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
5. The EU released a report
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?
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
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
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).
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
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.
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.
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
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
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
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
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,
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
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
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
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
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
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
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
Rare Earth Elements - The Global Supply Chain - US Congress Research
Paper, July 2010 Back
IMCOA: Industrial Mineral Company of Australia, Roskill: http://www.roskill.com/
CREIC: China Rare Earth Information Centre Back
These are: Baotou Steel Rare Earth Hi-Tech Company; China Minmetals
Company; Jiangxi Copper Corporation; China Nonferrous Metal Industries
Foreign Engineering & Construction Company. Back
Baotou Steel Rare Earth Hi-Tech Company Back