Despite widespread concern that China's
declining production and increased demand for rare earths will
leave the rest of the world short, a combination of Chinese
efficiency improvements and new global production means that
little or no supply gap is actually in store for the sector,
according to analysts.
"I do not believe there is any great crisis,"
said Jack Lifton, independent rare earth metals consultant at
Jack Lifton LLC and publisher of the Jack Lifton
Although China might be forced to import some
outside rare earth minerals in the near to midterm to meet its
own soaring demand, internal mining efficiencies slated for
completion within the decade should keep China largely out of
the global marketplace going forward, he said.
"China's now restructuring its mining
industry in general and consolidating and reorganizing to
remediate pollution and to increase productivity. When you're
doing that, production goes down because you're closing, you're
consolidating, you're reconfiguring," Lifton said of short-term
disruptions in Chinese rare earths supply. "But what everybody
needs to remember is China will recover. They'll fix their
environmental problems, they'll improve the efficiency and
productivity of their mining sector and sometime within the
next decade China will come roaring back as a light rare earths
producer certainly able to satisfy its own needs."
Data compiled by Dudley J. Kingsnorth,
executive director of Industrial Minerals Co. of Australia Pty
Ltd., confirmed that China should largely be able to meet its
own midterm needs.
Although Chinese rare earths production,
which totaled some 125,000 to 140,000 tonnes in 2008, will fall
to between 110,000 and 130,000 tonnes this year, annual
production will rebound in subsequent years, he said. In 2015,
for example, China is forecast to produce between 170,000 and
185,000 tonnes of rare earth metals, or some 74 to 88 percent
of that year's estimated global demand of 210,000 to 230,000
Using simple subtraction, those figures
suggest a roughly 45,000-tonne supply gap in 2015, but analysts
believe that new non-Chinese projects-Lynas Corp. Ltd.'s Mount
Weld deposit in Western Australia and Molycorp Minerals LLC's
Mountain Pass Mine in California are two examples-should be
able to pick up any slack when it comes to rare earths
"I think by and large that will satisfy the
non-Chinese demand," Kingsnorth said at the Technology and Rare
Earth Metals Policy Conference in Washington earlier this
"There is sufficient production available
coming up to resolve any short-term issue," Lifton agreed.
But while many miners claim to be sitting on
rare earths, only a handful of projects are actually needed to
fill any supply gap.
"The rare earths sector is seeing names
popping up like mushrooms after rain," Hallgarten & Co.
analyst Christopher Ecclestone said in a research note, adding
that the market has come to view rare earths mining as "sexy."
But "some of the players may not be serious about mine building
and may be just paying lip service to the concept," he
By Lifton's count, some 161 companies claim
to have rare earth deposits outside of China, but less than a
dozen will ever reach production. "(The serious candidates) can
produce more than enough material to relieve the pressure in
the event that China reduces or eliminates its exports. It is
not possible for any of the others to come into production soon
enough for them to make a difference in the near term and I
don't think it matters in the long term," he said. "The
important thing in the West is we bring Lynas and Molycorp
online as soon as possible so we will not be dependent on China
in the short term or maybe ever in light rare earths."
But since the two producers, which arguably
are closest to production, are sitting primarily on light, not
heavy, rare earths, analysts said it is crucial to bring a
Western supply of heavy rare earths online as well. Heavy rare
earths, such as europium and dysprosium, are scarcer-and,
therefore, costlier-than their "light" counterparts, like
cerium and lanthanum.
"Light rare earths aren't rare. There's more
cerium on the planet than copper," Ecclestone told
And it is heavy rare earths, not light ones,
that China said it might be out of within 15 years, according
to Kingsnorth's research.
Although a light rare earths supply gap is
unlikely, the heavy rare earths cause a little more concern,
Ecclestone said. "The Chinese have been supplying the world
with rare earths for almost 30 years at full pelt. Is it that
big and bottomless that's it's going to go on forever? The
Chinese have not depleted most of their other resources in
exporting, and yet in rare earths, where they're supposedly the
smartest people around, they're the ones who have sold off
their rare earths for a song," he said.
But a supply solution for heavy rare earths
is in sight, too. Even if Chinese restructuring doesn't yield
an improvement in heavy rare earths output, a number of Western
producers slated to come on-stream in the next few years could
save the day.
Saskatoon, Saskatchewan-based Great Western
Minerals Group Ltd., for example, will bring its heavy rare
earths project online in South Africa in 2012, which could
supply the Western World with enough heavy rare earths to fill
any 2012-through-2015 supply gap, according to Lifton.
But the real heavy rare earths solution
comes after 2014, when Toronto-based Avalon Rare Metals Inc.'s
Nechalacho project in the Northwest Territories is forecast to
come on-stream. Together, the two Canadian companies will be
able to totally satisfy the Western World's heavy rare earths
needs, Lifton said. "When Avalon comes into production, the
heavy rare earths crisis will be over forever." ANNE