— Chris Kimmerle is a Reuters market analyst. The views expressed are his own.—
By Chris Kimmerle
NEW YORK, Oct 12 (Reuters) - The Obama Administration has laid out an aggressive program to cut U.S. oil imports by one-third by 2025 through use of more domestic oil, promoting increased energy efficiency and deployment of more clean alternatives to fossil fuels such as wind turbines, electric vehicles and photovoltaic power systems.
To carry out this strategy, the United States needs a growing supply of the rare earth elements and other critical metals essential to the manufacture of alternative energy equipment such as florescent lamps, magnets, rechargeable batteries, state of the-art electric motors, and wind turbine components.
Growing alternative energy industry demand is incremental to critical metal consumption during the manufacture of computers, catalytic converters and other emission control devices, fiber optics and modern weapon systems.
As recently as 2009, the United States consumed approximately 12 percent of total global rare earth production and its appetite for the critical metals is growing rapidly.
But global supply is constrained by Chinese trade and environmental policies and at risk due to potential instability of mine and mineral processing operations in nations having evolving central governments such as the Democratic Republic of the Congo.
The risk is greatest for 14 critical metals. These are the nine rare earth elements not currently mined in the United States — yttrium, lanthanum, cerium, praseodymium, neodymium, samarium, europium and terbium — along with dysprosium and indium, gallium, tellurium, cobalt and lithium.
The federal government may need to do more to overcome the political risk that threatens the availability of the critical elements required to implement the national energy plan.
The rare earths compose a group of 17 transition metals, including the 15 lanthanides plus scandium and yttrium.
Except for promethium, these elements are widely distributed in the Earth’s crust. But unlike base metals, they are seldom found in discrete economically recoverable ore deposits.
Instead, they are generally recovered as byproducts of mining and processing other metals. Their recovery is dependent on the economics of their host metal and the cost of their secondary recovery from mining “waste.”
Cobalt is a byproduct of nickel and copper mining while tellurium is produced in association with copper and indium and gallium are byproducts of zinc mining.
The U.S. Department of Energy estimates that more than 95 percent of global rare earth production is based in China, long the primary exporter of refined critical metals.
In recent years China’s consumption of rare earth metals has increased. The Chinese now have centralized planning goals to ensure a stable supply for domestic manufacturing. This has reduced availability of rare earth supplies outside of China.
The United States sees this as a risk to U.S. strategic interests and emerging alternative energy policy.
The critical metals logistics chain has four links: mining and ore benefaction, secondary recovery from mine “waste,” refining and component manufacturing. Each is exposed to risk including overdependence on single sources of supply and foreign ownership or control of patent rights associated with metal production and component manufacturing.
Cobalt mining is concentrated in the Democratic Republic of the Congo (51 percent of global production) plus Zambia (12 percent) and China and Russia (7 percent each). While China accounts for just 7 percent of mined cobalt production, it produces 39 percent of the global supply of refined cobalt followed by Finland (15 percent), then Canada, Australia and and Norway with less than 10 percent each. Any disruption of mining operations in the Congo or the withholding of Chinese refined metal will have a material impact on already tight global supplies.
The Obama administration is coordinating a broad federal initiative to ensure availability of critical metals for the U.S. economy. The Department of Energy (DOE), Office of Science and Technology Policy, U.S. Geological Survey, U.S. Department of State and the Department of Defense all are involved.
Federal programs are designed to establish a broad-based plan to encourage research and development and provide financial support to foster a stable growing supply of critical elements.
The program includes plans to diversify the U.S. rare earth supply chain and facilitate domestic extraction, processing and manufacturing. The plan encourages development of alternative supplies from Europe, Africa, Asia and Australia. DOE is supporting research and development of alternatives to the critical rare earths and encouraging recycling, reuse and more efficient use of material already in the United States.
It will take five to 10 years to develop new critical metal production facilities. Meanwhile, demand for critical metals will grow quickly due to growing demand for clean energy and prices could be volatile due to a continued threat of Chinese export controls and stretching of critical metal supply lines.
New critical metal production is scheduled to eventually come online in Australia, Brazil, Canada, Greenland, Kazakhstan, Namibia, Russia, South Africa, Sweden, Tanzania, United States and Vietnam. Even as production ramps up, the U.S. Department of Energy predicts that indium and the rare earths dysprosium, terbium, europium, neodymium yttrium will remain in “critical short supply.” The DOE also expects tellurium, cerium and lanthanum will remain at “near critical supply” levels and gallium, lithium, cobalt, praseodymium will fall outside the “critical” category.
Free market forces may eventually contribute to a growing availability of critical metals. But the political risk in this market requires federal support to insure continuing access to a reliable supply or else the United States and other markets are in danger of replacing dependence on imported oil with new dependence on a more concentrated supply of for imported critical metals. (Editing by John Kemp and David Gregorio) (Chris.Kimmerle@thomsonreuters.com; Reuters messaging: Chris.Kimmerle@thomsonreuters.com.net; 646-223-7914)) Key Words: Column US ALTERNATIVES / MARKET