Recent Dynamics in the Global CRITICAL Rare-Earth Market. Jack Lifton, Technology Metals Research


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Jack Lifton från TMR berättar om sällsynta jordartsmetaller (REE).Vilken är efterfrågan och hur stort är utbudet? Presentationen tar upp politik, priser, problem och mer när det kommer till Rare Earth Elements.

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Recent Dynamics in the Global CRITICAL Rare-Earth Market. Jack Lifton, Technology Metals Research

  1. 1. Recent Dynamics in the Global CRITICAL Rare-Earths Market Gareth P Hatch, PhD Presented by Jack LiftonFounding Co-Principals, Technology Metals Research, LLC GeoArena October 17, 2012 – Uppsala Konsert & Kongress
  2. 2. Overview An Introduction to the Rare Earths Rare-Earth Demand Current Rare-Earth Supply Chinese Mining & Export Quotas Rare-Earth Price Volatility The Politics of Rare Earths Other Supply & Demand Issues Future Sources of Rare-Earth Supply
  3. 3. Disclaimer & Cautionary StatementThe information contained in this presentation is provided by Technology Metals Research, LLC (“TMR”) andthe author, for general educational purposes only. Certain information herein is based on third-party sourcesthat are believed to be reliable, but whose accuracy is not guaranteed. It may also contain statements thatcould constitute forward-looking statements, describing expectations, opinions or guidance that are notstatements of fact. Forward-looking statements may include, among others, statements regarding futuremarket supply and demand, government policies, and other market dynamics, or the assumptions underlyingany of the foregoing. In this presentation, words such as "may", "could", "would", "will", "likely", "believe","expect", "anticipate", "intend", "plan", “goal”, "estimate" and similar words and the negative forms thereof areused to identify forward-looking statements.Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that arebeyond TMRs control, and which may cause actual results, level of activity, performance or achievements tobe materially different from those expressed or implied by such forward-looking statements.This presentation is provided on an “as is” basis, and neither TMR nor the author make no representations orwarranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability oravailability with respect to the third-party information, data or charts contained herein, for any purpose. Use ofall information herein is voluntary, and reliance on it should only be undertaken after an independent review ofits accuracy, completeness, efficacy and timeliness. Any reliance placed on such information is thereforestrictly at the risk of the user.In no event will TMR or the author be held liable for any loss or damage including without limitation, indirect orconsequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising outof, or in connection with, the use of this presentation or the information contained within it.
  4. 4. Recent Dynamics in the Global Rare-Earth MarketI: An Introduction to the Rare Earths
  5. 5. Which are the 17 rare-earth elements? Source: Technology Metals Research An Introduction to the Rare Earths 5
  6. 6. The rare-earth industry focuses on 15 elements Source: Technology Metals Research An Introduction to the Rare Earths 6
  7. 7. The rare earths can be divided into sub-groups Source: Technology Metals Research Definitions relate to the processing of concentrates Used by metallurgists & flow-sheet engineers Not always used elsewhere in the industry • Sm frequently grouped with lights; Eu & Gd with the heavies Be sure to know which convention is being used • Make sure to compare “apples to apples” An Introduction to the Rare Earths 7
  8. 8. The magnet-related rare earths Source: Technology Metals Research For commercial permanent-magnet materials: • Sm-Co type: Sm (Gd, Pr) • Nd-Fe-B type: Nd, Pr, Dy (Tb) • Sm-Fe-N type: Sm An Introduction to the Rare Earths 8
  9. 9. The “alphabet soup” of rare-earth acronyms Rare-earth element – REE Rare-earth oxide – REO Light REE / REO – LREE / LREO Medium REE / REO – MREE / MREO Heavy REE / REO – HREE / HREO Critical REE / REO – CREE / CREO Total REE / REO – TREE / TREO An Introduction to the Rare Earths 9
  10. 10. Why should I care about non-magnet-related REEs? REEs are chemically very similar to each other – thus: • They are always found together • They have to be mined together They are very difficult to separate from each other • They require complex processing routes, e.g. solvent extraction • Facilities require significant capital & operational expenditures The dynamics for any one REE indirectly affects them all • Magnet production can ∴ be affected by non-magnet REEs An Introduction to the Rare Earths 10
  11. 11. Applications for REEs Significant growth in end-use demand • New hi-tech products and devices in addition to new markets • Increased market penetration of clean-energy platforms Clean-energy applications require significant quantities Beware of the hype Be aware of the potential impact of legislation • E.g. Effects of ban on incandescent light bulbs on HREEs • Drive for more energy-efficient appliances and devices An Introduction to the Rare Earths 11
  12. 12. Recent Dynamics in the Global Rare-Earth Market II: Rare-Earth Demand
  13. 13. From where does the demand originate?2011e Demand 2016f Demand 105 kt TREO 160 kt TREO Sources: IMCOA, Technology Metals Research Rare-Earth Demand 13
  14. 14. From where does the demand originate? Estimate of global rare-earth demand in 2011 (t REO ± 15%) Japan & Market End Use China USA Others Total SE Asia SharePermanent Magnets 16,500 500 3,500 500 21,000 20% Metal Alloys 15,000 1,000 4,000 1,000 21,000 20% Catalysts 11,000 5,000 2,000 2,000 20,000 19%Polishing Powders 10,500 750 2,000 750 14,000 13% Phosphors 5,000 500 2,000 500 8,000 8% Glass Additives 5,500 750 1,000 750 8,000 8% Ceramics 3,000 1,500 2,000 500 7,000 7% Other 3,500 500 1,500 500 6,000 5% Total Demand 70,000 10,500 18,000 6,500 105,000 100% Market Share 67% 10% 17% 6% 100% Source: IMCOA Rare-Earth Demand 14
  15. 15. From where does the demand originate? Forecast for global rare-earth demand in 2016 (t REO ± 20%) Japan & Market End Use China USA Others Total SE Asia SharePermanent Magnets 28,000 2,000 4,500 1,500 36,000 23% Metal Alloys 23,000 2,000 3,000 2,000 30,000 19% Catalysts 15,500 5,500 2,500 1,500 25,000 16%Polishing Powders 13,000 2,000 2,000 1,000 18,000 11% Phosphors 8,500 750 2000 750 12,000 8% Glass Additives 7,000 1,000 1,000 1,000 10,000 6% Ceramics 4,000 2,250 2,500 1,250 10,000 6% Other 5,000 8,000 4,000 2,000 19,000 12% Total Demand 104,000 23,500 21,500 11,000 160,000 100% Market Share 65% 15% 13% 7% 100% Source: IMCOA Rare-Earth Demand 15
  16. 16. Recent Dynamics in the Global Rare-Earth Market III: Current Rare-Earth Supply
  17. 17. From where does the supply originate?2011e Supply 2016f Supply103 kt TREO 195 kt TREO Sources: IMCOA, Chinese State Council Information Office, Technology Metals Research Current Rare-Earth Supply 17
  18. 18. Where are REEs currently mined? Source: Technology Metals Research Current Rare-Earth Supply 18
  19. 19. Recent Dynamics in the Global Rare-Earth MarketIV: Chinese Mining & Export Quotas
  20. 20. Rare-earth mining production in ChinaProvince / Region 2011 Mining Quota LREOs (t) HREOs (t) Fujian 0 2,000 Guangdong 0 2,200 Guangxi 2,500 0 Hunan 1,500 0 Inner Mongolia 50,000 0 Jiangxi 0 9,000 Shandong 1,500 0 Sichuan 24,400 0 Yunnan 0 200 Sub-totals 80,400 13,400 Total Quota 93,800Actual Production 96,900 Sources: Technology Metals Research, Chinese Ministry of Land & Resources, Chinese State Council Information Office Chinese Mining & Export Quotas 20
  21. 21. Chinese rare-earth export quotas China has been issuing export quotas for several years • Ostensibly to “remediate” environmental issues • Obvious “side-effect”: inward re-location of supply chain 2012: allocation contingent on better pollution controls Allocations split between L and M/HRE production Alloys and compounds not included 40% reduction in 2010 started the price increases Chinese Mining & Export Quotas 21
  22. 22. Chinese rare-earth export quotas* rare-earth oxides only – other materials may constitute approx. 2-3,000 t / year Sources: Chinese Ministry of Commerce, Chinese Ministry of Industry & Information Technology, Asian Metal Chinese Mining & Export Quotas 22
  23. 23. Recent Dynamics in the Global Rare-Earth Market V: Rare-Earth Price Volatility
  24. 24. What caused the recent REE price spike? Triggered by 40% reduction in 2010 export quotas Led to disconnect between internal & export pricing Inflection point in Feb 2011 for internal China prices • Internal stockpiling / speculation • Siphoning to black market for export – arbitrage opportunity Prices peaked in Jul-Aug 2011 Significant reduction in volumes of official exports • Apparent increase in smuggling of rare-earth materials Rare-Earth Price Volatility 24
  25. 25. Recent REO prices Sources: Technology Metals Research, Metal Pages Rare-Earth Price Volatility 25
  26. 26. How was the magnet industry affected? Major efforts to reduce Nd-Fe-B usage in 2011-2012 • Switch from REPM to induction motors • Switch from surface-mounted to interior REPMs • Switch back to ferrite where possible • Higher HREE-containing REPMs – some switched to Sm-Co Also efforts to “drop down” a grade or two • Reducing Dy / Tb = significant cost savings Magnet REO demand: 2010 ≈ 26 kt; 2011 ≈ 21 kt • Likely to rebound in 2012 – though end users are still wary At least one bankruptcy of a magnet company… Rare-Earth Price Volatility 26
  27. 27. Recent Dynamics in the Global Rare-Earth Market VI: The Politics of Rare Earths
  28. 28. Alleged REE embargo in 2010 Sep 2010: Chinese fishing boat collides with Japanese patrol boats near Senkaku Islands in East China Sea China accused of suspending REE shipments to Japan Japan releases fishing-boat captain Alleged suspension of shipments “lifted”… Whether or not it happened – it affected the outlook The Politics of Rare Earths 28
  29. 29. The WTO rare-earth trade dispute March 2012: USA, EU & Japan initiate WTO action • Covers exports of wide range of rare-earth-containing materials June 2012: State Council publishes REE white paper • Sets out position on various topics without tying into WTO case July 2012: Dispute resolution panel set up China likely to cite two GATT Article XX exceptions: • “necessary to protect human, animal or plant life or health” • “relating to the conservation of exhaustible natural resources” China recently lost a similar case The Politics of Rare Earths 29
  30. 30. Recent Dynamics in the Global Rare-Earth MarketVII: Other Supply & Demand Issues
  31. 31. Critical REEs for clean energy Sources: US Department of Energy, Technology Metals Research, Other Supply & Demand Issues 31
  32. 32. The balance between REE surplus and deficit Demand profile of each REE vs. natural occurrence: • Ratio Dy : Pr + Nd ≈ 1:50 – 1:2 for permanent magnets • Ratio Dy : Pr + Nd ≈ 1:100 – 1:50 in typical LREE minerals Impetus for finding new sources of HREE-rich minerals • Even HREE-rich minerals contain significant LREEs Forecast for global supply and demand for select rare earths in 2016 CeO2 Nd2O3 Eu2O3 Tb4O7 Dy2O3 Y2O3 Demand @ 60-70 kt 25-30 kt 625-725 t 450-550 t 1.5-1.8 kt 12-14 kt 150-170 kt/yr TREO Supply @ 75-85 kt 30-35 kt 450-550 t 300-400 t 1.3-1.6 kt 9-11 kt 180-210 kt/yr TREO Source: IMCOA Other Supply & Demand Issues 32
  33. 33. Recent Dynamics in the Global Rare-Earth MarketVIII: Future Sources of Rare-Earth Supply
  34. 34. Non-Chinese REE projects As of August 2012, TMR was tracking: • 441 REE projects in 37 countries outside of China • 90%+ at early stages of exploration & development Currently 43 advanced projects on TMR Index • Completed drilling and testing to a minimum level • Full list is available at Future Sources of Rare-Earth Supply 34
  35. 35. Current sources of REE supply Source: Technology Metals Research Future Sources of Rare-Earth Supply 35
  36. 36. Future sources of REE supply Source: Technology Metals Research Future Sources of Rare-Earth Supply 36
  37. 37. Future sources of REE supply outside of China Source: Technology Metals Research Future Sources of Rare-Earth Supply 37
  38. 38. Next challenge: producing separated REE products A particular issue for projects with HREE-rich deposits • Many such companies plan to produce concentrates only But end users can’t use REE concentrates! • Very few separation facilities outside of China • Even fewer independent, toll-based separation facilities A solution: build a centralized CREE separation facility • Innovation Metals plans to do just that • Low-cost tolling facility to be built in Quebec, Canada • IMC Consortium: mining companies, end users & traders Future Sources of Rare-Earth Supply 38
  39. 39. Acknowledgements My thanks to the following individuals for useful discussions: • Jack Lifton (Technology Metals Research, LLC) • Patrick Wong (Innovation Metals Corp.) • Dudley Kingsnorth (IMCOA & Curtin University) • Zhanheng Chen (Chinese Society of Rare Earths)
  40. 40. Thank You Gareth P Hatch, PhD Founding PrincipalTechnology Metals Research, LLC 180 S. Western Ave #150 Carpentersville, IL 60110 United States of America