Strategically important metals - Science and Technology Committee Contents


Written evidence submitted by the Department for Business, Innovation and Skills (SIM 00)

1.  Is there a global shortfall in the supply and availability of strategically important metals essential to the production of advanced technology in the UK?

1.  The current situation is that whilst there is currently no significant shortage/lack of availability of key metals, the situation could rapidly change. The UK operates in a global market and largely requires the same materials as other developed economies, and as the world economy moves towards high technology and low carbon manufacturing competition for strategic metals and resources in general will increase.

2.  Whilst there have been no reports of shortages, various industry sectors have expressed concerns relating to access and security of supply rather than scarcity of key metals and minerals. However there are differences in opinion on which resources are at risk as well as concerns that some shortages of materials might be short-lived and that others are likely to emerge.

3.  The UK, EU and other developed economies are consuming some natural materials (not just metals) at an unsustainable rate. Although reserves of most critical materials are sufficient to meet demand, pressure on untapped reserves may increase, with associated environmental impacts. Critical metals are produced in highly polluting and carbon intensive industries, accounting for 5-10% of global GHG emissions. It should also be noted that UK businesses depend on a wide range of materials.

4.  There are some concerns regarding the supply of metals such as platinum and tantalum; with the former likely to become increasingly scarcer, whilst supplies of the latter could possibly be disrupted by geo-political factors. (There are large, mostly undeveloped deposits in the Democratic Republic of Congo).

5.  The EU released a report[1] in June 2010 which listed 14 "critical" materials that could soon be in short supply unless the trade and policy measure of the EU were modified to ensure steady imports and domestic exploration and recycling promoted. The report states that EU economies would be damaged if the materials were inaccessible either due to shortage or export embargo, given that they are produced in a handful of nations only. The 14 metals and minerals are antimony, beryllium, cobalt, fluorspar, germanium, graphite, indium, magnesium, niobium, platinum group metals (PGM), rare earth elements (REE), tantalum and tungsten. Although China and Russia are significant producers of cobalt there are significant reserves in the Congo and others under development eg New Caledonia and Madagascar. Lithium is not included but EC sources consider that may soon change if the use of lithium in electric vehicle batteries increases dramatically. The increased use of the materials in new and emerging technologies suggests that demand for them could triple by 2030.

6.  The report cited the importance of changes in the geopolitical-economic framework that impact on the supply and demand of raw materials. These changes relate to the growing demand for raw materials, which in turn is driven by the growth of developing economies and new emerging technologies. Moreover, many emerging economies are aiming at reserving their resource base for their exclusive use. In some cases, the situation is further compounded by a high level of concentration of the production in a few countries.

2.  How vulnerable is the UK to a potential decline or restriction in the supply of strategically important metals? What should the Government be doing to safeguard against this and to ensure supplies are produced ethically?

VULNERABILITY

7.  In common with other countries, the UK is potentially vulnerable to shortfalls in supply of key metals. As there is no EU mining capacity for some materials (antimony, cobalt, iodine, molybdenum, and zirconium); they are all imported into the EU. For other materials (bauxite, graphite, iron ore, tin and phosphate rock) the EU produces less than 25% of its requirement. Brazil provides 54% of the EU's imports of graphite and 28% of its imports of mined cobalt. China provides 28% of the EU's imports of antimony ores and concentrates.

8.  The situation regarding rare earth elements (REEs) is of particular concern. There are 17 REEs which are used in a wide range of applications, particularly low carbon technology. These metals are integral to the transition to a low carbon manufacturing economy and are also important to other key UK industry sectors such as transport, defence and security. A stable supply will be important for achieving the transition to a green economy, securing green growth and re-balancing the economy towards high value-added manufacturing. The term (Rare earths) is somewhat misleading as they are relatively abundant in the earth's crust, some even more abundant than copper, lead, gold, and platinum; however they tend to be found in remote locations and small concentrations which render (their) mining expensive.

9.  Although China has the largest share, territories such as the CIS, United States and Australia have significant reserves of rare earths. Recent reports indicate there is an ample supply especially within the US, though many of these reserves are not at present exploited; collaborative science is vital in predicting and finding such deposits. There are known reserves of rare earth ore in Canada, South Africa, Brazil, Vietnam, and Greenland.

10.  China is expected to remain the main world supplier in the near term due to the time required to develop resources in operational mines elsewhere. A number of mines are likely to open outside China (United States, Australia and Canada) by 2014. Supply of particular Rare Earths may be limited over the medium term.

11.  World demand for rare earth elements[2] is currently estimated at 134,000 tons per year, with global annual production of around 124,000 tons - The shortfall is covered by existing stocks. World demand is projected to grow at 8-11% per year between 2011 and 2014 to 170,000-190,000 tons annually by 2014 (Source: IMCOA, Roskill and CREIC[3]). New rare earth mining projects can take 10-15 years to reach production, however a number of projects are due to come online in the next few years. In the long run global and undeveloped reserves should be sufficient to meet demand. China currently has 97% of the world's short-term production capacity of rare earths. China's market share is forecast to decline as productive capacity increases elsewhere.

12.  The highest growth is expected for magnets and metal alloys, as required in hybrid and electric vehicles. Hybrids are expected to gain an increasing market share, but other applications such as wind turbines will compete for the essential materials. Although total world supply is forecast to exceed total world demand, shortages are expected for key heavy elements such as dysprosium and terbium.

13.  Supply of rare earths at the present (and in the immediate future) is therefore reliant on China responding to the increase in demand and adjusting output. Concerns were heightened early in June this year when the Chinese government announced that mining rights for the rare earth elements would be restricted to a small number of Chinese state-controlled mining companies. The announcement did not specify the exact number or identity of these companies, but state media reporting made it clear that it referred to the four companies which already dominate the white-market supply of rare earths in at least one Chinese province each.[4] This followed the capping of production levels for 2010, and the imposition of a moratorium on all new mining licenses until 30 June 2011. China's Ministry of Land and Resources published its six-monthly review of rare earth export quotas on 21 July 2010, cutting them far more than is usual, and hitting foreign-affiliated companies hardest. China's Ministry of Finance announced on 14 December 2010 that it would increase rare earth export taxes in 2011. The announcement did not specify the extent of the increases, nor which rare earths they would target, nor whether they would apply to raw, processed, intermediate or final rare earth goods. China's rare earth export taxes currently apply to raw and processed rare earths only, and range from 15 to 25%.

14.  The results of this action, which effectively reduce rare earth exports by over 70% (for the second half of 2010 compared to 2009), will be twofold: protection against foreign ownership of strategic resources, and incentives for foreign companies to relocate manufacturing plants to China. We assess these to be the main motivations behind China's policy. In addition, prices are likely to be forced up in the short-medium term. The increased restrictions are also likely to deepen international concerns that China may be intentionally hoarding its reserves of rare earth metals and other key raw materials at a time of rising global demand; yet if this were China's intention, we would expect it also to impose export restrictions on the export of finished rare earth products - and it has not done so. Reports of a temporary cessation of rare earth exports from China to Japan - during a period of political tension - further illustrate the potential vulnerability of the West.

15.  Research for Defra has sought to identify those resource issues which represent the greatest threats and opportunities for UK businesses; and to assemble data on the nature and scale of those threats and opportunities, and the business understanding of these. This research covers a wide range of biotic and abiotic resources, including key metals, and is based on a review of literature and engagement with key sectors. It will be published shortly.

SAFEGUARDING SUPPLY

16.  Concerns have heightened since the recent China-Japan dispute. Therefore whilst options in terms of securing supply are perhaps limited, other countries are already taking pre-emptive/contingency measures to safeguard supply.

17.  Such measures are largely contrary to the UK's traditional free market approach to economic policy.  Unilateral action aimed at securing supplies of critical metals should be subject to very close scrutiny and can be proposed only after careful analysis of the long-term costs and benefits involved, with particular attention to the environmental consequences.

18. The UK possesses some rare earth reserves in the tailings of disused tin mines in Cornwall. However given the marginal economics and limited success in recovering rare earths from operational tin mines overseas, these are unlikely to be economic.

19. An issue that any country intending to develop rare earth production facilities must consider is the potential lack of qualified workers. Very little extraction and refining knowledge exists outside China and such knowledge will have to be developed.

20. China's export restrictions create a two-tier pricing system, where raw and semi-processed rare earth prices inside China are much lower than on the international market. (There are no current restrictions on the export of finished rare earth products from China.) Consequently, there has been much speculation that China's objective may be to attract foreign firms with low domestic prices to develop high value-added technology industries within the country. However, China's Ministry of Land and Resources has said publicly that the main intention of the quotas is to protect reserves from environmentally reckless exploitation. Some commentators have predicted the cessation of licences for rare earth exports from China in 2014, but Beijing has denied any plans to choke off supplies. There are currently 32 licensed exporters of rare earths in China. China's Ministry of Commerce said in November that China needed to improve the management of rare earths by a combination of measures including [but not limited to] export quotas, export taxes, and regulation of exporters. (Other measures could include extraction licences and export licences.) The UK Government supports free trade and therefore believes an export ban by China would be anticompetitive and undesirable in the long run. Nevertheless, a cessation of Chinese exports would have a number of long-term effects:

  • It would improve the economic viability of non-Chinese sources of rare earths that were previously undercut by Chinese supply, thus increasing global security of supply.
  • Such a long-term signal may be helpful to non-Chinese mining projects in raising finance and in long term planning. It may also work as an incentive to develop specialist skills in extraction and refining of rare earth metals.
  • These new mines would be expected to operate to much higher environmental standards than is currently the case with most Chinese mines. Chinese mines in the south of China are generally regarded as having an extremely poor environmental profile. The major producer in north China has also been criticised in this respect.[5] Thus the export ban would enable not only a newer but also greener supply chain to be established.
  • China could become the de facto monopoly supplier of goods dependent on these important materials, if the cost of alternative sources were to remain relatively too high.
  • Non-Chinese businesses would still be able to purchase value- added items (magnets, motors etc) from Chinese sources, or establish more expensive non-Chinese supply chains albeit with a better and more transparent environmental profile. This principle already applies in many other UK industrial sectors.

21. The main negative effect of the export restrictions is likely to be some short-term supply tightness, particularly if the first two major non-Chinese rare earth projects are delayed. However such tightness will also be an incentive for the acceleration of these and other projects.

22. It may be that China will tempted by higher prices to continue the export of rare earths. This could impact on the economic viability of the new non-Chinese mines, and thus leave China as the possible sole supply of rare earths. There is also the "grey" market to consider - the considerable volume of rare earths that circumvent the export quotas and are mined and exported illegally from China. The degree to which these exports are targeted by enforcement authorities will also affect the viability of non-Chinese mines. If China does continue to export rare earths, the possibility remains that no alternative, greener, sources of supply will become viable.

23.  The UK could encourage the accelerated development of commercially viable sources of rare earth in other countries more likely to be amenable to exporting such materials to the UK and/or countries which might supply components for or complete electric vehicles.

24.  Scientific research has an important role to play and the UK Research Councils are a source of relevant information in support of strategic approaches to tackling the issue. The British Geological Survey, a centre of the Natural Environment Research Council, and the UK's premier centre for earth science information and expertise, monitors global metal production and trade. Research Councils UK (RCUK) has provided a separate submission to the Committee.

3.  How desirable, easy and cost-effective is it to recover and recycle metals from discarded products? How can this be encouraged? Where recycling currently takes place, what arrangements need to be in place to ensure it is done cost-effectively, safely and ethically?

25.  Currently, re-use and re-manufacture of components rich in strategically important metals would be preferable to recycling on a cost and environmental basis. In many cases, particularly for REEs recycling is labour intensive and very costly. Recycling of REEs is currently not economically viable and currently makes limited contribution to demand; however if the cost of REEs continues to rise recycling becomes more realistic. Therefore, it is important to design products so that valuable components can more easily be recovered and whenever possible, re-used. Reducing the amount of resources such as rare earths used in various production processes and applications is also necessary, in addition to looking into alternative materials. Research is underway in Japan which has had some success. The Japanese firm Hitachi has developed machinery which can recover rare earths from discarded disk-drives eight times faster than manual labour. The company plans to get 10% of its rare earth needs through recycling in 2013.

26.  The UK is looking at targeted measures to encourage, incentivise and enable improved resource efficiency through the Review of Waste Policies, the new strategic steer for Defra's resource efficiency delivery body, WRAP, the Natural Environment White Paper, and through the Roadmap to a Green Economy being developed by Defra, BIS and DECC. It is also important to continue working with Businesses and Trade Associations to raise awareness, and spread best practice.

27.  Internationally, Japan is thought to have only one or two facilities left that are able to recycle rare earths from scrap, a costly process which has largely passed to China, according to industry sources. To be cost-effective in Japan, the price of rare earth metals would have to rise 10-fold, but with further price rises likely, the likelihood of more REE recycling increases - Over the past five years, the price of neodymium, used in such products as computer hard disks, has risen about six-fold and that for dysprosium, used in data storage devices, eight-fold.

28.  It is worth noting that the current recycling rate for REEs in most countries is around 1%, a figure consistent with that for other metals.

29.  There are well-established methods for the recycling of most batteries containing lead, nickel-cadmium (NiCd), nickel hydride and mercury, but for some, such as newer nickel-hydride and lithium systems, recycling is still in the early stages and not designed for the recovery of their rare earth contents.

30.  There is no collection infrastructure in place for nickel-metal hydride (NiMH) batteries yet. This is because of the long time span of the batteries coming into the recycling markets. There needs to be proper separation and segregation of rare earth-related components for optimum recovery.

31.  Rare earth magnets are fragile and fracture very easily. It is estimated that between 20-30% of the rare earth magnet is scrapped during manufacturing because of breakages or waste cuttings such as swarf and fines.

32.  There are potentially a number of extraction processes but none of them developed commercially due to drawbacks on yields and cost. The most attractive appears to be treatment with liquid metals. Little progress has been made in 15 years or so. Therefore there is potential to undertake some development not only to avoid possible supply shortage but also to retain the rare earths in the UK.

33.  The UK will also host the next EU Innovation Forum in March 2011 which will consider and help raise awareness of resource security issues.

34.  The UN Environment Program has also called for a global drive to recycle rare earth metals, warning that supplies of rare earths may be exhausted within 40 years.

4.  Are there substitutes for those metals that are in decline in technological products manufactured in the UK? How can these substitutes be more widely applied?

35.  In terms of rare earths, there are currently no reliable substitutes. Other metals have been tested, but with no success. Research is on-going; however the likelihood of developing viable alternatives in the near future is remote.

36.  It also very much depends on the need of the process or product it is being used for. Some low carbon technologies have very specific material needs and alternatives are not always readily available. We need to support/encourage UK companies to assess their own particular situation, understand the resources they use and mitigate risks to supply. There may be more of an issue for smaller companies than large who may generally have a better awareness of the issues.

37.  This is possibly an opportunity to encourage/support UK businesses to develop alternatives, new processes, develop new markets etc. For example no feasible replacement for the rare earth magnets used in electric vehicle motors has been discovered. Minimisation of rare earths in existing magnets will only result in small reductions in material usage compared with the overall demand.

38.  The reduction or replacement of dysprosium usage is a high priority on many research agendas as this element will suffer the tightest resource constraints. Both design and technological solutions to achieve this should be investigated.

39.  Electric motors which do not require permanent magnets are the most likely way of reducing or eliminating rare earth in electric vehicle magnets. However, for technical reasons rare earth technology is favoured in the current generation of hybrid vehicles.

40.  Despite some historic expertise, negligible research into magnetic materials now occurs within the UK. When compared to the efforts of Japan, China and the USA, public and private funding of research in this area is minimal.

41.  The demand for Rare Earths in batteries will naturally decline as manufacturers shift from NiMH batteries towards lithium-based technology. (Consequently, this may cause supply issues around lithium.) Even with improvements NiMH batteries are unlikely to compete with lithium-based alternatives in performance terms.

42.  Many alternative battery technologies are being investigated as improvement of battery performance is a key consideration in the future development and implementation of electric vehicles. None of these is heavily reliant on rare earths at the current time.

43.  The UK has reasonably strong research in this area, though may not have the manufacturing base to exploit developments in a commercial setting.

5.  What opportunities are there to work internationally on the challenge of recovering, recycling and substituting strategically important metals?

44.  There are existing and forthcoming initiatives at EU level such as the resource efficiency flagship initiative, Raw Materials Initiative, Low Carbon Roadmap to 2050, and work on Sustainable Materials Management, which all provide good opportunities on particular aspects. The UK Government is working to ensure these are all joined up to provide a coherent approach under the EU2020 Strategy.

45.  Work is planned under FP7 Nano-sciences, Nano-technologies, Materials and new Production Technologies looking at novel materials for replacement of critical materials (platinum group metals and rare earths).

46.  The EU has launched a Consultation aimed at business to gather information on the EU interest with regard to export restrictions on raw materials that might impact EU business in China, the EU or third countries.

Department for Business Innovation and Skills

20 December 2010


1   Critical Raw Materials in the EU - Issued by the EU's Raw Materials Supply Group Back

2   Rare Earth Elements - The Global Supply Chain - US Congress Research Paper, July 2010 Back

3   IMCOA: Industrial Mineral Company of Australia, Roskill: http://www.roskill.com/
CREIC: China Rare Earth Information Centre 
Back

4   These are: Baotou Steel Rare Earth Hi-Tech Company; China Minmetals Company; Jiangxi Copper Corporation; China Nonferrous Metal Industries Foreign Engineering & Construction Company. Back

5   Baotou Steel Rare Earth Hi-Tech Company Back


 
previous page contents next page


© Parliamentary copyright 2011
Prepared 17 May 2011