Towards a cohesive European rare-earth elements strategy

Recently, rare earths made the headlines again, as Japan announced the discovery of vast rare earths deposits in the Pacific Ocean, on the seabed in international waters near Hawaii and Tahiti, which made international headlines. The commercial viability and environmental sustainability of underwater mining at depths of 3,500 to 6,000 metres, as well as the ownership issue in international waters raise dilemmas, but the mere fact that the (unimaginable, but a few years ago) prospect of deep sea mining for rare earths is being seriously considered, shows the importance of access to these unique elements.
 

Rare earths are a group of 17 chemical elements, with exotic names such as lanthanum, cerium, neodymium, europium, terbium and dysprosium which are essential for hundreds of high-tech, green-tech, medical, aerospace and defence applications, but whose low concentration levels in the earth’s crust make their extraction and economic exploitation difficult. It is estimated that every hybrid car needs approximately 25-30kg of rare earths and every new 1MW wind turbine needs 200kg of neodymium metal - some €4 trillion worth of products, around 5% of the world's GDP, are today dependent on rare-earth metals, with global demand expected to grow in the coming years.

At present, China holds a virtual monopoly in possessing the largest reserves of rare-earth elements in the world, at 36%, and controlling approximately 97% of the world market. It has a strong scientific research in the field, significant competitive advantage in the production of alloys and final products and is pursuing bilateral agreements for securing known reserves worldwide. While significant deposits and potentially lucrative opportunities exist in Canada, Russia, the US, India, Brazil, South Africa and some developing nations, the rest of the world, including the EU, lacks the technical know-how to process rare earths. US government agencies calculate that it will take between ten and 15 years to re-establish a viable rare-earth elements production industry in the US, while 170 doctorates, master and bachelor students specialized in rare earths will need to graduate every year for four years to regain basic know-how in the field.

To make things worse, China is using its monopoly as a tool to leverage power in the field of international politics. The Asian superpower has restricted exports of rare earths on the grounds of increased domestic needs and the need to improve the environmental sustainability of its own rare-earths production. Export quotas in the first half of 2011 were by 35% lower compared with last year and China has announced the extension of export quotas to include also iron alloys containing more than 10 per cent of rare earths by weight.

Consequently, prices have skyrocketed and in some cases have increased by 1000% since last year, whereas production lines outside China are increasingly experiencing disruptions with the electronics industry having been hit the hardest. Meanwhile foreign companies have moved their high-tech factories and research centres to China to circumvent quotas. China is also stockpiling these elements in order to maintain its influence over global rare-earths prices and supplies.
 

The highly distorted market of rare earths with export restrictions triggering price speculations together with the supply vulnerability makes the somewhat neglected quote attributed to President Deng Xiaoping in 1992, "there is oil in the Middle East; there are rare earths in China" more pertinent than ever. While we might not be heading towards a 'rare earths crisis', comparable to the oil crisis of the 1970s, the situation is highly disconcerting and immediate action is required. With China's reputation as a cheap and reliable supplier undermined, the US, Japan, and Korea, all big users of rare earths, have already taken bold steps to develop strategies to secure access to rare earth deposits worldwide or to re-establish a rare earth market of their own and to ensure supply and price stability for their industries.
 

The US, faced with very ambitious green-tech targets, including having 1 million plug-in electric vehicles in circulation by 2015, and the risk of trading a dependence on foreign oil for one on foreign minerals, has not lost momentum and is re-establishing domestic production of rare earths. Molycorp is putting the rare-earths mine at Mountain Pass in California, which closed in 2002, back into operation. The largest rare-earths mine outside China is expected to produce ten different high-purity rare earths oxides - both light and heavy rare earths - as well as a variety of rare earth metals alloys, and permanent rare earth magnets.

As far as the EU and its relations with China are concerned, the Union is determined to continue putting pressure on China into relenting on rare earths through dialogue and its "diplomacy of raw materials". The ruling of the WTO a few days ago against China's unfair export restrictions of certain raw materials should pave the way for an effective response for free and fair access to rare-earths supplies as well. The European Commission, as it stems from the reply of President Barroso, to a letter sent by myself and other European People's Party MEPs regarding the issue of security of supply in rare earths, is "analysing all options, including taking legal action regarding rare earths under the WTO Dispute Settlement Understanding".

In this context, the EU is facing a great challenge. It needs to:

In this direction, Greenland's deposits, estimated at around 6% of global reserves, could offer a viable alternative source that would guarantee European added value in the extraction and processing of these elements. After all, Europe's investment in Green technologies can not be based on raw materials that are extracted under dangerous and unsustainable conditions in China and elsewhere.

The recycling of electronic waste can also become a significant source of rare earths, with some companies having already developed ways to recover rare earths by means of recycling rechargeable batteries and the European Commission is stepping up efforts to recover and recycle rare earths from electronic waste. Stockpiling together with strategic partners should not be excluded either, as it can protect companies against monopolist pressure and price rises in the rare earths market. A precondition for all the above, of course, is that the EU invests in research and innovation and in education and training of the next generation of rare earth scientists and engineers.

The practically unknown topic of rare earths a few years ago has received a lot of attention and become a highly politicised issue since it became clear that China is not a reliable supplier of these elements to the rest of the world. The sense of urgency that this issue poses, as so many fast growing - and key for industrial competitiveness - cutting-edge technologies depend on rare earths, makes immediate action necessary. Whether the EU will emerge as a winner from this struggle depends on how determined it is to take a proactive role in securing rare earths for itself as well as the necessary know-how and expertise in the field.