Derk Bol

In the near future, with the growth of demand and protectionist barriers to export, the biggest difficulties on the supply side, are gathered in nine critical materials: the platinum group (which includes platinum, osmium, iridium, ruthenium, rhodium and palladium), germanium, antimony, magnesium, gallium, indium, niobium and tungsten. (Tungsten, reached peak production in Portugal in World War II, and Korean War).

The European Union has defined these materials as critical to its economy. In some cases, entirely dependent on imports. This is the case of platinum, antimony and niobium.

China’s strategic advantage

In seven cases the geography of the extraction and production of critical raw materials is located in China, that since the 1990s began a strategy of world domination on the supply chain: 97% of the production of rare metals (particularly in the region of Inner Mongolia, where they are extracted in infra human conditions), 87% of antimony, 84% of tungsten, 83% gallium, 82% magnesium, 79% germanium and 60% of Indian. The other major producers of these critical materials are Brazil, with 90% of the production of niobium, and South Africa holding 77% of platinum production. In short, three of the BRICS (short for Brazil, Russia, India, China and South Africa).

To ensure more effective control of rare earth industry, the Chinese company Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co Ltd, the world’s largest producer, announced the creation of an exchange to these commodities.

China has already started export controls on rare metals, tungsten, indium and magnesium, either through export restrictions – with cuts ranging between 37% and 50% – in 2011, and the imposition of an export customs duty on refined rare earth mine products. “China is the main winner in the current scenario of the supply chain to high technology,” told us Derk Bol, a scientist at the Materials Innovation Institute in Delft, the Netherlands, which recently presented in Brussels a study on the critical materials. Geopolitical factors and fluctuations in market price expectations will bring a lot of volatility to this sector, refers Derk Bol.

Bol believes, however, that the current geoeconomic advantage of China will push other countries to reactivate production and seek to change the correlation of forces in this market. “Reopen old mines of rare metals, such as the Mountain Pass in Southern California, United States, or new mines in Australia, may be one way, or start extracting these rare metals from mines that are currently producing base metals such as copper. The rare earth mine products are in many cases by-products of base metals mining. But it would take several years, and until then, China has the strategic advantage both economically and geopolitically.” Showing the evolution of the production of these rare earth materials, on the chart, he notices that after the American era, we are now facing a Chinese era.

Responding to the challenge, the American Molycorp, which holds the Mountain Pass mine, made an entry on the stock exchange last year raising $ 500 million to reopen the mine, and in November came the first Exchange Traded Fund, the Market Vectors Rare Earth / Strategic Metals (REMX), quoted in the New York Stock Exchange. And the U.S. Congress wants to build a strategic reserve of rare earth to the military.

Increasing demand

The Dutch scientist pointed out that in four cases – gallium, indium, germanium and platinum – the growing in the demand will be brutal. He estimates that by 2030, the demand of gallium will be multiplied by six, indian by three, germanium will double and platinum demand will be multiplied by one and a half. This extraordinary increase in demand will be due to the development of sectors such as photovoltaics, flat panel displays and the tactile, the semiconductor light emitters, optical fiber cables, optical technologies, solar film, batteries, high-performance fuel cells and catalysts.

The European Union, under the “Raw Materials Initiative”, set in 2008 that the critical materials are critical in industries that will mark the economy of the future: cars powered by alternative energy production and energy storage, energy conservation, protection environment, high precision machinery (involving nanotechnology), miniaturization technology, processors and integrated circuits and consumer electronics. Not to mention the most sophisticated military industry, such as missile systems, night vision, navigation and radar.

“High-tech metals” have high media visibility. The Toyota Prius, a hybrid, powered by electricity, for example, uses 25 kg of these materials.

Risk of war

The scarcity of this type of materials crucial to new technologies wouldn’t be a new thing. In the recent past there were problems with the supply of silicon for solar panels sector (90% are still based on silicon) and in 2000 was the crisis of tantalum for cell phones.

Derk Bol even admits that there is a risk of wars for these resources, but stresses that they “can be avoided if the free trade of these materials is done through the World Trade Organization. On a small scale, they already are the reason of border disputes”.

Replacing these critical raw materials for new artificial ones can be a way to avoid this economic and political stress, but the Dutch expert warns that “that is a short term solution; a good solution usually takes 5 to 10 years to develop.” That is why the Dutch scientist considers recycling and efficiency in product design and production chain as a huge aid to offset the risk of shortages and geopolitical control of critical raw materials.

@LISWIRES/JPO, English Edition 2011