April 07, 2011

Events From Around Town: A Rare Earth Crisis, or No Rare Earth Crisis? That is the Question.

Yesterday, the American Enterprise Institute hosted a two
panel discussion on whether there is “A
Rare-Earth Crisis?
” The panelists came from diverse backgrounds and were each
able to offer a unique perspective on the topic. At the same time, there were a
number of disagreements between them, especially over the actual question of
whether there is a rare earth crisis. Here are some of the major takeaways from
four of the panelists that I think are worth recounting: 

Jack Lifton:

Mr. Lifton began by noting that he had been studying rare
earth metals, in some capacity, for nearly forty years. He took a hard line
view on the question of whether there is currently a rare earth crisis, arguing
that there was an urgent need for the U.S. government to do more to secure a
steady flow of rare earth metals.

Despite offering these strong opinions on the subject, there
was not a great deal of evidence to back them up. Nevertheless, he offered some
interesting facts that helped frame the conversation, including that:

  • Rare earth metals constitute less than 0.01
    percent of the amount of metals used each year. Steel, which is the most used
    metal in the world, accounts for 91 percent;
  • After producing a large amount of rare earths
    domestically for years, the United States gradually decreased its production
    levels until 2002, when production stopped completely; and
  • The number one use of rare earths today is for
    magnets in the engines of automobiles. This accounts for 40 percent of all uses
    of rare earths.

Cindy Hurst:

Cindy Hurst is an analyst from the U.S. Army Foreign
Military Studies Office. Her overall point was that China has been increasing
its investment in research and development of rare earths over the past two
decades. During this time the United States, which had been the leading
innovator in this field, has substantially decreased the amount of scholarly
and scientific focus on the subject. One example she cited was that the China
Society of Rare Earths claims to have 100,000 registered scientists, and while
this number is almost certainly inflated - Ms. Hurst estimated that about a
third of these “scientists” are in fact administrators - the United States has
only a handful of scientists and academics that focus on rare earths. 

Robert Jaffe

Dr. Jaffe is a physicist from the Massachusetts Institute of
Technology who chaired a working group that recently
released a report on energy critical elements
. Energy critical elements,
Dr. Jaffe explained, are a number of elements that are crucial to the
production of different types of emerging energy technologies, such as wind
turbines, solar energy collectors and electric cars. These elements include, but
are not limited to, rare earths.

In contrast to Mr. Lifton, Dr. Jaffe’s working group concluded
that there was not a major short-term problem. They did, however, argue that there
was a need to develop a long-term approach to energy critical elements. Dr.
Jaffe also referred to rare earths as the “flavor of the day;” predicting that
the attention they are currently receiving would fade, only to be replaced by a
new panic over other energy critical elements such as Tellurium and Gallium. He
backed up these arguments with an in depth examination of the factors that can
potentially constrain the availability of elements. These include:

  • Absolute abundance of the minerals and their
  • Geopolitical risks;
  • Risks of joint production (the demand for some
    elements are low enough that it can be met by extracting them when mining other
    elements that are in more demand);
  • Environmental and social concerns; and
  • Response times in production and utilization.

Andy Davis

Mr. Davis was an associate with Molycorp, an American rare earth
company that is currently spearheading an effort to mine rare earths from Mountain
Pass in California. There were two points that he made that are worth recounting.
First, he noted that while many argue that rare earth minerals aren’t technically
rare, and in fact are found in a large number of mine deposits throughout the
globe, only a few of these deposits have a high enough ore grade to make them
economically viable to extract. Therefore, if we come to rely on the rare
earths in these less rich deposits, we will have to incur higher operating
costs and higher prices.

Staying on the topic of price, Mr. Davis also discussed how
Molycorp believes it will be able to compete with China on rare earth minerals
despite China’s low labor costs and ability to ignore many of the environmental
impacts of its activities. The key to Molycorp’s success in this matter,
according to Mr. Davis, is innovative technology that is more energy efficient
and less harmful to the environment. These innovations have allowed Molycorp to
extract the same amount of rare earth minerals using half the amount of

In all, there was no shortage of disagreement among the
panelists. The lack of consensus on the issue begs for more research on rare
earths and critical materials. Fortunately, the natural security team has just
sent to the printer a report from Christine Parthemore on the subject that will
be released soon, so stay tuned.