycorp's plan to restart the Mountain Pass mine in California and end China's monopoly got off to a discouraging start. Molycorp purchased the mine -- once the world's largest producer of rare earths -- from Chevron in 2008 and was able to generate $7.1 million in sales the following year by processing rare earths from existing stocks. Still, that was far short of the estimated hundreds of millions it would take to restart the mine. Its prospects dimmed after the Department of Energy denied it a loan guarantee and its July 2010 IPO failed to raise the $500 million it had hoped for.
However, the company's fortunes would change as China instituted even stricter quotas and blocked shipments of rare earths to Japan altogether over a diplomatic dispute. The aggression sparked worldwide panic of a supply shortage and companies began scrambling to find new sources of the elements. Soon after, Japan's Hitachi Metals agreed to a joint venture with Molycorp Minerals to make the coveted alloys and magnets. Its share price rebounded, nearly tripling in that time.
Molycorp has continued to expand its business with its $17 million purchase of Santoku America and an $89 million acquisition of Estonia's AS Silmet, a company that also converts raw materials into rare earth minerals for finished products. And in November, Molycorp formed a joint venture with Daido Steel and Mitsubishi Corp. to make neodymium magnets.
Photo: Molycorp photos via Lance Atchinson and Jeff Wilson; Wikicommons
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Feb 22, 2012
If the US and it's so-called allies want rare earths, they can mine it themselves under their own territory at significantly higher cost and deal with the radioactive tailings disposal themselves. The Chinese aren't preventing the US and it's so-called allies from producing their own supplies domestically. They just want the cheap Chinese stuff instead!!!!!
This means we MUST mine our own thorium for advanced nuclear like LFTR, for lithium for the best EV battery, the LiFePO4 (not li-ion) and even for metals for concentrated solar thermal, concentrated GaAS Fresnel arrays (twice as efficient than silicon) and so on. We all MUST promote these as I want my kids to be able to drive when (gasoline is too expensive)!
It is highly unlikely that the Molycorp Minerals mine is the only place for rare earths to be found in this country. There is high probability that other deposits exist in the general area and some serious prospecting is in order. Let another site be found and the Chinese will give way.
Soon, rare earth metals will be mined all over the place. China cornered the market to gain monopoly power by underpricing their exports. Now that they are cutting supply as demand rises, the price is going up. Rare earth elements are not as "rare" as commonly thought. Price brings out the prospector and miner.
"...prospects dimmed after the Department of Energy denied it a loan guarantee..." Apparently, rare earth strip mining operations just aren't green enough for the current administration, despite how critical rare earths are to modern manufacturing and national security. Either that, or political contributions to the Obama election campaign by Molycorp executives weren't up to snuff with those of Solyndra execs.
This shows the danger of handing over significant control of critical materials to a country that can and will use that control as a weapon. Its time to think about creating a strategic reserve and perhaps tariffs to discourage such dependence on such foreign sourcing and use those tariffs solely to build that stockpile. We have made a terrible mistake in allowing critical materials/drugs to be made outside the US and must be careful to minimize the risks.
... but wait until government gets involved. Then, just like oil - they'll tax, pillage, and steal from the industry. However, it'll be through regulation, taxes, and fines. I really hope they don't unionize their work force. This is an industry really worth watching. By the way - what do the tree-huggers and bark-eaters think about rare earth industry? Or, have they not woken up yet?
And Yucca Mountain was to be the nation's nuclear waste STORAGE facility, not a nuclear waste producer. Sheesh.
You have the wrong view of government and jump to a conclusion that hasn't happened and probably won't happen. The mine existed and was profitable until China was able to supply the rare earths cheaper. The problem was a cost factor unrelated to regulation, taxes and fines; the Chinese had cheaper products that stopped the mine. What makes it profitable now is the Chinese have increased their prices and have controlled who they sell to. This is market dynamics not goverment.
However, when any market becomes profitable, it catches the eye of the government as a potential source of revenue. Mining is an already very regulated industry for very good reason. The point I'm making is that should this sector become profitable (it has the potential to), will the government impose new regulations on it not yet imposed on the mining industry. Or, in other words, will there be new rare-earth regulation? This again would give China the upper hand. It will be interesting to watch and see.
Pull out your old economics textbook and read the chapter on monopoly power. China undercut prices to close the molycorp mine. Now that the Chinese are exercising their monopoly power, it is backfiring on them. This is what happens when critical strategic resources are outsourced to other countries, especially communists. China is one gigantic national monopoly. They do not have a true market economy. Their version of communism looks a lot like US capitalism during the period 1850-1970. The only difference is they owe us a great debt for saving them from total Japanese enslavement during WWII.
It is possible to be pro business and pro environment. Manageable regulations drive process improvements that often save money and increase profit margins with meeting compliance rules. The hard part is when the feds buy into a rule change that is overly burdensome for minimal environmental impact. Case in point. The feds have required fire resistant carpets on commercial passenger planes for years. In 2009 they changed the rules to require the fire resistant carpets be made in a more environmental manner from natural renewable materials. This rule has had a minimal impact on the environment compared to the hundreds of millions being spent bringing planes into compliance. Naturally taxpayers had to fund millions in R&D to even figure out how to make such carpets.
... other countries are showing marked improvement in helping business. We're in a death spiral unless we (as a nation) become very, (stress on very), pro-business.
The question is where will the rest of the world stand when that does happen. And, how long from now will that be? Ironically - in 50 years China could be the neo-America. There's an interesting thought.