The US Department of Energy (DOE) has released its 2011 Critical Materials Strategy, which examines the role rare earth metals and other key materials play in clean energy technologies such as wind turbines, electric vehicles, solar cells and energy-efficient lighting. The report found that several clean energy technologies use materials at risk of supply disruptions in the short term, with risks generally decreasing in the medium and long terms.
“Supply challenges for five rare earth metals (dysprosium, neodymium, terbium, europium and yttrium) may affect clean energy technology deployment in the years ahead”, says the DOE.
In recent years, demand for almost all the materials examined has grown more rapidly than demand for commodity metals such as steel. Growing demand for the materials studied by the DOE comes from clean energy technologies as well as consumer products such as cell phones, computers and flat panel televisions. In general, global material supply has been slow to respond to this rise in demand over the past decade due to a lack of available capital, long lead times, trade policies and other factors.
While businesses at various stages of the supply chain are adapting to these market dynamics by taking defensive measures to protect themselves from price volatility and material scarcity, and proactively responding to market opportunities by offering additional sources of supply or potential substitutes, the DOE is still concerned about the impact of short-term supply shortages on its economic competitiveness.
China squeezes supply
The particular worry is that China, which controls about 95 percent of the rare earth metal market worldwide, started capping its exports of these raw materials in 2009. At the moment, about 60 percent of the country's rare earths supply is controlled by a single company, called Inner Mongolia Baotou Steel Rare-Earth, which is stated owned, and enables China to control supply and prices.
In December, China’s Commerce Ministry announced further reductions in export quotas, revealing that exporters would only be allowed to sell 10,546 tonnes of rare earth metals during the first half of 2012, representing a 27 percent decrease from the first half of 2011. Furthermore, only 11 companies will be allowed to sell to companies based outside of China, down from 26 in 2011.
In addition to China’s stranglehold on the industry, some experts are concerned that non-Chinese rare earth metal companies’ abilities lack the expertise and suffer high ore processing costs, which means they are not positioned to fill the supply gap.
Back in November for example, Jack Lifton, founder of the industry consultancy Technology Metals Research, told Reuters that of the 244 non-Chinese companies planning to produce rare earth metals, less than 4 percent would prove profitable. Indeed, a number of firms which quickly started to launch new mines after China squeezed exports in 2009 were forced to mothball operations soon after.
Despite this panorama, the DOE remains buoyant that a solution will be found. It reveals in its 2011 Critical Materials Strategy that a number of universities and other institutions are preparing a future science and engineering workforce through courses, research opportunities and internships that provide important trans-disciplinary knowledge on rare earth metals. Building workforce capabilities through education and training will help address vulnerabilities and realize opportunities related to critical materials, although the DOE warns in its report that “much more work is required in the years ahead”.
“Many governments are recognizing the growing importance of raw materials to economic competitiveness and taking an active role in mitigating supply risks,” reveals the DOE.
In the past year, DOE and other stakeholders have scaled up work to address these challenges. This includes new funding for priority research, development of DOE’s first critical materials research plan, international workshops bringing together leading experts and substantial new coordination among federal agencies working on these topics.
“The transition to a clean energy economy will create jobs, enhance our security and cut pollution,” said US Secretary of Energy Steven Chu. “This report provides information to help with the transition to a clean energy future, identifying strategies for responding to potential shortages of critical materials in the years ahead. It will help us seize opportunities, using American innovation to find substitutes, promote recycling and help secure supplies of rare earth elements and other materials used in energy technologies.”
Three-pronged strategy
DOE’s strategy to address critical materials challenges rests on three pillars. First, diversified global supply chains are essential. “To manage supply risk, multiple sources of materials are required. This means taking steps to facilitate extraction, processing and manufacturing here in the United States, as well as encouraging other nations to expedite alternative supplies. In all cases, extraction, separation and processing should be done in an environmentally sound manner,” says the DOE.
Second, substitutes must be developed, with research leading to material and technology substitutes that will improve flexibility and help meet the material needs of the clean energy economy. In the fiscal year 2012, for example, DOE reveals it will spend $20 million to fund an energy innovation hub focused on critical materials that will help to further advance its strategy.
Third, the DOE concludes that recycling, reuse and more efficient use could significantly lower world demand for newly extracted materials. Research into recycling processes coupled with well-designed policies will help make recycling economically viable over time.
The DOE also sees international cooperation as essential, if a negative impact of rare earth metal shortages on clean energy goals is to be avoided. In the past year, the DOE has organised several workshops with the European Union, Japan, Australia and Canada identifying possible R&D collaboration topics such as resource mapping, separation, processing, substitutes and recycling. The DOE is also pursuing international information sharing to help improve transparency in critical materials markets.
The 2011 Critical Materials Strategy is the DOE’s second report on this topic and provides an update to last year’s analysis. Using a methodology adapted from the National Academy of Sciences, the report includes criticality assessments for 16 elements based on their importance to clean energy and supply risk. The report is the product of extensive research and data collection by the Department over the last twelve months.
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