Rare Earth Prices Spike, Relief May be Years Away

Global demand for rare earth minerals has skyrocketed in recent years, driven in no small part by the popularity of hybrid cars like the Toyota Prius.

At the same time, China -- which is home to the vast majority of the world's rare earth mining operations -- has been tightening its hold on the elements, resulting in a classic supply-and-demand price spike.

Since 2009, prices for rare earth minerals have climbed to dizzying heights: According to the Wall Street Journal, minerals that sold for $10.32 per kilogram in 2009 now sells for $162.66 per kilogram.

The New York Times' Keith Bradsher this week ran an in-depth look at the problem, noting in part:

While the price inflation is a concern to manufacturers, consumers in many cases will barely notice the soaring cost of rare earths. Even though the materials are crucial to the performance of everyday equipment like automotive catalytic converters and laptop computer display screens, rare earths typically are used only in trace quantities.

 

One exception is the Toyota Prius hybrid car, whose manufacture uses a kilogram of neodymium.

Toyota has been raising prices for the Prius, but has cited demand for the car and economic conditions. While acknowledging that rising prices for raw materials in general have affected the company's overall financial results, Toyota has declined to provide a breakdown of the role of rare earths. (Production problems stemming from the Japanese earthquake and tsunami have also crimped supplies of Prius cars, which are made only in Japan.)

In the recent past, we've reported on a couple of promising efforts to expand supplies of rare earth minerals. First was Hitachi's attempts to recycle rare earth magnets from consumer electronics. Second was the construction of a new rare-earths refinery in Malaysia.

Bradsher says that the Malaysian mine is tied up with regulatory challenges, while Japanese companies like Hitachi are having a harder than expected time making progress on recycling magnets. All of which suggests that prices will continue to climb for some time.

Today's article in the Journal puts a slightly shinier spin on the news: Yes, prices will likely continue to rise, but within two years will reverse as new mines come online and supplies increase.

The fact that prices are high now and will remain that way is likely already pushing companies to find less-rare alternatives. The journal quotes an unnamed minerals trader as saying: "When you have these high prices, people immediately start to look for substitutes, and it takes one to two years, but people can switch out of rare earths."

Rare earth magnets photo CC-licensed by HappyMonkey.