Japanese Counters Chinese Export Quotas and Rare Earth Prices on the Rise Again

Japanese trading houses have, over recent months, been able to help push down rare earth prices by dipping into inventories rather than buying more from China. But that was only a temporary solution as the latest news shows.

Prices of key REE are on the rise again – and it affects mainly the element whose supply shortage will not be solved by Mt Weld and Mountain Pass. While the two new mines will produce some neodymium, dysprosium supplies remain a problem.

This supply-demand inbalance affecting HREE will not be resolved until Western mines are, between them, producing the full range of rare earths and guaranteeing non-China buyers security of supply. We are still a long way from that day.

The Nikkei news service reports that dysprosium is back around $US1,400/kg, up 17 per cent since March. However, that is still a long way down from the $US3,700/kg that obtained last July.

Neodymium prices paid by Japanese buyers have risen about 11 per cent since March and are now about $US195/kg.

The Nikkei quotes a rare earths expert saying these latest hikes will raise the cost of magnets used in hybrid vehicles by several thousand yen per vehicle. (To put that in perspective, 5,000 yen is worth $US61.40.)

Japanese end-users seem to have been forced to go back to Chinese sellers not only because there was a limit to how long they could run down inventories but also because magnet demand has been rising. Another complicating factor is that European and Chinese trading houses have also been in the market buying REE supplies.

So this means the “reduce, recycle and replace” story has to remain intact while the West continues to battle toward meaningful levels of production. The latest development is that Honda Motor Co has unveiled a technology for extracting and re-using REE metals from nickel-metal hydride batteries.

Hybrid vehicle batteries usually wear out in five to 10 years. The potential for recycling is illustrated by the fact that Honda in 2010 collected only 1,034 batteries in 2010 – yet it has so far sold 800,000 hybrids since 1999.

(We have previously made the point that Japanese and other companies which invest heavily in recycling will not want to close down these operations just because Western mine supply is available; and the longer Western companies take to get into production, the more end-users will scale up these recycling efforts – and keep them going to compete with mined REE.)

Honda noted it had been saddled by an unsteady supply source of REE. This new technology will enable the company to recycle 80 per cent of used rare earth metals in hybrid batteries. It had done so in partnership with Japan Metals & Chemicals Co.

And here is the kick in the tail: “Both Japanese firms pointed out that the approach was not just an experimental process but will entail mass production process at the recycling plant,” International Business Times reported. You can’t get it any clearer than that: this alternative, non-mine supply of rare earth metals is here to stay.

The metals are said to be equivalent in purity to those mined and refined.

In a typical hybrid vehicle, reports Nikkei, the nickel-metal hydride batteries weigh about 20kg and contain several kilograms of rare-earth metals. Honda already recycles some of these batteries for materials that can be used in making stainless steel. This REE development will just improved the economies of scale.

Honda last year announced plans to begin making electric motors and batteries in the southern Chinese city of Guangzhou. And by the time 2012 is out, Honda hopes to have introduced five new hybrid models – the Insight, CR-Z, Fit, Civic and Acura. One of the reasons for choosing China instead of Japan for battery and other manufacture is that Honda sees big potential in the Chinese domestic market for hybrid and plug-in vehicles. At its Dongfenh Honda plant, the company plans to raise capacity to 360,000 units a year by 2013 and later crank that up to 480,000 units.