More on Rare Earth Metals: Are They the New Oil?

Following on my colleague Euan Sadden’s blog post about China’s dominance of the rare earth metals market, the U.S. Department of Energy (DOE) has just unveiled its new Strategy on Critical Materials. Last week, I caught David Sandalow, DOE’s Assistant Secretary for Policy and International Affairs, presenting the key findings. He spoke at a half-day seminar on rare earth elements held by the Center for Strategic and International Studies.

DOE’s Strategy on Critical Materials is the agency’s attempt to assess potential supply risks in key materials used in clean technologies. For this report, DOE focused on just four clean tech options: wind turbines, solar cells, electric vehicles, and energy efficient lighting. Specifically, DOE looked at four components in these technologies: magnets, batteries, PV thin films and phosphors, and at 14 rare earth elements or other key materials such as lithium used in them:

DOE developed four relatively simple demand scenarios for each element: low or high market penetration of the technology; and low or high material content levels. (The market penetration scenarios came from International Energy Agency (IEA) estimates.) These are plotted against 2010-2025 supply projections. While these are not meant to be definitive projections for future demand, the scenarios do suggest which materials might face the greatest supply risks. DOE also developed a “criticality” matrix, ranking the elements according to their importance and the potential for supply constraints.

There is much more detail in the report, which I haven’t had a chance to read through yet, but a few thoughts based on David Sandalow’s overview:

First, this is certainly timely. The possibility of resource constraints for new, clean technologies is attracting attention from government and industry in the U.S. It seems a cruel irony that we would wean ourselves from petroleum only to find ourselves overly dependent on other resources with limited availability and held by governments not entirely favorably inclined towards the U.S. and other western developed world countries.

Second, while lithium may attract more attention, this report suggests that the rare earth metals are a bigger supply concern. In the short term, the report does not find that lithium supply is likely to be an issue. After 2015, depending on the market penetration scenario for PHEVs and BEVs, demand does begin to outstrip potential supply.

Third, the document is quite limited in scope. I believe the work was produced with a very short turn-around time, which may partly explain limiting the analysis to four technologies, but it would be valuable to look at other options which could see significant uptake in the 2010-2025 timeframe – for example, looking at fuel cells and their impact on demand for platinum and other precious metals.

Finally, I think an undercurrent of this whole event was unease over the potential for China to use its dominance in rare earth metals as a foreign policy tool, a topic David Sandalow wisely sidestepped. This is likely to be an increasingly important subject for U.S. government and for industry, although not one for the DOE to tackle directly.

Lisa Jerram is a senior analyst contributing to Pike Research’s clean transportation and clean industry practices with a focus on fuel cells and emerging transportation technologies. Jerram has more than 15 years experience in the alternative energy market, including an extensive background analyzing policy and regulatory issues, demand drivers, and technology factors for industry and government clients.


  • andresbodoira

    Developed countries are too used to take at all cost the materials they need for their industries from poor countries. They have done so from their colonies in the 19th century and from “friendly” goverments in the past century. This is a new era. It is time to pay a fair price. This will redestribute de richness in the world and will permit countries like Bolivia to develop.

  • Paul RED

    US actually has the largest deposits of rare earths, however due to environment complaint they were shut down long time ago.

  • JamesDavis

    If you can stay away from rare earth metals, it is a good idea to do so because what are you going to do when the rare earth metals run out and you have destroyed half the planet getting to them.

  • FutureofUSChinaTrade

    China’s clamping down on its rare earth mineral exports (or, now, making them more expensive) is problematic for the U.S. for two important reasons: 1) though China does not have the majority of the world’s remaining stores of raw rare earth minerals (it has about 30%), it currently produces about 97% of the world’s rare earth; and 2) rare earth mining and refining operations in the U.S. largely shut down over the last decades as mining and refining operations in China were so much less expensive (and environmental regulations more lax).

    That transition of rare earth mining and refining operations from the U.S. to China reflects the typical development story: when a developing economy becomes able to do the same-quality work (or near to it) at a lower cost than the developed economy, that comparative advantage shifts.

    Yes, that means job losses for workers in the more developed economy, but those short-term losses can be fixed by retraining those workers to higher-productivity jobs (productivity boosts are what keep advanced economies like America’s growing, after all). And it also means that consumers buy the goods we have come to love for much less – in this case cell phones and computers (and the kind of green technology that is likely the wave of the future).

    Of course, when China imposes export taxes, restricts supply, or engages in other market-distorting tactics, it makes sense why users of rare earth minerals are concerned. So that begs the question, in an increasingly flat global world, where the natural movement is toward comparative advantage (produce and export what you’re best at, import the rest), does it ever make sense to resist that movement in order to maintain at least some domestic supply of critical goods?

    http://futureofuschinatrade.com/article/us-china-rare-earth-mineral-fracas

  • Anonymous

    It’s not only rare earth, I think the ‘true’ costs of many input resources (including oil and coal and uranium) have been severely distorted (underpriced) for the ‘good’ of industrialized nations for many years. It’s about time for a ‘change’.

  • TheOne

    Asteroid Belt, here we come.

  • asky

    Actually, there are a lot of asteroids that periodically come into the vicinity of Earth, are would be much easier to reach. But yes, asteroids, here we come… for all the rare earth riches that we believe they hold.

  • Pierre

    ‘ Rare earth metals are key to global efforts to switch to cleaner energy — from batteries in hybrid cars to magnets in wind turbines. Mining and processing the metals causes environmental damage that China, the biggest producer, is no longer willing to bear.

    China’s rare earth industry each year produces more than five times the amount of waste gas, including deadly fluorine and sulfur dioxide, than the total flared annually by all miners and oil refiners in the U.S. Alongside that 13 billion cubic meters of gas is 25 million tons of wastewater laced with cancer-causing heavy metals such as cadmium, Xu Xu, chairman of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters, said at a Beijing conference on Dec. 28.’ (http://www.bloomberg.com/news/2011-01-05/china-rare-earths-leave-toxic-trail-to-toyota-prius-vestas-wind-turbines.html)

  • William Smith

    In most cases, environmental studies are conducted once it has finished drilling the surface and pre-feasibility studies. The secret to planning a successful green mining operation is to begin working in the environment prior to surface disturbance takes place

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  • Franco

    That transition of rare earth mining and refining operations from the U.S. to China reflects the typical development story: when a developing economy becomes able to do the same-quality work (or near to it) at a lower cost than the developed economy, that comparative advantage shifts.

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  • tapra1

    components in these technologies: magnets, batteries, PV thin films and phosphors, and at 14 rare earth elements or other key materials such as lithium used in them:Tech Expo