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Another megatrend accelerating demand for rare earths: aging population

Megatrends are massive social, environmental and technological changes that present both challenges and opportunities. For example, electric vehicles are a megatrend in transportation. Currently, many global megatrends are in motion that will dramatically reshape the way we live over the coming decades, including: urbanisation, automation, clean energy, the Internet of things, and aging population. All of these megatrends will also have a dramatic effect on the global supply of rare earths and Zirconium (Zr), Hafnium (Hf) and Niobium (Nb). Here, I’m going to focus on the impact of our aging population. First, however, you may be wondering…

Why should I care about the global supply of rare earths and Zr, Hf, Nb?

We rely on rare earths every day. Rare earths are 17 elements collectively labelled the ‘vitamins of industry’ because they play a small but vital role in a wide range of modern technologies. They’re in every smartphone, tablet and computer, for example, along with Zr, Hf and Nb.

These elements also play a major role in the manufacture of permanent magnets, which have multiple applications in advanced technology for transport, information and communications, defence and medicine. We use permanent magnets in motors, generators, actuators, alternators, bearings, brakes, separators and holding devices, torque drives, magnetos, meters, loudspeakers, relays… you get the picture!

Elements essential to high technology are to the 21st century what oil was to the 20th century: global economic and political stability depends on a steady, sufficient supply.

What does our aging population have to do it?

Let’s start with some startling figures… In 2015, 8.5% of humans were aged 65+. By 2050, 16.7% will be in that age bracket, due to declining fertility and increasing longevity.  China is predicted to have 330 million citizens aged 65+ by 2050, compared to 110 million today. India’s current older population of 60 million is projected to exceed 227 million in 2050. A century ago, there were fewer than 14 million people this age on the entire planet!  Exponentially growing numbers of elders will place enormous strain on health care and pension systems, with massive consequences for wellbeing and economies.

Simultaneously, the global trend to have fewer children means there will be less potential support for older people from their families in the future. In some European countries, more than 40% of women aged 65+ live alone. Even in societies with strong traditions of elder care, such as in Japan, traditional shared living arrangements are becoming less common. To reduce the old-age-dependency ratio (old-age dependents: working-age population) which is 30% and rising in some European countries, governments are increasing retirement ages and seeking means of extending careers and promoting independent living.

Many of the potential solutions to these burgeoning problems involve high technology.

A robot buddy for Grandma

If family members can’t look after their elders, perhaps automated care is the answer. Smartphones, tablets and computers can be filled with software and apps designed to support seniors in independent living – reminding them when to take medications, for example. Smart watches and other sensor systems can monitor health and behaviour in real time and alert remote caregivers in an emergency. Smart pendants can register when the wearer falls and contact aid providers.

Amazon has launched Alexa and many new companies are developing other voice-activated companion technologies for assisted living, to keep elders active and connected to their communities, like ElliQJibo or Kuri. Some are promoting robotic pets. Mobile robots, including drones, can fetch or carry objects and complete household chores. The i-Support project is developing an integrated, intelligent, automated bathroom system to help seniors wash and toilet themselves safely.

Elders are adopting automated assistance faster than younger people might expect. Retirement villages and other care facilities are eager to test these technologies. There seems little doubt that it will soon be standard practice for seniors and their human carers to be assisted by smart devices and robots… and all these technologies require rare earths and Zr, Hf, Nb.

Timely treatment for Grandpa

Whereas in the past, infectious diseases affecting the young were the primary global health concern and cost, in this century, non-communicable diseases that affect older people – such as heart disease, cancer and diabetes – will impose a far greater burden. Alzheimer’s Disease International projects that 115 million people worldwide will be living with AD/dementia in 2050. To combat these old-age diseases, early detection and intervention are essential.

Rare earths have health and medical applications ranging from diagnosis to drug treatments and surgical equipment. They are used in imaging techniques such as CAT scans, Magnetic Resonance Imaging (MRI), Positron Emission Tomography and X-rays. An average MRI machine contains 700 kg of rare earths. Drugs based on rare earths are providing treatments for lung, prostate, breast and bone cancer and rheumatoid arthritis. Rare earths are also used in modern surgical technology, such as cochlear implants and robot-assisted surgery. Clearly, in the field of medicine alone, the aging megatrend will increase demand for elements essential to high tech, far faster than Grandpa can ride his mobility scooter to the pharmacy.

Prolonged youth for boomers

Aging baby boomers will do everything possible to feel and look young, spending their considerable retirement funds freely on high technology for enhanced bodies and assisted living. This technology ranges from electric bicycles (to keep pace with younger push-bikers) to robotic limbs (for easier walking and greater strength) and smart glass in vehicles (to help older eyes adjust to light changes). To keep the bloom on the boomers, an increasing supply of high tech materials will be needed.

Where will we find enough rare earths to meet accelerating demand from the aged?

The cost of rare earths and Zr, Hf, Nb in these technologies is a very small fraction of the total materials cost, but their presence is essential, so uninterrupted supply is critical. I have explored the threat to global security presented by China’s current near monopoly of high tech materials supply in a previous post. Right now, Australia has an excellent, long-term opportunity to secure our supply of rare earths and other essential elements through Alkane Resources’ Dubbo Project. The wisest investors –­ old or young ­– will move their money into high tech materials ahead of the aging megatrend.

Sources

Critical Elements for Future Technologies

Today’s global economy is being driven by several disruptive ‘megatrend’ industries that will change the world as we know it. This is part of the quest for technologies and solutions that are faster, stronger, cleaner, smaller, lighter and safer. For example:

  • Clean energy – power generation with low emissions and enhanced energy storage
  • Transportation – electric vehicles and aerospace developments using new materials
  • Ageing population – new detection and treatment methods in healthcare
  • Internet of Things – data networking of smart devices, vehicles and buildings
  • Automation and robotics – the road to artificial intelligence

Growth of these megatrend industries is escalating; moreover, several are converging, creating growth rates much higher than historical levels. They all rely on myriad new and emerging technologies that in turn rely on materials containing specific elements and minerals that are essential to their production. These ‘critical elements’ become even more so when they are subject to restricted supply – whether due to general scarcity or the economic constraints of a dominant producer.

Zirconium, hafnium, niobium and rare earths have each been identified by many countries as critical elements that are essential to many future technologies. They are also playing a key role in the above megatrend industries. For example:

  • Zirconium – Zirconium-based ceramics are used in solid oxide fuel cells, special alloys, dental replacements and jet turbine coatings; zirconium is also used in kidney dialysis and smartphones.
  • Rare earth elements – Praseodymium/neodymium alloys are used in permanent magnets for wind power turbines, electric vehicles and industrial robots; rare earth elements are also used in medical imaging techniques, smartphones, fibre optics, special alloys, ceramics and electronics.
  • Hafnium – Hafnium is used in several aerospace alloys and ceramics, while hafnium oxide is emerging as a material of choice in semiconductors and data storage devices.
  • Niobium – Niobium’s main use is in high strength low alloy steels (HSLA); niobium alloys are being used in aerospace rocket engine nozzles (with hafnium); niobium is also used widely in engineering steels (including turbines), MRIs, capacitors for electric motors and mobile electronics.

The global markets for most of these critical elements are controlled by China’s vast manufacturing industry. China currently produces more than 75% of the world’s zirconium products and over 90% of high-value rare earths used in permanent magnet production. Hafnium, which is currently produced as a by-product of nuclear-grade zirconium, is also controlled by China. On the other hand, 85% of niobium is produced and manufactured in Brazil.

Single country domination of these elements, which are essential for clean energy and advanced tech (including defence) applications, could negatively impact the economy and security of all nations. The global economy needs the introduction of reliable, independent, long-term suppliers outside the dominant markets.

Eye on China

In reinforcement of the global market’s sensitivity to China’s manufacturing sector, recent domestic developments are expected to have far-reaching effect. The Made in China 2025 policy aims to move Chinese industry away from low-value, polluting industries to manufacturing for higher-value, downstream markets. This is likely to have the unintended consequence of restricting rest-of-world supply of certain critical elements (including zirconium and rare earth elements) due to consumption by downstream Chinese manufacturers. Moreover, supply of technology components containing these elements (such as rare earth permanent magnets and electric motors) would potentially cease as China focuses on selling finished products (such as electric vehicles or total wind turbine systems).

Compounding this, the Chinese government’s ‘war on pollution’ is leading to stricter enforcement of environmental laws across the sector. The imposition of additional regulations, along with environmental inspections and audits, are causing temporary plant closures and are also likely to curb some illegal mining. In the case of rare earths, illegal mining accounts for more than 50% of supply. China will also be looking to recoup a US$30-40B industry clean-up cost.

This all means the period of low prices and oversupply is probably now over for rare earths and zirconium materials. Moreover, demand is predicted to escalate – demand for rare earth magnets alone looks set to grow at 9% or more. Insatiable demand for these critical elements from both China and the rest of the world means global manufacturers will need to seek alternatives and develop complete mine to market supply chains in order to continue and guarantee production.

This makes the Dubbo Project a highly significant long-term, reliable and independent supply option outside China.

How to secure our critical rare earths supply: lessons from China

Not to advance is to drop back – Chinese proverb

Rare earths are a group of 17 elements, known as the ‘vitamins of industry’ because many applications require only minute – but critical – amounts. Permanent magnets are an exception, being composed of 31% rare earths. Permanent magnets are the main driver of the US$3-4billion global rare earths market, accounting for just 20-25% of volume, but 80-85% of value, due to their multiple applications in advanced technology for transport, information and communications, defence and medicine. Permanent magnets are critical for high performance electric vehicles, wind turbines, smartphones, computers, and magnetic resonance imaging, for example.

Dig the well before you are thirsty – Chinese proverb

In 1992, Deng Xiaoping said ‘There is oil in the Middle East. There is Rare Earth in China.’ China’s rare earths industry began with mining and extraction and extended to downstream manufacturing. China has now conquered more than 90% of the rare earths market.

Most people are unaware of the critical role of rare earths in technologies we use daily, and on which our future industries and wellbeing will depend. Consequently, they are unaware of the threat presented by China’s near monopoly in rare earths supply. Single country domination in the production of minerals essential for clean and efficient energy generation, advanced computing and communications, and high-tech defence applications, has the potential to disrupt economies and the security of all nations. While the US, Canada, Japan, Korea and Europe are taking action to secure their rare earths supply, Australia has no such strategy in place.

When you drink the water, remember the spring – Chinese proverb

Companies who buy materials and technology without concern for the origins of their components are enabling China’s dominance of supply. Purchase specifications usually focus on performance criteria and prices, ignoring the source of components. A traceable supply chain from mineral sources through to products requires elemental mapping of materials and devices, and is the first step to addressing the risk of supply monopoly.

There are three truths: my truth, your truth, and the truth – Chinese proverb

Industry platforms quote daily rare earths prices, and news items about market developments provide other price data. Estimating supply is more difficult, as actual rare earths production appears to be much higher than official Chinese government production quotas. Inspections by China’s Ministry of Environmental Protection have identified widespread non-compliance, illegal activities and corruption in rare earths production.

The best way to determine the true state of the rare earths market is to study demand for the rare earths in permanent magnets, which leads price increases. Prices for praseodymium/neodymium (Pr/Nd) oxide, the main magnet rare earths, have increased by over 70% since the beginning of this year.

When the winds of change blow, some build shelter while others build windmills – Chinese proverb

Based on data provided by Professor Dudley Kingsnorth from the Industrial Minerals Company of Australia, some of the big changes affecting the price of rare earths in recent years are as follows:

  • In 2011, China had more than 150 companies involved in mining, processing and marketing rare earths. Consolidation since 2014 has resulted in just six state-owned enterprises, and their subsidiary companies, controlling the rare earths market.
  • In 2011, China had more than 150 companies involved in mining, processing and marketing rare earths. Consolidation since 2014 has resulted in just six state-owned enterprises, and their subsidiary companies, controlling the rare earths market.
  • In 2015, China removed export taxes of 15-25% from rare earths.
  • The Made in China 2025 initiative is providing $US hundreds of billions in Chinese government support for ten high-tech industries to achieve 70-80% domestic supply by 2025. Electric vehicles, wind power and industrial robots are included industries, which require permanent magnets.
  • Demand for Pr/Nd oxide for permanent magnets has increased from 27,500t in 2011 to an estimated 46,500t in 2017 – a compound annual growth rate of 9%.
  • China’s ‘war on pollution’ (announced in 2014) is showing signs of being a permanent campaign. The cost of rectifying the environmental damage caused by mining and processing over the past 30 years is estimated at US$30-40 billion, driving up rare earths prices.
  • Since 2011, illegal Pr/Nd oxide production has increased by around 3.3 times to 24,500t, or 50% of total supply. (This is a conservative estimate, based on Chinese domestic consumption only.) The Chinese government’s attempts to stop illegal mining – partly to prevent further environmental damage – have driven prices up as customers compete to secure legal supplies.
  • Production shortfall for Pr/Nd oxide has increased from 35-40,000t to 100-120,000t.

Opportunities multiply as they are seized – Chinese proverb

In summary, China’s ‘war on pollution’ appears to be reducing its illegal rare earth supply while domestic demand is increasing with support from government policies. With demand for permanent magnets set to grow at 9% p.a. or more, where will extra supply come from to feed insatiable demand from China and the rest of the world? Chinese companies are not waiting for legal Chinese supply to increase to match demand, but are actively seeking foreign sources of rare earths to fill the gap.

Alkane Resources’ Dubbo Project is construction-ready, having received all necessary government approvals. With an estimated mine life of 70+ years, it will produce critical zirconia, niobium, and light and heavy rare earths.

It doesn’t require the wisdom of Confucius to know that Australians should seize this opportunity to secure our high-tech future and economic wellbeing.

The best time to plant a tree was twenty years ago. The second-best time is now – Chinese proverb

Exponential growth of Electric Vehicles make rare earths Extremely Valuable

Electric vehicles (EVs) have existed since the mid-19th century, but now – due to technological advances and the threats of peak oil and climate change – their time has come and the era of the internal combustion engine (ICE) is ending. Just as demand for ICE vehicles drove up the value of fossil fuels in the 20th century, increasing demand for EVs is about to launch the value of rare earths through the roof.

With rapidly falling prices, improving performance, minimal operating and maintenance costs and reduced carbon emissions compared to ICE vehicles, demand for EVs is climbing an exponential curve like demand for TVs, computers and mobile telephones did (see Figure 1), but on a far tighter time frame. Global electric car stock surpassed 2 million vehicles in 2016, after crossing the 1 million vehicles threshold in 2015.

China leads the growth in EV sales and has mandated targets for New Energy Vehicles of 8% for 2018, 10% for 2019, and 12% for 2020. A new study produced in partnership between Carbon Tracker and the Grantham Institute at Imperial College London predicts that ‘EVs account for approximately 35% of the road transport market by 2035… By 2050, EVs account for over two-thirds of the road transport market.’ Although cars like the Tesla 3 and the Hyundai Ioniq attract most attention, EVs include buses, trucks, bicycles, motorbikes and sundry other carts, trolleys and conveyances.

Global attention should be on the supply chains for materials critical for the construction and operation of EVs, like rare earths.

Rare earth permanent magnets (REPMs) are critical components in high performance electric motors. Debate has raged for years over the relative merits of REPM motors and induction motors, but Tesla has chosen an REPM motor for their just-released Tesla 3, to achieve higher power density, enhanced efficiency, faster acceleration and greater range.

A standard model electric car requires around 5 times the REPMs as an ICE vehicle (see Table 1). REPMs contain approximately 31% rare earths (Neodymium and Praseodymium). A standard model electric car needs about 2.0kg of REPMs for its motor, or around 750g Neodymium / Praseodymium oxide. Luxury models use more REPMs in motors for seats, windows, side mirrors and the boot/trunk. (Rare earths are also needed for the proximity, infrared, motion and other sensors that make driverless vehicles possible.)

The price for a standard electric car is currently around USD30 000, while the price for the rare earths in its motor is about USD50. The price of electric cars is expected to continue to drop, due to the falling cost of batteries and efficiency gains from mass production, but by 2020, the cost of the rare earths in their motors may increase significantly, as demand outstrips supply.
Price-sensitive applications of rare earths will be forced to seek alternatives. But even if rare earth prices increase significantly, they would still represent a tiny fraction of the cost of a standard electric car, so the use of REPMs to achieve superior motor performance by electric car manufacturers seems likely to continue.

In its Global EV outlook 2017, the International Energy Agency indicates that the electric car stock is likely to range between 9 million and 20 million by 2020. When EV sales reach 10 million per year, this will require up to 16,500 tonnes per annum of rare earth oxides on top of current production, equivalent to a 35% increase on all current production, or a 75% increase on current legal production. With a continuing crackdown on illegal rare earth mining, supply is likely to decrease, raising prices even further.

The value of Alkane’s Dubbo Project, which will produce at least 1,300 tonnes per annum of rare earth oxides for magnets, is clearly set for dramatic increase. It should attract investors like a magnet.

Figure 1: The rate of adoption of new technologies is accelerating

Table 1: Demand for Praseodymium and Neodymium in Electric Vehicles

Sources

https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf
https://www.vox.com/science-and-health/2017/2/2/14467748/electric-vehicles-oil-market
http://www.carbontracker.org/report/expect-the-unexpected-disruptive-power-low-carbon-technology-solar-electric-vehicles-grantham-imperial/
https://en.wikipedia.org/wiki/New_energy_vehicles_in_China
http://www.ev-volumes.com
https://www.tesla.com/en_AU/model3
https://www.hyundaiusa.com/ioniq-models/index.aspx
https://electrek.co/2017/08/07/tesla-model-3-new-details-revealed/
http://www.permanentmagnet.com/neodymium-permanent-magnet-for-Tesla-electric-vehicles-20170110.html
http://www.mining-technology.com/features/featurethe-false-monopoly-china-and-the-rare-earths-trade-4646712/
http://www.alkane.com.au/projects/current-projects/dubbo

Supply chain sustainability driving zirconium prices higher

Leading companies are placing increasing importance and accountability for sustainable sourcing of raw materials, and traceability throughout the supply chain. This includes auditing of suppliers to ensure that all elements or compounds can be traced back to where they have been originally mined, and then processed at various stages across the supply chain. This often involves multiple countries, companies, and responsibilities to ensure that materials are produced to the correct specifications at every step of the way, while also upholding strict social and environmental standards. This also addresses commitments to meet international health and safety standards and conditions for workers, and ensuring there is no exploitation of children or minority groups, such as in the production of cobalt or tantalum in Africa.

“Sustainability” has different meanings to different stakeholder across the value chain, and includes the effect of mining and processing on the environment, downstream manufacturing, and the degree of recycling of end of life products to recover critical elements. Minimising the impact of mining and processing on the environment is a common goal, with efforts to minimise the carbon footprint and use of water and chemicals during processing. This includes minimising the amount of waste and residues produced and how they are safely neutralised, stored, and managed over time. The mineral sands industry in Australia is a good example of how mines can be developed to extract the zirconium and titanium ores, which in many cases are exported for further processing. Once a mine reaches the end of its life, the mine and surrounding areas are remediated so that the original landscape is in many cases left in a better condition than before mining commenced. This includes returning the environment to its natural condition, and meeting obligations undertaken when environmental agreements and licences were first granted.

With China responsible for supplying over 75% of global zirconium materials in the form of fused zirconia and zirconium oxychloride (ZOC) derived chemicals and powders, the importance of secure and sustainable supply chains for these critical elements is becoming increasing important. In the case of ZOC, China now produces over 90% of global supply as traditional producers in Japan, Europe, and North America cut back or ceased production 20-30 years ago when they could no longer compete. Interestingly, the Chinese zirconium industry relies on the importation of zirconium ores and concentrates (zirconium silicate), which are mainly supplied by Australia and South Africa. It has faced many challenges in recent years as it modernises production facilities to minimise air, water, and soil pollution. This has required significant ongoing investment to upgrade facilities to meet tougher environmental laws and policies, and is a continuing trend to address responsible production. Restricted supply and prices increases this year being can be attributed to tougher environmental compliance costs, plus higher chemical and raw material costs. Next in line is expected to be greater scrutiny of zirconium chemicals waste streams and how they are handled, stored and managed, as there is increased emphasis on all types of soil and water pollution. As widely reported, almost all of the uranium and thorium found in ZOC waste streams comes from the zirconium silicate raw material, which adds up to ~65 tonnes per year.

Chinese Premier Li Keqiang announced at the National People’s Congress in March that “we will make our skies blue again…and build a green Great Wall of sustainable development”. This strongly supports the government’s commitment to reduce all forms of pollution, and the widespread efforts by authorities to carry out environmental inspections on its chemicals industry. This includes the zirconium chemicals industry, with Shandong Province temporarily suspending ZOC production in April and May. These are all important steps towards more sustainable production, and is expected to be followed by more environmental inspections and policies to control pollutants, including taxes on waste products, which is expected to further increase production costs.

The increased sense of urgency by western customers over zirconium prices and sustainable supply makes Alkane’s Dubbo Project (DP) an important alternative source of zirconium supply which is independent of China and zircon, as well as other critical rare earths, hafnium, and niobium.

High k Sourcing & the Supply Chain for Hafnium and Zirconium

I would like to thank Dr Jonas Sundqvist from TECHCET for inviting me to join the CMC – Critical Materials for Semiconductor Device Manufacturing conference 2017, which resulted from our conversation over lunch at the NaMLab High k Application Workshop in Dresden, Germany, almost exactly 2 months ago.

I had asked a simple question: Does anyone know where hafnium and zirconium come from? I explained that hafnium was a byproduct from the nuclear industry, but came from Australian and South African zirconium-hafnium-silicate ores (zircon), that are mostly processed in China. I then said there was a growing shortage of hafnium. Everyone stopped eating and looked at me, and that is why I am here today.

I deal in critical raw materials, which enable many of the devices to work, and in most people’s eyes is the beginning of the discussion. I see the world very differently and literally dig much deeper into the supply chain, having spent 30+ years of my career working with companies in extracting and adding value to mineral ores containing the critical elements of the periodic table which are needed to make things work.

I find it curious that every stakeholder in the IoT believes they are the most important component, system, platform, or delivery method to connect to a customer, where maximising value is about closing the gap between the physical and digital world. This reminds me of the old joke, Who is the Boss?, where every part of the body thinks they should be Boss? Most Important Part of the IoT? Everyone and everything remotely involved! I think this a great metaphor for why everyone should be respected across the value chain, starting with the sustainable extraction of critical elements from the environment. In a company, the cleaner is just as important as the CEO as they all serve different but critical tasks.

I would also like to acknowledge the presence of Mr Ian Gandel who was in the audience and is Alkane’s largest shareholder, and Mr Patrick Bartl, who suggested I look at a TED Talk presentation by Mr Andrew Stanton on ‘The clues to a great story’. Andrew, of course, is the director of Finding Nemo. Andrew says don’t give the audience 2+ 2 = 4, just give them 2+2, and make them earn their lunch! Let’s see how I go!

View my presentation at http://alkane.com.au/pdf/announcements/20170512.pdf