Dysprosium and neodymium are key ingredients in the huge permanent-magnet generators (PMGs) used in large direct-drive wind turbines.
PMGs may be installed in up to 25% of onand offshore wind turbines globally by 2013-14, up from about 5% at present, says the report. That means wind turbines could account for one-third of neodymium use within a few years. By 2025, as many as 75% of offshore wind turbines could use rare-earth PMGs, it states.
The report warns it could take 10-15 years to break American dependence on Chinese supplies of rare earths. The US must speed up development of its rare-earth resources and liaise with other countries to develop trading relationships, it recommends.
China may have only 35-40% of global rare-earth reserves. But the country controls an estimated 97% of the rare-earth market because of far-sighted government policy and intensive mining activities. Most of the reserves outside China have lagged in development.
China also consumes more rare-earth elements than any other country, in part for permanent magnets for export. The current cost of rare-earth metals is one factor in the shift of the production of wind turbine components to China from Europe, the US and elsewhere in Asia.
Meanwhile, the US has threatened it may file a complaint with the World Trade Organisation (WTO) over China's restraints on exports of rare-earth metals. Over the past few years, China has cut export quotas yearly by 5-10%. "The United States will continue to pursue vigorous engagement with China on this issue and will not hesitate to take further actions, including WTO dispute settlement, if appropriate," said the US Trade Representative's 2010 report on China's WTO compliance.
At the end of December, China announced it will slash its export quotas for rare earths by 35% to 14,446 tonnes in the first half of 2011 compared with the same period a year earlier. But this is more than the 7,976 tonnes allowed in the second half of 2010.
Gareth Hatch, a rare earths analyst at Technology Metals Research in Illinois, notes that the tightened export quotas do not apply to finished or semi-finished goods, meaning permanent magnets made in China may be little affected.
However, the export quotas could impact non-Chinese-made permanent magnets. "The possibility of increased prices and potential supply disruption, particularly in the latter part of the year, is not insignificant given the challenges reduced exports have and will bring," he says.
China will also hike export taxes for some rare earths, including neodymium, from 15% to 25% for 2011, China's finance ministry announced.
China has defended its exports policy as legal and necessary for environmental protection. "China will continue to supply rare earths to the international market and will take effective management steps over their export in accordance with WTO rules," says foreign ministry spokeswoman Jiang Yu.
Chinese state media have reported that environmental standards for rare-earth mining will be toughened in early February, which will likely lead to price increases. "The government will allow two or three years for rare-earth companies to upgrade their techniques. If they don't meet the standards, the miners will be banned from the industry," Huang Xiaowei, vice-director of the National Engineering Research Centre for Rare Earth Minerals, told China Daily.