By Feini Tuang
Technology is revolutionizing the way we live. In this part of the affluent world, we are experiencing a comfortable and convenient life with ever more possibilities. It has become an unexamined belief that technology can give us a better life and more is always better. However, a sustainable future may not be possible when the parts cannot come together as a larger whole. Clearly, there are gaps when we see workers struggling to make a living with poor health, villages and forests degenerating, resource depleting and farmland and water sources contaminated. These are not gaps to be ignored when we have the privilege to drive our hybrid cars, listen to our iPods and watch LCD TVs. It is only through examining our beliefs that we can change how we shape the world. Here we will examine our beliefs through the rare earth metals value chain.
Our Techie Dream
We dream of a cleaner future powered by wind turbines and solar panels, with the Internet and mobile phones connecting us into a global village. We want our hybrid cars, laptops, iPods, LCD TVs, medical equipments and defense missiles to take us to work, give us much fun and keep us feel safe. We believe that technology can give us a better life and we want more of it.
At the core of this technological transformation, rare earth metals with their unique properties are playing a critical role to make these possible. For example, two of the rare earth metals with high magnetic performance - neodymium and dysprosium are used to make the permanent magnets used in wind turbines, motors, hard drives, head phones, medical imaging equipments, and missiles. Lanthanum is used to make rechargeable metal hydride batteries used in electric cars, and terbium is used to make compact fluorescent lamps (CFL).1 Industries reliant on the rare earth metals are estimated to be worth 4.5 trillion USD or five percent of global GDP.2
Global sales of hybrid electric cars are forecasted to be 3 million units in 2015, up from 732,000 units in 2009.3 The 3 million cars will require 33,000 tonnes of rare earth metals.4
Global Wind Energy Council (GWEC) forecasted that the global installed wind capacity will reach 409 GW by 2014, up from 158.5 GW at the end of 2009. The additional 250.5 GW will require 167,000 tonnes of rare earth metals.5 This is greater than the 150,000 tonnes of rare earth metals produced by China in 2009.6
The demand for rare earth metals is growing with the expansion of the clean technology, consumer electronics and the defense industry. The picture so far goes along with our belief that “technology can give us a better life and more is always better.” It does look like we need to accelerate rare earth production to meet our rising demand and that is exciting. How does the supply side of the picture look like?
Since the 1980s, China has dominated much of the rare earth market. The US who used to own the largest rare earth mine in the world - Molycorp’s Mountain Pass mine, ceased mining by 2002 after facing radioactive thorium waste disposal issue with tightening environmental regulations. It was also much cheaper to import from China than to continue mining.7 China currently accounts for 36 percent of the world rare earth reserves8 and 97 percent of world production.9
While the rare earth price has been rising in the past few years, at an average of RMB 100,000 per ton in 2009, the price has risen little more than 20 percent since 1979. “The current price does not reflect the proper value of rare earth. We are a price-taker on the international market,” said an NDRC official.10 With its spur of cheap rare earth production and low social and environmental standards, China is facing complex challenges.
Social and Environmental Challenges
Inner Mongolia is home to one of the world’s largest and most destructive rare earth mines - the Baiyun Obo mine – which produces half of the world’s rare earth metals.11The Baogang refinery in Baotou that processes the iron and rare earth ore from the Baiyun Obo mine was built in 1956 with little or no consideration for health, safety and the well-being of the surrounding environment.12 In subsequent years, harmful chemicals have continued to be emitted into the air or dumped into a neighboring tailing lake, contaminating agricultural lands and local water sources, including the nearby Yellow River where some 150 million people depend on it as a primary source of water.13Villages have been uprooted when formerly fertile lands could no longer produce food.
The staggering destruction is also found in rare earth mines across southern China with small illegal mining enterprises springing up along with larger state-owned enterprises. With the same belief that “technology can give us a better life and more is always better”, these mining enterprises are exploiting the resources in the name of technology for economic value with little consideration for people and the environment. In externalizing the social and environmental cost for over thirty years, China is now coming to terms with the real cost of its unsustainable mining practices.
In addressing the challenges facing the rare earth industry in China, the Chinese government has recognized producing more is not always better as they have a finite resource base and serious social and environmental problems to deal with. Meanwhile, China is also prioritizing production for local consumption to make enough wind turbines and hybrid cars to meet its low-carbon target.
As measures to control production, production and export quota as well as export tax were imposed. In July 2010, China cut export quotas by 72% for the second half and shipments will be capped at 7,976 tonnes, down from 28,417 tons for the same period in 2009.14
Illegal mining and smuggling also present challenges with rising prices fueling opportunistic local governments and small businesses looking to reap quick profits from higher prices. Subsequently, prices have fallen due to oversupply. Despite caps on excessive production, they have largely been ineffective. For example, 20,000 tonnes of smuggled rare earth accounts for one third of the rare earth export in 2008.15
To crackdown on illegal mining and consolidate small refineries, China’s Ministry of Industry and Information Technology (MIIT) is developing an Entry Standard for Rare Earth Industry. The standard will include regulations on production scale, technological equipment, energy consumption, resource utilization, environmental protection, product quality as well as supervision and management.16
China is also planning to stockpile 300,000 tonnes of rare earth ore concentrates by 2013 to better regulate the pricing of rare earths metals as well as to help ensure its own future supplies.17
Furthermore, there are over 13 million tonnes of rare earth ore left in the tailing lake, and 500,000 tonnes are added annually.18 The volume is largely driven by iron mining from the same deposit as rare earth metals are extracted as a byproduct of iron mining.19 Due to inefficient design and processes, 75 percent of the rare earth were not extracted and being dumped with the tailings or byproduct waste. Stockpiling may help to reduce the rare earth wasted in the tailings. Baogang is also developing technology to extract rare earth from the tailing lake to achieve more effective resource utilization.20
China’s near monopoly in this area has many countries concerned about China’s potential grip on technologies of the future. Its recent introduction of production and export caps on rare earth metals to bolster domestic supplies have set off outcries from western countries, particularly from the US which has come to rely on the rare earth metals for production of its military aircraft and defense weapons. Whether these countries can successfully bring their cases forward to the WTO has yet to be determined.
This reliance on China has prompted the exploration of other alternatives. In the US, Molycorp, the former owner of the world’s largest non-Chinese deposit of rare earth metals is now raising money for an IPO to restart operations in the Mountain Pass mine.
Changing Our Belief
Putting our techie dream together with the reality of the rare earth supply, do we see a sustainable future? Obviously, we see a picture full of paradox.
From the US’s response, we can see that we truly rely on technology and we want more at a lower price. This fits in with the belief that “technology can give us a better life and more is always better.”
China as the producer recognized that the resource we have is finite and non-renewable and we cannot keep going down the track of extraction and destruction.
The rare earth story in China is a microcosm of resource extraction in the world. The same story of extraction and destruction is happening in Africa. The mining of tantalum, an important material for making the capacitors used in mobile phones is fueling conflict and genocide in the Democratic Republic of Congo.
To be responsible global citizens and consumers of products made of rare earth metals, we can clearly see that this is certainly not a challenge for China alone, and it is a challenge for us all. Our techie dream created this reality.
We cannot create a different outcome without changing our beliefs. We need to recognize that our vision of a clean technology future is at odd with the current reality of rare earth production. Technology doesn’t always give us the solutions. More is not always better. We need to recognize ourselves as people and not just consumers. We need to look at the big picture and come together to find integrative solutions. The first step is perhaps just as simple as consuming less. As a collective, it makes a big difference.
4 Wardsauto.com, http://wardsauto.com/ar/chinese_lanthanides_hybrids_100427/
5 Two tonnes of rare earth metals are required for a 3MW wind turbine. Renewableenergyworld.com, http://www.renewableenergyworld.com/rea/news/article/2010/04/global-wind-market-going-strong-at-150-gw
10 21cbh.com, http://en.21cbh.com/HTML/2010-6-3/yMMDAwMDE4MDYyMQ.html
11 New York Times, http://www.nytimes.com/2009/09/01/business/global/01minerals.html
12 China Weekly, http://news.sina.com.cn/c/2009-10-22/143718885679.shtml
15 Netease News, http://news.163.com/special/00012Q9L/xituchukou100211.html
16 21cbh.com, http://en.21cbh.com/HTML/2010-5-14/5NMDAwMDE3NzI5NQ.html
Feini Tuang is Senior Consultant at the Global Institute For Tomorrow