Searching For Rare Earths

The semiconductor industry is pre-occupied with several and expensive technologies at once.

One the device side, the industry is looking at new chip architectures, such as 3D NAND, finFETs and stacked die. On the manufacturing front, there is 450mm technology, next-generation lithography (NGL) and new materials. And that’s just the tip of the iceberg.

Another technology that deserves equal or more attention is something even more basic—rare earths. Rare earths are chemical elements found in the Earth’s crust. They are critical for use in the production of cars, consumer electronics, computers, communications, clean energy, health care, national defense systems and others.

There are 17 elements that are considered to be rare earth elements, 15 elements in the lanthanide series and two additional elements that share similar chemical properties. They include scandium, yttrium, lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium.

In total, the estimated market for the rare earths sector is $10 billion to $15 billion, with 100,000 to 110,000 tons of rare earth elements currently produced annually around the world, according to the Rare Earth Technology Alliance (RETA).

The big driver for rare earths are magnets, which are used in hard disk drives, electric motors in cars, wind turbines and other products. Magnets represent one-fifth of the world’s consumption of rare earths. Other end products are alloys, petroleum and others.

“Although the majority of magnets in use today are ferrites, rare earth magnetic materials receive wide acceptance in some uses because of performance advantages,” according to a new economic report from RETA and the American Chemistry Council (ACC). “Metallic alloys containing cobalt or iron in conjunction with lanthanides have considerable magnetic properties. A variety of alloys are used but the most important are samarium-cobalt and neodymium-iron-boron. These magnets are used in higher-value applications. Even with ferrites, thulium is used.”

So why should we care about magnets and rare earths? The relatively obscure subject of rare earths entered the limelight in 2012, when the European Union, Japan and the United States filed a complaint against China. Filed in the World Trade Organization (WTO), the complaint alleged that China applied restrictions and export duties on two forms of rare earth elements, namely molybdenum and tungsten. The complaint argued that the duties are inconsistent with China’s WTO obligations.

China disputed the claims, saying the restrictions were related to conservation and the need to reduce pollution caused by mining. The U.S., Europe and Japan disagreed, arguing that the restrictions were designed to favor Chinese companies.

The dispute over molybdenum and tungsten were only the tip of the iceberg. At the time, the world discovered what many in the industry already knew–China accounted for 97% of the world’s total production of rare earths. In other words, China has a monopoly on the market and basically could control the prices.

Then, in March of 2014, the WTO issued a ruling, saying that China’s export quotas and tariffs on tungsten and molybdenum violated the General Agreement on Tariffs and Trade (GATT), and China’s accession agreement to the WTO.

Not surprisingly, China disputed the ruling, saying the nation is being unfairly treated. Instead of following the ruling, China will even look to “strengthen its control of rare earths exports,” according to a recent report from Bloomberg.

Clearly, the European Union, Japan and the U.S. must put some pressure on China to follow the rule of law. But in other respects, China makes a strong case for itself. China has about 23% of the world’s total rare earth reserves, but has been serving 90% of the world’s demand, according to Antaike, a Chinese state-run research firm.

The United States, in fact, has a large reserve of the world’s rare earths, according to Antaike. The U.S. dominated the market until the 1980s, but then it shut down its mines due to environmental concerns, according to the firm.

To a large degree, the research firm is correct. Several years ago, for example, the U.S. ceased production of high-end magnets. But in fact, with the exception of a small output of cobalt magnets, the U.S. is a non-factor in magnets. Today’s some 90% of the world’s magnets come from Japan and China.

In recent times, the United States has taken steps to boost the production of rare earths. In fact, the U.S. rare earths industry contributes to the North American economy with $795 million in shipments, employing nearly 1,050 workers, according to RETA.

Obviously, the United States needs a new and sound policy on rare earths. RETA, for one, is unable to dictate policy. The group merely serves to provide information about rare earths and their associated technologies.

That leaves policy up to the U.S government. However, based on the recent track record of Congress, it’s up to private industry to act. But is it too late for the United States to re-enter the game?

In fact, U.S.-based suppliers like Molycorp and others are ramping up production of various rare earths. Time will tell if Molycorp and others can bring this business back to earth.