This paper, “Neodymium No Deal (N.D.) explores this great new global innovation in alternative energy technology and the challenges that this sector faces that will undermine the credibility of this commodity in the “clean” and “green” tech energy field.

1. 2011
Tec 275
Power Technology
Monica Leslie
[NEODYMIUM N.D.]
[This paper, “Neodymium No Deal (N.D.) explores this great new global innovation
in alternative energy technology and the challenges that this sector faces that will
undermine the credibility of this commodity in the “clean” and “green” tech energy
field.]

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Background
Neodymium is a rare earth metal that is commonly used in the development of alternative energy
technology. The mineral is commonly used as an alloy made up of Neodymium-Iron-Boron
alloy (Nd2Fe14B) (Parry). Neodymium, like many specialty earth metal alloys is necessary for
the lightweight permanent magnets that are used in Prius motors and other hybrid forms of
transportation, “smart” electronic devices like cell phones and the mass production of electricity
produced by maglev wind turbine generators (Pasternack).
The structure of the atoms within the magnet, which forms a tetragonal crystal, gives this alloy
its magnetic strength (“eHow”). The alignment of this mineral’s molecular structure creates a
very durable magnetic field that makes neodymium magnets the most powerful electro magnets
in the world. Therefore, the magnetic properties of neodymium make it one of the most
desirable resources used in renewable energy technologies and other technological applications.
These applications include, but are not limited to their use in hi-fi speakers; air conditioning
units, washing machines, hard drives; lasers and even technologies like smart bombs
("Hitachi").
Despite the connotation associated with the name, rare earth metals aren't that "rare" in
abundance. The name comes from their seeming scarcity when first discovered in the late 18th
century in an ore found near Ytterby, Sweden (Biello). According to a study performed by the
U.S. Geological Survey, China holds the largest share of worldwide reserves of rare earth metals
including neodymium; about 36 percent (Robison, and Ratnam). The U.S. is second in its
ability to supply these minerals, holding 13 percent of the reserves.
Earth metals like neodymium are often found interspersed throughout ores that make mining the
material difficult and expensive to extract. This makes these minerals challenging to find in
profitable concentrations because these rare earth ores or (REOs) are often laced with radioactive
isotopes including thorium, radium and in some cases uranium (Biello).
Growing Concerns
The process of neodymium extraction is highly complex ("Neodymium"). Due to the
complexity of the process, neodymium is never isolated on a small scale laboratory basis. The
process involves intensively boiling the ores repeatedly in sodium hydroxide, sulphuric and
hydrochloric acids in order to extract the lanthanides and metals out of the ores in their salt form.
And in some cases, such as in cities like Baotou, China where rare earth mining has dominated
the landscape, ores are even extracted by pumping acid into the ground before undergoing the
chemical extraction process.
This has created some concern that as the role of permanent magnets in the renewable energy
sector continues to increase in importance and magnitude, that the deadly and sinister side of the
massively profitable rare-earths industry raises serious questions over whether creating a reliance
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upon this resource as a critical building block of future technology could, in the long run prove to
be economically and environmentally detrimental (Hatch).
Environmental Impact
“The fact that the wind-turbine industry relies on neodymium, which even in legal factories has
a catastrophic environmental impact, is an irony,” says Jamie Choi, an expert on toxics for
Greenpeace in China (Parry, and Douglas ). ‘It is a real dilemma for environmentalists who
want to see the growth of the industry,’ she says. ‘But we have the responsibility to recognise the
environmental destruction that is being caused while making these wind turbines.’
In an article written by Simon Parry and Ed Douglas, “The True Cost of Britain’s Green
Obsession: Pollution on A Disastrous Scale,” the authors document the wide scale destruction
made to local farmland and waterways put into jeopardy due to the chemical processing and lack
of oversight over neodymium factory production and extraction from Chinese mines(Parry,
and Douglas ). In an excerpt of the piece published by the Global Warming Policy
Foundation, the authors note:
Hidden out of sight behind smoke-shrouded factory complexes in the city of Baotou, and
patrolled by platoons of security guards, lies a five-mile wide ‘tailing’ lake. It has killed
farmland for miles around, made thousands of people ill and put one of China’s key
waterways in jeopardy. This vast, hissing cauldron of chemicals is the dumping ground
for seven million tons a year of mined rare earth after it has been doused in acid and
chemicals and processed through red-hot furnaces to extract its components. The waste
from this highly toxic process ends up being pumped into the lake looming over
Dalahai. The state-owned Baogang Group, which operates most of the factories in
Baotou, claims it invests tens of millions of pounds a year in environmental protection
and processes the waste before it is discharged. According to Du Youlu of Baogang’s
safety and environmental protection department, seven million tons of waste a year was
discharged into the lake, which is already 100ft high and growing by three feet each year
(Parry, and Douglas).
Because of environmental concerns like these, the extraction and processing of neodymium, in
addition to the end-of-life-cycle treatment of this resource undermines the credibility of this
critical component of alternative energy to provide a safe, clean “green technology”. The vast
amounts of highly toxic acids and heavy metals that leak into surface and ground water which
villagers rely on for potable water and highly concentrated chemical emissions released into the
atmosphere make this commodity, which is believed to be the cleanest and safest way to protect
the environment and restore communities, an inevitable catalyst for the “massive environmental
degradation and the destruction of communities”. (Parry)
In the United States, the Molycorp mine at Mountain Pass faced similar challenges regarding the
mine’s growing ecological costs (Margonelli). After hundreds of thousands of gallons of
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radioactive waste washed over into Ivanpah Dry Lake in 1998, production and processing at the
mine was brought to a screeching halt.
After Mark Smith, took over as the CEO in 2000, Smith worked with 18 California regulatory
agencies to resolve the compliance issues (Margonelli). Smith wanted to reopen the mine as
an environmentally friendly rare earth supplier in order to appeal to investors that have become
increasingly conscious of environmental concerns in hopes that he can competitively enter the
market with these new environmental safeguards.
In an interview given by Lisa Margonelli written in an article for the Atlantic Magazine Smith
shares:
“We want to be environmentally superior, not just compliant. We want to be sustainable
and be here for a long time,” he says expansively before talking about opening a
permanent-magnet factory employing 900 nearby (Margonelli ).
But Margonelli is sure to state in her article “Clean Energy’s Dirty Little Secret” that Smith’s
effort to turn Mountain Pass into an environmentally friendly producer comes with costs his
Chinese competitors don’t have to pay: for starters, $2.4 million a year on environmental
monitoring and compliance. She poses the question whether consumers would be willing to pay
more for “local minerals and homegrown magnets?”
This question also raises additional concerns.
Economic Concerns
China currently produces almost all of the raw metals extracted from rare earths. In 2006, nearly
all of the world’s roughly 137,000-ton supply of rare-earth oxides came from China
(Margonelli). Over the past few years, China has cut exports sending the price of neodymium
oxide to a high of $60 a kilo in 2007.
Even though many Americans believe that they currently dominate the most significant global
markets in many large scale sectors, “China’s market for power equipment dwarfs that of the
United States, even though the American market is more mature.”
China’s biggest advantage may be that its domestic demand for electricity is rising 15 percent a
year (Bradsher). According to the International Energy Agency, China must produce almost
nine times the electricity generation capacity as the United States in order to meet its consumer
demand over the next ten years. Surprisingly, there is no significant neodymium production
surplus in the United States.
In the United States, many energy companies have decided to forgo the purchase of renewable
energy equipment because the infrastructure and support systems are not in place to make the
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retrofits economically viable and so they must to operate fossil-fuel-fired power plants that have
already been built and paid for. However in China, where much of the commercial scale
alternative energy technology is produced, access to renewable power equipment is easily
accessible and competitively priced because the resources are locally available and cheaper to
produce at a larger scale.
It has been estimated that to build the latest and most efficient one megawatt capacity
wind turbine powered electric generator requires one ton of the rare earth metal
neodymium for use in a permanent magnet made from the alloy neodymium-iron-boron.
The total amount of neodymium produced annually in the USA is at most 600 tons, and
all of it is used already to build nd-fe-b magnets for various applications. The current US
installed capacity for electricity generation is 1,000 gigawatts (a gigawatt is 1000
megawatts), of which 0.6%, 6 gigawatts, is generated from wind turbines. The global
annual production of neodymium, essentially all of which is mined in China, is today at
an all time historical high of 26,500 metric tons (Parry).
Consequently China does not have any known plans to divert any of its neodymium production
to foreign manufacturers for the production of large scale permanent magnets for American wind
turbine electricity generation (Lifton).
This leads many Western investors to believe that it would not be economically viable for the
United States to invest in wind technology and neodymium earth ore production. The amount of
neodymium that would be necessary to make this effort worthwhile could not be obtained. The
rate of production would have to be over the total projected demand for 2014 which is already
estimated to be 38,000 metric tons, 50% greater than today's production and demand
(Humphries). We would need to double the short order production of neodymium in order to
replace the “outmoded, outdated, and therefore very inefficient and expensive iron based magnet
technology” that the United States is currently using in wind turbine technology (Margonelli and
Lifton).
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In his analysis of the publication Top wind-turbine firms: U.S parts makers needed, Jack Lifton
Co-founder and Director, of the firm Technology Metals Research, LLC critiques the
authors of the publication in his own article appropriately named “Braking Wind: Where's
the Neodymium Going To Come from (Lifton)?” In this article Lifton notes that the only
possible (non Chinese) sources for neodymium production could occur through the
following corporations:
Lynas Corp (Mt. Weld, Australia),
2. Arafura, Ltd (Nolan's Bore, Australia)
3. Molycorp (Mountain Pass, california)
4. Great Western Minerals Group, Ltd. (Hoidas Lake, saskatchewan, Canada),
5. Avalon Rare Metals (Thor Lake, Northwest Territories, Canada), or
6. Thorium Energy, inc. (Lemhi Pass, Idaho).
Lifton belives that this poses a problem because presently, not a single one of the mining
ventures listed above has yet produced a single gram of commercial rare earth metal. While
several claim to be ready to begin or continue their operations, many factors have recently
brought the physical operations of all of the above companies to a halt, so that at the present time
there is no foreseeable alternative to Chinese sourcing for rare earth metals at any date certain in
the near term (Lifton).
While two rare-earth projects are scheduled to ramp up production by the end of 2012 -- one
owned by Molycorp Inc. in California and another by Lynas Corp. in Australia -- the GAO says
it may take 15 years to rebuild a U.S. manufacturing supply chain (Bloomberg).
A Threat to National Security?
In an article written by Peter Robison and Gopal Ratnam and published in the Bloomberg report
in September of 2010, the domination of the neodymium ore market by Chinese rare earths
manufacturers doesn’t just constitute a challenge just because of the supply chain issue but also
because of the threat that this poses to national security (Robison, and Ratnam). The
article, “Pentagon Loses Control of Bombs to China Metal Monopoly,” documents how the
United States’ underestimation of the Chinese domination of the rare earths market has created
the framework for a future resource crises in which China will be able to use leverage over this
coveted mineral as a potential weapon against the United States.
This is particularly important because of the usage of neodymium magnets in the production of
technological components which include; control systems which “direct the fins of bombs
dropped by U.S. Air Force jets in Afghanistan, silence the whoosh of Boeing
Co. helicopter blades, direct Raytheon Co. missiles and target guns in General Dynamics Corp.
tanks. The article quotes Peter Leitner, a senior strategic trade adviser at the Defense
Department from 1986 to 2007 stating that in regards to the monitoring of this critical resource
that “The Pentagon has been incredibly negligent.”
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This worries analysts like Irving Mintzer, a senior adviser to the Potomac Energy Fund. “If we
don’t think this through, we could be trading a troubling dependence on Middle Eastern oil for a
troubling dependence on Chinese neodymium (Margonelli).”
"There is no single military system in use by the Pentagon that does not contain rare earths,"
Alex King, director of the U.S. Department of Energy's (DoE) Ames Laboratory in Iowa notes,
“ranging from Abrams tanks to radar systems (Biello).”
In a recent report submitted to Congress by the Federation of American Scientists compiled by
Marc Humphries, a Specialist in Energy Policy advised Congress that it would be in the best
interest of the United States Congress to establish a government-run non-defense economic
stockpile and/or private-sector stockpiles (Humphries). Humphries justification for this is that
securing a stockpile can help control the prices and access to these rare earth elements so that a
supply of this commodity can be available for use for “green initiatives” and defense
applications” during times of what he describes as normal supply bottlenecks. This report was
submitted to Congress as recently as September of 2011.
Running Out of Solutions?
Unfortunately rare earth recovery can be just as difficult and expensive because the alloys are
mixed into chemical compounds for use during the production stage ("Deutsche Welle").
Also, since REEs are available raw on the world market, there leaves very little economic
incentive recycle despite the urgent plea to do so for the sake of national security.
"The complex chemistry involved doesn't just make it difficult to make new production plants, it
makes it difficult to make new recycling plants," says Doris Schüler of the Institute for Applied
Ecology in Freiburg ("Deutsche Welle" ). Not only does rare earth recycling require a big
capital investment, Schüler says, but Europeans also lack the necessary know-how.
In her interview published in Deutsche Welle Schüler states that she believes it would take at
least five or 10 years before all the technical, economic and legal conditions were in place to
support a successful recycling system. But industry might not be able to wait that long, since the
world's supplies of the material are dwindling.
According to a U.N panel on metals that is chaired by experts from India, Germany, and Yale
University, “Boosting end-of-life recycling rates not only offers a path to enhancing those
supplies and keeping metal prices down, but can also generate new kinds of employment while
ensuring the longevity of the mines and the stocks found in nature,” Achim Steiner, executive
director of the U.N. Environment Program, said in a statement.
The U.S. Geological Survey, Mineral Commodity Summaries, published in January 2011 reports
that the United States imported 4700 metric tons of mixed rare earth ores as commodities in 2010
("U.S. Geological Survey"). This figure does not take into account the amount of rare
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earth ores that could easily be recovered from the millions of imported Chinese manufactured
goods that Americans purchase cheaply, use for a short period of time and eventually throw
away.
Japan Rises to Meet the Need for New Innovation
Meanwhile Japan, who wishes to become the world leader in recycled rare earth metals has been
amping up its research and development to allow its recovery sector to become its leading
supplier ("Alt Energy Stocks"). The government of Japan has been instrumental in getting
the recycling of REs underway and has both instituted subsidies and facilitated inter-industry
cooperation. Although Japan is poor in natural resources, the National Institute for Materials
Science reports that used electronics in Japan hold an estimated 300,000 tons of rare earths
(Tabuchi). Though the amount in reserves won’t come close to the amount of rare earth alloys
China produces – a nation which mines 93 percent of the world’s rare earth minerals; analysts
speculate that tapping these urban mines could help reduce Japan’s dependence on its neighbor.
Currently the Japanese electronics producer Hitachi is the leader in rare earth recycling and
recovery due to the development of their dry electrostatic recovery system which eliminates the
need for worker exposure to harsh chemical acids ("Physorg.com"). Hitachi claims that
using this method the separation and collection of rare earth magnets requires approximately five
minutes per worker per unit and that this method has increased production efficiency so that the
harvested material can be reprocessed into new electronics. Hitachi aims to commence full
recycling operations by 2013 after calculating overall recycling costs and recovery ratio. The
development of Hitachi’s research is believed to bring the advancements needed in the
neodymium and rare earths market that will increase accessibility to these commodities, reduce
the cost of processing and alleviate the environmental burden of extraction.
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