Lithium (Li) is extracted from both mineral deposits (mainly from mineral spodumene) and salts (mostly from lithium-rich brines in salt lakes). Global lithium end-use market is primarily comprised of batteries (39%), ceramics, glass (30%) and lubricating greases (8%).
Europium (Eu) has an atomic number 63. Europium can be applied to TV LED screens for red colouring. Its oxide is widely used as a phosphor activator.
Europium and erbium is the smallest commercial sector by volume, but largest by value. They are used in the production of phosphors for television media and energy efficient light globes.
Yttrium is a soft, silver-metallic, lustrous and highly crystalline transition metal. It is chemically similar to the lanthanide elements, and it has traditionally been classified as a rare earth metal. Known as blackish grey powder, the metal never produces spectrums. Although metallic yttrium is not widely used, its compounds are. Yttrium oxide is suitable for making superconductors, that is conducting electricity without energy loss.
Terbium compounds are used as green phosphors in fluorescent lamps, computer monitors, and TV screens. Another major use is with dysprosium and iron in the magnetostrictive alloy. Tb is also used as a crystal stabilizer of fuel cells at higher temperatures. The element is mainly found in China, Russia, and CIS. In Guangzhou, China, Tb resources is estimated to be only 15 thousand tons and it would take only 37 years for them to be consumed.
By far, the largest consumer of dysprosium is the permanent magnet for high-efficiency traction motors in hybrid and electric vehicles, wind turbine generators and hard disc drives. The sources with the highest percentage of contained dysprosium are the ion adsorption clays of Jiangxi Province, China and xenotime ores in South China and Malaysia. Dysprosium is also used to make control rods for nuclear reactors.
Neodymium (Nd) is the most durable type of permanent magnets commercially available. Neodymium and praseodymium (NdPr) oxide accounted for 36 percent of global rare earth metals consumption in 2015. NdPr is attractive to global automotive manufacturers because it weighs much less than the ferrite material used in magnets.
Rare Earth Metals In Green Technology
The growth of global primary energy will increase by 1.3% per annum until 2035. Renewable energy is the fastest growing sector and its share in primary energy will increase to 10% by 2035. Against the backdrop of a growing demand for green power, rare earth metals used in permanent magnets for wind turbines and energy-efficient lighting will fuel strong growth.
However, the demand will not grow evenly for all rare earth minerals. The average volume of individual rare earth metals used in various applications is shown in the table below.
In 2016, 2020, 2025, and 2030, rare earth minerals used for clean technology purpose is going to require 33.9, 33.3, 33.6, and 51.9 kt Rare-Earth-Oxide raw material respectively. Global demand for rare earth minerals in clean technologies is shown below.
Nd and Dy Are Poised for Growth
With a growing demand for LED, sales of CFL and LFL lighting will decrease over the next decade. As a result, Eu, Tb, and Y used in LED lighting are subject to further decrease. Overall, rare earth metals used in CFL and LFL will decrease correspondingly. The share of rare earth minerals demand in lighting is expected to decrease from 29.2% in 2016 to 3.2% in 2030.
By contrast, the market for wind power, electric vehicles, NiMH batteries, and catalytic converters will grow. The demand for Nd and Dy oxides in these three fields will grow exponentially.
As with what happened to the lithium-ion battery in EV industry, NdPr is poised for demand growth. On the Chinese market, rare earth minerals industry was consolidated in 2017 due to government regulation and export strategy. The concentration enables Chinese producer groups to lock NdPr oxide sourcing and pricing.
EV Lithium In Spotlight
Since the GFC, demand for lithium minerals and chemicals has grown steadily at 10% to 15% per annum. The growth is driven by lithium batteries, glass, and ceramic segments. Batteries for laptops, mobile phones, pads and ebook readers are the most popular. Demand for lithium in the electric vehicle segment has grown exponentially from 2014 because global car manufacturers launched new models to secure electric vehicle market share. And the trend seems to continue in the following years as the chart shown below.
Lithium price underwent strong growth last year. While lithium is in the midst of a boom cycle, its price could be so high that many miners are moving into lithium for a higher profit margin. In the next few years, the supply may outstrip demand and we could see a fall in lithium prices.
Emerging Australian Lithium Operations
Two brine operations in Chile and a spodumene operation in Australia are main producers of world lithium. Talison Lithium’s Greenbushes mine has world’s largest and highest grade spodumene deposit. Two other Australian spodumene operations are in Mt Marion and Mt Cattlin, with the former active since 2015, and the latter recommencing commercial production in 2017.
NdPr Rally Would Benefit Lynas Corporation Ltd (ASX: LYC) Share Price
Operating the Mt Weld mine in Western Australia, Lynas Corp is the only large rare earth metals producer outside China. The major customers of Lynas Corp are Japanese entities who prefer to diversify their sourcing after the price downturn.
With strong Japanese backing, Lynas Corp reported revenue growth of 75% to $200.9 million and NdPr production up by 6% in H1 2018. It’s noticeable that increased production and sales volume in H1 2018 are signs of a better price environment.
Northern Minerals (ASX: NTU) Focuses On Rare Earth Elements Projects
With a market capitalisation of 90.64m, Northern Minerals is focused on the development of heavy rare earth projects, particularly dysprosium. Positive on Dy outlook, the company wants to become a global player in rare earth minerals production outside China. It has begun a Browns Range Pilot Plant Project in Western Australia and the project is expected to produce 1,719,000 kg of mixed rare earth minerals carbonate containing 148,200 kg of Dy, as well as terbium, lutetium, and neodymium. Produce will be purchased by JFMAG, a 51% owned subsidiary of Guangdong Rare Earths Group. Although total revenue has doubled from 2016 to 2017, the consolidated net loss also doubled due to significant investments in production.
Dy and its sibling holmium are the world’s most magnetically susceptible elements and, as such, are important in hybrid and EV motors. As it plays out in China, more countries are beginning to ban the sale of non-EV. It’s reported that there are 100 grams (about 3.5 oz.) of dysprosium in a typical hybrid motor.
Galaxy Resources Limited (ASX: GXY) A Promising Lithium Play
Galaxy Resources Limited (ASX GXY) would be a promising stock amongst listed pure-play lithium mining companies. The company is one of the few profitable companies with large market capitalization, and it has signed a series of long-term off-take agreements with customers in Asia.
FY16 net profit increased 123.6% compared to FY15, which can be directly attributed to the restarting of the Mt Cattlin mine in the last quarter of FY16 (impairment reversal on property, plant, and equipment).
In November 2017, after Galaxy announced that it signed a series of 5-year off-take agreements with customers in Asia, the share price rocketed 8.6%. The contracts guarantee a minimum of 200,000 tonnes lithium concentrate produced by Galaxy annually and will have constant buyers until 2022.
In spite of future oversupply concern and the fact that lithium miners are highly volatile, Morgan Stanley and Ord Minnet are bullish on Galaxy. The sharp sell-off in recent two months could be a buying opportunity, as Deutsche Bank forecasts demand of lithium will triple by 2025.