Opportunities & challenges for rare earths in green technologies

Suzanne Shaw, Senior Analyst Roskill Information Services Ltd.

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Disclaimer

The statements in this presentation represent the considered views of Roskill Information Services Ltd. It includes certain statements that may be deemed "forward-looking statements." All statements in this presentation, other than statements of historical facts, that address future market developments, government actions and events, are forward-looking statements. Although Roskill Information Services Ltd. believes the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include changes in general economic, market or business conditions. While Roskill Information Services Ltd. has made every reasonable effort to ensure the veracity of the information presented it cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the statements in the presentation should be used for general guidance only.

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Outline

What are green technologies? Rare earth consumption by end-use Case study: Rare earth permanent magnets Case study: NiMH batteries Case study: Phosphors What do green technologies mean for the future of the rare earth industry?

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Rare earths in Green technologies

Autocatalysts established use in catalytic convertors Phosphors established application, but new growth from the replacement of incandescent with fluorescent/LED lamps NiMH batteries used in HEVs but will be replaced by Li-ion in the coming years Rare earth permanent magnets potential growth if the market for wind turbines and HEVs materialises Magnetic refrigeration in development, limited availability of gadolinium

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Rare earth demand by end use, 2010

Phosphors 6% Glass 9% Ceramics 4% Other 6% Permanent magnets 27%

Polishing 13% Catalysts 16% Metallurgical applications 19%

Source: Roskill

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World: Division of rare earth consumption by major end use, selected years, 2000-2015f (%)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2000 Magnets Catalysts 2003 Metallurgy 2006 Polishing Glass 2010 Phosphors 2015f Ceramics Other

Source: Roskill

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Case study: Rare earth permanent magnets

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Rare earth consumption in permanent magnets

At least 33,250t rare earths consumed in permanent magnets in 2010, the vast majority of which are NdFeB magnets: 30-33% Nd (Pr, Dy replacement) 66-69% Fe 1% B Alloy manufacturers cutting Dy additions from 5-8% to around 2-4% US Department of Energy funding research in nanocomposites in 2011 at GE and University of Delaware Recycling research in Japan, UK (hydrogen decrepitation)

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China: Production of rare earth magnets by type, 1996-2010 (t)

90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

Sintered SmCo

Sintered NdFeB

Bonded NdFeB

Source: CREIC

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Application of NdFeB magnets in the Chinese domestic market 2008 (%)

Magnetic seperators 6% CD pickups 6% Wireless electric tools 6% MRI 2% Magnetisers <1% Other 9% Audio applications 24%

Mobile phones 8% DVD & CD storage 9%

Source: CREIC

Buttons 14%

Electric vehicles 16%

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World: Forecast sales of HEVs, EVs and PHEVs, 2008-2016 (M units)

3.0 2.5 2.0 1.5 1.0 0.5 0.0 2008 2009e 2010f 2011f 2012f 2013f 2014f 2015f 2016f

Sources: Roskill

However, induction motors can also be used e.g. Toyota RAV4, Chevy Volt, Mini E

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World: Installed wind power capacity, 1996 to 2009 (MW)

180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 New installation Wind power capacity

Source: Global wind energy council

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Wind turbine technologies

Early wind turbines - standard speed (SS) - 3-stage gearboxes - up to 250kg permanent magnets for 3MW Intermediate Speed (IS) later developed - greater quantities of magnets, up to 0.5-1t for 5MW New direct drive (DD) systems eliminate the gearbox, NdFeB magnets used to turn blades at same speed as the generator up to 2t for 8MW To date, DD technology has mainly been implemented in China, which will lead any growth in demand Roskill
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Producers of direct drive wind turbines, 2010

Turbine Enercon E-126 XEMC Darwind DD115 Gamesa G-128 GE 4.0-111 Repower 3.4M104 Repower 3.2M114 Alstom ECO 110 Doosan, with ASMC Windtec Enercon E-82 Enercon E-101 Leitner LWT 93 Siemens SWT-3.0-101 Vestas V112 Dongfang, with ASMC Windtec Fuhrlnder FL 2500/104 Leitner LWT 106 Nordex N80 Gamma Nordex N90 Gamma Samsung 25x Source: Notes: Windpower Monthly DD-Direct drive Power (MW) 7.5 5.0 4.5 4.0 3.4 3.2 3.0 3.0 3.0 3.0 3.0 3.0 3.0 2.5 2.5 2.5 2.5 2.5 2.5 Rotor diameter (m) 127 115 128 110 104 114 110 82 101 93 101 112 104 106 80 90/100 99.8 Drive system DD DD, Other Other DD, Other Other Other Other Other DD DD DD, Other DD, Other Other Other Other DD, Other Other Other Other Prototype 2009 2010 2008 2010 2009 2011 Late 2009 Late 2009 2009 2009 2011 2009 2010 2010 2009 2009 2009 2010 Series 2010 2010 2012 2010 2020 2009 2010 2011 2011 2011 2010 End 2009 2010 2010 -

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Case study: NiMH batteries

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Rare earth consumption in NiMH batteries

Around 11,000t rare earths consumed in NiMH batteries in 2010. La-NiMH alloy is used in the battery anode. Dominant battery type in HEVs - growing at 15%py to 2013/14 After which growth will slow due to increasing competition from Li-ion in HEVs Li-ion already replacing NiMH in portable applications Toyota currently recycling the battery pack and is researching the retrieval of rare earths Roskill
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World: Secondary battery production by type, 1994-2011f (M units)

7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

NiCd
Source: Avicenne, IIT

NiMH

Li-ion

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NiMH Vs. Li-ion

Nickel-metal hydride Lithium-ion/polymer Nominal voltage (V) Positive electrode Electrolyte solution Negative electrode Energy density: (Wh/l) (Wh/kg) Temp. range (C) Advantages: 1.2 Nickel hydroxide Potassium hydroxide Hydrogen absorption alloy 200 80 -20 to 60 3.7 Lithium-metal oxide Organic electrolyte or polymer Carbon or lithium titanate 370 170 -20 to 60 Lithium metal polymer 3 Lithium-metal oxide Organic polymer Lithium metal 110-143 110-121 -20 to 60 Lithium metal Lithium- sulphur 2.1 Lithium-sulphur

400 300 -40 to 60 High specific Heavy duty use Heavy duty use Heavy duty use energy High energy No heavy metals High voltage High voltage density High capacity No memory effect No memory effect No memory effect Charge cycle of 500 Low self-discharge Low self-discharge Low self-discharge

Source: Battery Association of Japan; Roskill

Li-ion have a higher power to weight ratio than NiMH Roskill

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World: Forecast sales of HEVs, EVs and PHEVs based on NiMH and Li-ion batteries, 2008-2016 (M units)
3.0 2.5 2.0 1.5 1.0 0.5 0.0 2008 2009e 2010f 2011f 2012f 2013f 2014f 2015f 2016f

HEV containing NiMH

HEV, EV, PHEV containing Li-ion

Source: Roskill

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Case study: Phosphors

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Rare earth consumption in phosphors

Around 8,000t rare earths consumed in phosphors (and pigments) in 2010: Yttrium 60-70% Europium 6-8% Terbium 1-3% Gadolinium 1-2 Other rare earths 20-25% (including lanthanum, cerium, dysprosium and thulium)

Rhodia announced a process to recycle rare earths from fluorescent lamps in 2011. Mitsui Metals has also developed a recycling method in Japan Roskill
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World: Estimated consumption of rare earths in phosphors by end-use, 2010

LCDs/other FPDs 14% X-rays 2% Others 2%

CRTs 21%

Tri-colour lamps and fluorescent tubes 61%

Source: Roskill

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Typical phosphors for tri-colour lamps

UV (Low pressure)

BaMgAl16O17: Eu2+ Sr5(PO4)3Cl: Eu2+

Blue component in tricolour lamps

UV (Low pressure) UV (Low pressure)

LaPO4: Ce,Tb Green component in tri(Ce,Tb) MgAl11O19 colour lamps (Gd,Ce,Tb)MgB5O10 Y2O3: Eu3+ Red component in tricolour lamps

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7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

China: Output of tri-colour phosphors for fluorescent lamps, 1999 to 2009 (t)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: CREIC

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General lighting:
Increased legislation banning incandescent lamps - European ban by 2012, USA by 2014 Currently replaced with fluorescent lamps (global production of compact fluorescent lamps around 4Bn in 2009) White LEDs emerging, taking market share from fluorescents

LCD backlights:
Cold cathode fluorescent lamps held 60% and LEDs 40% of the market in 2010 LED share could rise to 75% by 2015

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LEDs Vs. fluorescents

Lifespan (000 hrs) Power use (W) Relative cost purchase Incandescent Fluorescent White LED 0.7-1.2 8-10 CFL 10-50 LFL 100 60-100 13-25 6-8 1 2-3 10-30 operating 8.5 2 1 100 80-98 +85 7-24 44-80 CFL 33-100 LFL 200 CRI Efficiency (lumens/W) Total mercury2 (mg) 4.63 5.04 CFL 0.63

Source: Energy Star; industry press

LEDs have a higher initial cost, but in the long term offer greater efficiency Manufacturers working on more natural colours

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Conclusions
Autocatalysts:
Development of mixed Ce/Zr oxides is reducing use of Ce per unit Offset by increased regulation of emissions standards Europe introducing Euro 6 in 2014; USA cutting CO2 emissions for new cars from 204gCO2/km to 160gCO2/km by 2020; stricter controls in BRIC countries Growth of 6-7%py to 2015

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Conclusions
Rare earth permanent magnets:
Increasing adoption of HEVs, EVs and PEVs using permanent magnet motors, but alternative powertrains such as induction motors also used Large potential market in DD wind turbines, although other technologies are available Price sensitive price vs. performance point is different for each end use New magnet manufacturing techniques use less Dy in NdFeB Growth of 11-13%py to 2015 Short term substitution of NdFeB with SmCo where possible, but restricted natural occurrence of Sm Long-term development of magnets with low or zero rare earths

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Conclusions
NiMH batteries:
Li-ion have largely replaced NiMH batteries in portable goods Li-ion starting to replace NiMH batteries in HEVs Toyota launched Prius Alpha in Japan in May 2011 Growth of 10-15%py to 2015 but easing to 2020

Phosphors:
No risk of substitution due to specific qualities of rare earths Short term growth due to bans on incandescent lamps and increased use of fluorescents. European ban by 2012, USA by 2014 Long term decline as LEDs take market share. LEDs could account for 15% of global lighting market by value in 2015 Growth of 7-8%py to 2015

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Conclusions
Others:
Ceramics in solid oxide fuel cells Cerium to polish solar cells Magnetic refrigeration

If the price remains high, investment will be diverted away from new applications towards research of substitution materials and technologies, and towards improved efficiency in the use of rare earths.

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The bigger picture: Future demand for rare earths

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China and ROW: Forecast growth in GDP and demand for rare earths, 2010 to 2015
140,000 120,000 100,000 12 10

Y-O-Y GDP growth (%)

Demand (tREO)

8 80,000 6 60,000 4 40,000 20,000 0 2010 China demand 2011 2012 2013 China GDP 2014 2015 2

ROW demand

Advanced economies GDP

Source: EIU, Roskill

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Industrial Minerals Minor Metals Steel Alloys Facing a major decision? We help you explore the impact on the market and the impact on you Roskill Consulting Group Ltd.
Contact: Suzanne Shaw Analyst +44 20 8417 0087 suzanne@roskill.co.uk

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