REE Automotive Ltd REE

from a different board, good article

[panamjr]

The Effect on Neodymium and Dysprosium Supply of China's Domestic Growth
March 13, 2011
PrintSend to a FriendTweet this Analysis
Jack Lifton
Summary
China's green-tech/cleantech growth targets as stated in the just-put-into-effect 12th five-year plan are ambitious. What is their effect on China's domestic demand for the two most important rare earth metals, neodymium and dysprosium?
Analysis
Chinese domestic demand growth for the rare earth permanent magnet metals, neodymium and dysprosium, over the next five years will be strongly influenced, and, perhaps, determined by the emphases announced in the new Chinese economic development five-year Plan for industrial policy that has just been put into operation. The general outline of this 12th five-year plan is reviewed and analyzed in the London Telegraph for March 5, 2011, in an article which is entitled "China's five-year plan: key points"
Before we discuss the specific section of the new five-year plan that influences rare earth metals demand growth you, first of all ,need to understand that China's industrial economy is centrally planned and rigorously controlled in detail, by the China State Council, the executive body of the Chinese Communist Party, which operates in a "King in Council" manner similar to the way in which the British government operated when the king had actual power centuries ago. In the case of the China State Council, of course, it is the "president" of China who is the head of state while the Prime Minister and State Council members are the daily overseers and rulers of the operations of the government. I don't think it's right to refer to the China State council as equivalent to the Chinese president's cabinet as many pundits do. The State Council is much more than an advisory group to the president; it is actually operating as the office of the executive branch of the government, and it consists of powerful men, all members of the Communist Party hierarchy, the men who actually rule China. The China State Council does not recommend industrial policy; it defines, organizes, and controls the Chinese economy in order to achieve the goals of the Chinese Industrial policy.
The council sets the goals ahead of time for each five year period, and it has traditionally done so by asking the permanent civil service bureaucracy to prepare position papers on their needs and wants prior to the finalizing of each new five-year plan. From these studies the China State Council decides on what the goals of the plan will be and how the state's total resources will be allocated to implement it successfully.
The current plan just officially promulgated is the 12th one since the 1949 revolution that brought the Chinese Communist party into power, This centralized planning of goals for industry is a legacy of the Soviet Union's evolution of the economic measures thought to be necessary for the transformation of socialism ultimately into communism. Needless to say Lenin and Stalin would no longer recognize the policies of the present Chinese Communist party as having originated in their own theorizing and economic experimentation, which was finally an unmitigated disaster and eventually brought about the economic and political collapse of the Soviet Union.
Second, you need to understand that the job security of a Chinese manager is a direct function of his or her ability to meet the goals of the five-year plan. Only systemic failure can save a manager who does not meet his assigned goals from disgrace and unemployment. Therefore Chinese managers take their assigned goals very seriously. Plans are made in detail by industry in China in collaboration with the central and provincial governments to allocate the resources of labor, capital, and natural resources necessary and sufficient in the eyes of the planners to meet the industrial goals for production.
Beijing may alter the timing of the execution of any particular aspect of the five-year plan but local officials have no such power to do so.
Note well that this is the complete opposite of American practice where legislators if they bother with this type of planning at all set over-reaching goals and then leave it to private industry and capital to meet them. Typically when western politicians simply do not understand a technology, such as vehicle electrification and the production of cost efficient batteries for such technologies, they then simply set goals to be met after they leave office and accept the congratulations of their similarly inclined constituents who like them know nothing of economics, manufacturing engineering, or from where natural resources come and at what rate.
This is not the case in China where bureaucrats are chosen for specific expertise as well as political reliability.
The punditry usually refers to the Chinese planning as industrial policy, but it is as much direction as it is just simple policy.
The Telegraph article contains the following in its translation of the five year plan's key points:
" Introduce targets for energy efficiency and consumption that will see China finding 20pc of its energy from non-fossil fuel sources by 2015. The contribution of coal and oil to fall from its current 90pc to 80pc."
When I was in Beijing on August 1, 2010 for the 6th Annual Chinese Society of Rare Earths Summit a speaker representing the Chinese wind turbine electricity generation industry told the conference that "in the next two five year plans, the 12th and 13th, beginning in 2011 China, in order to reduce the usage of coal to generate electricity and to improve energy use efficiency per productive unit of capacity, would add 330 gigawatts of wind generated electrical power, and that this would require a total of 59,000 metric tons of neodymium.
He said that the wind turbines to be built would use rare earth permanent magnet type generators to save on weight and maintenance. The reaction of the crowd, overwhelmingly made up of Chinese rare earth miners and refiners, it seemed to me was one mostly of surprise.
I understood why this was so. The neodymium required makes up just 28% of the total typical neodymium-iron-boron alloy that is the composition of a rare earth permanent magnet. Yet the spokesman from the Chinese Wind Turbine Industry had clearly said, and his slide showed, a need for 59,000 metric tons of new, additional, neodymium demand that had not been before added to the demand growth figures anyone had seen.
The Chinese businessman next to me had been busy photographing the wind industry spokesman's slides. I asked why he didn't just request a copy of the presentation. His reply was "You'll never get a copy from these guys. They're running trial balloons for the State Council."
Neodymium is typically around 20% of the total REEs produced by the Chinese light rare earth industry. That total last year, 2010, has been said by Dr Chen of the China Society for Rare Earths to have been just 89,000 metric tons of which 77,000 MT, or 86%, were light rare earths. this means that the Chinese production of neodymium for 2010 was about 15,000 MT.
Of the 12,000 MT of heavy rare earths produced in China in 2010 just 7% was reported to be the heavy rare earth, dysprosium, which would mean that 840 MT of dysprosium were produced from the so-called ionic absorption clays in southern China.
A typical rare earth permanent magnet of the neodymium-iron-boron type contains 3-12% of dysprosium overall-this means that 100 kg of such magnet alloy contains from 3 to 12 kg of dysprosium as well as 28 kg of neodymium. The OEM automotive industry uses the most dysprosium loading, as high as 12%, to give their rare earth permanent magnet based motors, sensors, generators, and the like the maximum service life at constant high temperature use.
Even assuming that the new demand for rare earth permanent magnet alloy for the Chinese wind turbine industry uses only 3% of dysprosium and even if the 59,000 tons of neodymium were only 59,000 tons in total of magnets one would still need an additional 1800 tons of dysprosium just for this project as well as an additional 18,000 tons of neodymium! If the demand for new additional neodymium for the wind turbine project is indeed 59,000 tons then a minimum demand for dysprosium could be 6,000 tons, which would be, at current production, the total dysprosium produced for the next 7 1/2 years!
These demand growth figures, assuming that the need is 59,000 tons of neodymium, would require at least a doubling of current Chinese light rare earth metal production and the total dedication of dysprosium production to this clean tech goal for most of the next decade. If there is a further demand growth from the automobile industry, the current largest user of dysprosium enhanced neodymium-iron-boron rare earth permanent magnets, and that growth parallels the increase in motor vehicle production expected in the next decade then this use alone will add the need for an additional production equal to the entire 2010 production of neodymium and dysprosium.
We would then be looking at a minimum at a torrid 15% a year growth in the demand for neodymium and dysprosium between 2011 and 2020 just from the Chinese domestic wind turbine industry and the global OEM automotive industry.
Such growth may be possible for neodymium production; it is unlikely to be achieved for dysprosium unless there is for the first time development of dysprosium resources outside of China.
The Chinese have emphasized over the last year that they believe their dysprosium resources are being exhausted, and that at current rates of production they have only 5-25 years of production remaining.,
If the growth of demand for neodymium and dysprosium above are correct then it is most likely that dysprosium will be OR IS ALREADY in short supply.
Therefore unless rare earth mining ventures with commercially significant dysprosium are now brought into production as soon as possible then clean tech growth outside of China will slow down or stop depending on whether or not the clean tech manufacturer has a Chinese source for REPM containing components and that Chinese source has an export license for rare earth containing components.