By on September 29, 2011

Last year, tensions ran high – about dirt. Emotions were whipped up about a Chinese embargo on stuff most people never had heard of: Rare earth.The stuff is used to make magnets that go into anything from hard drives to generators and electric motors. Cooler heads tried to point out that rare earth is not rare at all, and that China has as much a monopoly on rare earth as it has on sand. Nobody listened to the cooler heads, and rare earth prices went stratospheric. Step aside, those rare earth prices are crashing down.

Says Bloomberg:

“Rare-earth prices are set to extend their decline from records this year as buyers including Toyota Motor Corp. and General Electric Co. scale back using the materials in their cars and windmills. Prices for cerium and lanthanum, the most abundant rare- earth elements, will drop by 50 percent in 12 months.”

As promised in January, engineers at Toyota developed a new “induction”-type electric motor that did not only let the Chinese eat their own rare dirt, but also promised to be more efficient and more compact than the current fixed-magnet motors.

On the back of these news, and a cooling off of auto demand and electric car exuberance, rare earth prices started coming down in August and continue to go south. It’s not just supply and demand: Speculators are fleeing the stuff, and instead of an embargo there are now stories of rare earth dumping in China.

Toyota’s new technology exited the labs and is going in series production. John Hanson, a Toyota spokesman in Torrance, California, confirmed to Bloomberg that “moving from a fixed-magnet motor to an induction motor is a huge savings with regard to rare-earth metals.”

GM will sell a Chevrolet Malibu Eco next year that uses an induction motor, and will cut down on magnets that use the no longer so rare earths.



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13 Comments on “Rare Earth – Who Needs It?...”

  • avatar

    Whoa, whoa, whoa…was common sense just proven applicable to a world econo-political situation? Is the U.S. still involved?

    Induction motors…not exactly new technology. I seriously wonder why it took auto manufacturers so long to apply to their EVs. Immense torque but I do wonder about efficiency though…

    • 0 avatar

      You nailed it, Induction motors aren’t as efficient, so to get the same range you need more battery. When the cost of rare-earth motors gets above the induction motor cost + the extra battery capacity + factors relating to the extra mass, size etc, then the switch makes sense.

  • avatar

    “… will drop by 50 percent in 12 months.”

    That’s an opinion, not a fact or worthy news (yet).

  • avatar

    There goes the plan to reopen those defunct rare-earth mine in the U.S…

    • 0 avatar

      I wonder if that wasn’t the plan. Enact quotas to jack up prices, then flood the market when competitors started to come on line and pull the rug out from under them. Let the price stabilize higher than the original price, with potential competitors scared off by the shellacking they took.

      What, too paranoid?

    • 0 avatar

      It’s all part of our government’s brilliant long term plan to deplete the world’s supply of commodities while hoarding ours for the future. Just when you think we are totally broke after spending all our money importing oil, rare earth’s etc., the world runs out of the stuff and we have the monopoly! Brilliant!

  • avatar

    This article needs a lot more research. The variables that go into rare earth prices aren’t completely market driven as the majority of supply is controlled Bao Gang and China’s Chamber of Commerce of Metals.

    That said, there has been a drop in rare earth demand, partially because weakening economy, and partially because conversation moves by Japanese companies and shifting dependence. But that’s not the complete story…

    The bigger story is that a lot of Japanese companies are relocating their rare-earth dependent industry to China:

    Which is what China wanted all along. A lot of the commercialization and know-how associated with rare earths have been a closely guarded secret held by Japanese firms. By moving to China , China can poach these technologies.

    Another motive is that China also wants to undermine several rare-earth alternative mines that are expected to come online by 2013. Molycorp, Great Western Mineral, and Lynas all have plans in the US, Australia, and Canada to bring mines back up. A drop in rare-earth prices makes the business case very difficult, however, given what has happened in the past its very unlikely to deter investors in these mines.

  • avatar

    Neither the Volt nor the Tesla Roadster use PM motors, it was always a story about nothing.

  • avatar

    China’s embargo on rare earth did spike prices. But it also showed that depending on China as one’s SOLE rare earth supplier is stupid. And therefore costly.

    If you depend on rare earths, there are solid reasons to have a backup plan using long term contracts with reliable (aka non-China based) firms. Reliability in a supplier can command a premium price, especially if a disruption can shut production down.

  • avatar
    Jeff Semenak

    Rare Earth – I just want to celebrate…

  • avatar
    Jeff Semenak

    Or, better yet, Get Ready…

  • avatar

    Since money can’t be made the old fashioned way everyone is looking for the escalator to riches and wealth. This is no different from any other commodities broker.

    Back in the 70’s a civil war in Zaire cut off the world’s cobalt supply. Alnico magnets used cobalt and it forced a move to Ferrite magnets, undoubtedly a better material and smart move. Cobalt prices never recovered from the crash as demand weakened.

    Now if someone finds a way to control the air and water supply through a single entity then they have something. And the governments will find a way to tax it as well.

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