On a single day last week shares in a Colorado-based mining company Molycorp rose dramatically by 12 percent on the stock exchange.
The sudden investment in Molycorp was surprising because it related to mining activities that had not even happened yet — the company’s $781 million expansion and modernization project at its flagship Mountain Pass rare earth facility in California will not come online until later this year.
Actually the sudden rise in share price had far less to do with Molycorp’s mining concerns than the policies of the Chinese government, and the knock-on effect those policies have on nervous investors. It was a reflection of market uncertainties concerning the Chinese government’s decision to impose quotas on the export of rare earth metals.
Rare earth metals comprise a list of 17 elements which occur naturally in mineral form in the ground. They are an essential component in renewable energy technology and currently China exports about 95 percent of the world’s supply.
Recently the Chinese monopoly on supply has led to problems. In March, the European Union, the U.S and Japan all complained to the World Trade Organization that China was illegally cutting off access to rare earth exports while holding down prices for its own manufacturers.
Mindful of the expected explosion in renewables in the coming years, this question mark over supply has got western countries seriously worried. The extent of that concern can be seen in the Molycorp share price hike.
Rare earths are the non-renewable part of renewable energy and their future availability is one of the biggest potential dark clouds threatening take-up of clean tech.
In wind power and in electric cars rare earths are essential.
A single large wind turbine, rated at about 3.5 megawatts (MW), will typically contain about 1,300 pounds of rare earth metals. Magnets in the turbine contain the rare earth element neodymium. According to research by MIT released earlier this year neodymium demand could increase by as much as 700 percent in the next quarter century.
In electric cars the dependence is even greater. A conventional car uses just over a pound of rare earth materials – mostly in small motors – but electric cars can use nearly 10 times as much in their lightweight batteries and motors.
Another rare earth, dysproprium, is a key component of the magnets in electric car engines. Magnets are necessary to make electric motors spin, and the strong and durable permanent magnets used in the cars need dysprosium to ensure performance at high temperatures.
The MIT report claimed demand for dysprosium could increase 2,600 times in the coming 25 years. Reflecting this demand, between 2010 and 2011 the price of dysprosium oxide rocketed from an average of $229 a kilo to $1,454.
The irony about rare earths is that contrary to the name they are quite an abundant resource — trace amounts can be found in almost all massive rock formations. Even though China claims that its own supplies of the metals have been over-estimated (China says it only accounts for 23 percent of global deposits, while the the rest of the world puts its share at about a third), until recently the metals were plentiful enough in the country to be used as clasps in women’s purses.
In the U.S. too rare earths, which are also needed in a wide range of consumer products such as cell phones, flat screen TVs and computers, are not that rare; the country is reckoned to have significant deposits lying dormant in the ground.