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US fears Chinese stronghold on rare metals will tighten

UNITED STATES: China's global leadership in rare-earth metal mining and manufacture of permanent magnets is worrying US wind power developers.

China's hold over the market for rare-earth metals is expected to lead to a major increase in the price of magnets for wind power as early as next year, unless they are made in China. These metals are key ingredients in the huge magnets used in large next-generation wind turbines.

China has cornered some 97% of the growing rare-earth metal market, thanks to its far-sighted government policy. For the past five years it has been steadily lowering export quotas and upping its prices. In October, China Daily reported that China will slash its rare-earth quotas by 30% in 2011. Chinese officials vehemently denied the report.

China is also the leading producer of rare-earth-based permanent magnets, and is increasingly making and installing or exporting larger Chinese-made wind turbines. The US does not currently manufacture permament magnets.

David Sandalow, assistant energy secretary for policy and international affairs at the Department of Energy (DoE), has warned Congress that supplies of the elements must be globalised. Sandalow also told a US Senate subcommittee that a draft strategy to ensure continued US access to rare metals will be issued this autumn.

The Obama administration will encourage US production of rare-earth metals, as well as production by US trading partners other than China, he said.

The main rare-earth metals used in wind turbines are neodymium and praseodymium. They are used in direct-drive permanent magnets in generators. Without them, generator magnets would have to be heavier to be strong enough, increasing the cost of a wind turbine.

A high-energy permanent magnet generator (PMG) for a 3.5MW turbine may require as much as two tonnes of neodymium-based alloy, says Dr Gareth Hatch, co-founder of Illinois-based Technology Metals Research.

Use of rare-earth metals in wind power is accelerating. PMGs are expected to be installed in between 15% and 25% of wind turbines globally by 2013-14, up from about 4 and 5% now, says Hatch, an expert in permanent magnet applications.

The DoE's Sandalow cited clean energy as a key reason for concern. "There's no reason to panic, but every reason to be smart and serious," he told the Senate subcommittee, according to The Hill, a Washington DC blog. "To manage supply risk, we need multiple, distributed sources of clean energy materials in the years ahead."

The metals are not in fact "rare", but quite common, although the ores from which the metals are produced are mostly mined and processed in China. Rare-earth metals are found around the world, including in Australia, the US, Canada, South Africa and elsewhere in Africa, and in parts of northern Europe. China may have as much as 35-40% of global reserves.

World consumption of the rare-earth metals may almost double by 2015, particularly with wind power installations rocketing. Rare-earth metals are also used in computer hard drives and other high-tech consumer equipment.

Three bills have been introduced in Congress to encourage US research, mining and processing - for example, by preventing stockpiling, providing loan guarantees for mining and by considering a trade case against China for unfair practices.

"We are all to blame for allowing China to take this (near-monopoly) position," says US Magnet Materials Association president Ed Richardson. "But it's not healthy for competition."

Some mining and production of the metals at two locations in California and western Australia may start in 2011 and 2012, easing the bottleneck. "It is the next three to four years that are the challenge," says Hatch. "In the longer term, we are fairly hopeful of being less dependent on the Chinese."

This is crucial for wind power. As Richardson notes, the larger wind turbines become, the more they depend upon PMGs.

The crisis could hit home in the wind industry in 2011. That is when rare-earth permanent magnets may become much more expensive because of scarcer supplies and hiked prices of rare earths, according to Adalbert Stroehle, director of sales and marketing at Vacuumschmelze of Germany, which makes the permanent magnets used by companies such as Siemens and Vestas. Vacuumschmelze has contracts in place for the supply of rare earths, so its price is stable.

But Stroehle says: "It looks like the situation will become more difficult next year. It is a substantial issue for us. We cannot substitute rare earths." He adds that Chinese magnet makers can obtain rare earths much more cheaply, making it hard for non-Chinese manufacturers to compete.

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