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Planet-Profit Report, reporting on sustainable development in the Western United States.

Hot rare earth: helping renewables or not?

What will the impact be on electric vehicles?

This month, I took a business trip around the world. I had meetings in London, Abu Dhabi, Hong Kong, and Toronto. Even though we’re living in a global economy, the regional differences in local economies are very distinct. London is in the midst of one of the greatest austerity programs the United Kingdom has seen, but the dealmakers remain active. 

The opulence in Abu Dhabi is as advertised – the luxury economy is something to behold, and you can’t walk through a hotel lobby without seeing several representatives from international companies. But there’s talk that the fundamentals behind the economy are weak, even discussion about knocking down some skyscrapers to address the glut of luxury accommodations. 

And China is as hot as what you read in the papers. One person I spoke with said he can put together a $50 million deal in three phone calls – provided it’s taking place in China. 

In Hong Kong, I went to a conference on rare earth metals. I had been hearing discussion about China adjusting its export policy on these necessary commodities – integral components of nearly every component of renewable energy, from solar panels to wind turbines to electric vehicles. 

China produces 90 percent of the world’s rare earth metals. Up until this year, the country exported about 60 percent of its production – and caused a major shock to Japan and other nations when it decreased this amount to help fuel China’s own growth. 

China’s skyrocketing growth is changing the game for rare earth metals. New demand is increasing consumption, and if this outpaces new production – as looks likely in the near term – prices will have no where to go but up. And the writing is on the wall: About 200 rare earth companies have sprouted up around the globe. 

What does this mean for the renewable energy industry? There are lots of firms working hard to increase production in several areas of the world. But this won’t be immediate: expect 2-5 years for many of this production to come online. 

Electric vehicles are particularly vulnerable to fluctuations in rare earth prices. We’re at an exciting point with electric cars, with many industry observers suggesting that we could be approaching a tipping point of sorts for widespread public adoption – particularly as we emerge from the Great Recession. 

The spike in prices is great news for producers – we’re already seeing renewed interest from uranium miners in marketing rare earths that result as byproduct of operations. But let’s hope this same phenomenon doesn’t hinder our vulnerable electric vehicle market.