by Greg Klein | February 28, 2016
In his latest Zimtu Research report, analyst Chris Berry considers the viability of a rare earths supply chain independent of the Middle Kingdom. China continues to mine about 90% of world supply, consume about 70% of world supply and dominate metallurgical expertise. But the risk of not developing supply and expertise outside China looms large, he argues.
China could end the current low-price, oversupply situation by cracking down on illegal mining and environmental destruction—or by simply flexing its geopolitical muscles. Moreover, security of supply remains a concern for Western countries: “The United States and her allies would like to make sure that the F-35 stays in the air when it’s really needed.”
Western attempts to find substitutes have had uneven results, Berry finds, and sometimes mean switching one REE for another. “Multiple industry sources have indicated that minimizing dysprosium in magnet feed, for example, means increasing the percentage of neodymium or praseodymium.”
With low prices prevailing and financing an ongoing challenge, mining costs and metallurgical realities take priority. A potentially successful approach would be to develop “a deposit that produced a mixed rather than separated REE concentrate and passed this on to the next piece of the supply chain. To be sure, margin would be forfeited as separated oxides command a premium, but the stark economic realities of the REE mining space dictate that a new business model be created.”
Berry’s eight-page report provides a clear, insightful look at this challenging imperative.