Government fumbles opportunity on processing rare earths


Lou Kilzer, Pittsburg Tribune-Review

Four days after America’s largest rare earth mining company announced it soon would have enough material to ship to China, the Obama administration said it would force the Chinese to ship more rare earth elements to the United States.

Confused?

Industry insiders say you should be.

Rare earths are the glue that holds together much of the modern world’s most advanced technologies: guidance missile systems, flat-screen TVs, cellphones, generators in windmills and motors in hybrid cars.

But experts say both sides of the country’s political divide have gone out of their way to oversimplify and underestimate the magnitude of what faces the nation.

Mining and separating rare earths is the first step in making high-tech gadgets, but it’s the step that most mesmerizes policymakers. The hard parts are making separated rare earths into powders, metals, alloys and magnets, said Jeff Green, a Washington-based rare earths consultant.

“The politicians don’t have any idea of what’s going on here,” said Jack Lifton, a director at Illinois-based Technology Metals Research. “The issue for the U.S. is not the production of rare earth concentrate; we don’t need to worry about that. The problem is we don’t have the ability to process what we have.”

The Obama administration’s $34 billion energy loan guarantee program is a case in point, Lifton said. Solar, wind and electric cars don’t use raw rare earths. They use refined products such as permanent magnets, and America has lost the ability to make those products.

The government denied an energy loan to Molycorp, a Colorado-based company with the world’s largest rare earth mine in California, but gave millions of dollars to Solyndra, a now-bankrupt American solar panel maker. The Tribune-Review reported last fall that Solyndra imported a substantial amount of solar cells from China.

“Rather than supply Solyndra with loan guarantees, if we had put the money into magnets, we would have an industry today,” Lifton said.

Daniel McGroarty, a rare earth consultant for Carmot Strategic Group, agreed.

“Having raw rare earths is only the beginning of the process,” he said. “China holds the latter part of the supply chain. We have to reclaim all of the steps if we want to reverse China’s dominance. The challenges are formidable, and we have little time. We have let a lot atrophy.”

McGroarty said the Department of Energy has been the most insightful of all federal agencies. Yet he has questions.

“The rare earth manufacturing industry did not move to China overnight,” Green said. “It took years.”

‘Mine-to-magnets’ plan

More than a year ago, the Tribune-Review outlined how America reached this position.

A decade ago, Molycorp extracted rare earths from its California mine, refined them into oxides and then sent them to companies that performed the critical manufacturing steps.

One of those companies was Indiana-based Magnequench, which made bonded neodymium-iron-boron magnets once produced by General Motors.

In the early 2000s, Molycorp, faced with fierce price competition from China and environmental concerns, closed its Mountain Pass mine. Magnequench soon looked for other suppliers and relocated to China. Then Hitachi Metals pulled out of Edmore, Mich., in 2005, leaving America bereft of neo-magnet manufacturers.

Few worried. Foreign-made magnets were cheap.

But China began limiting raw rare earth exports. Companies scrambled. Molycorp reopened its mine and planned to sell thousands of tons a year.

China, meanwhile, kept improving its manufacturing skills at making powders, metals, alloys and magnets — arts largely lost in America.

When it reformed in 2010, Molycorp sold itself to investors with a “mine-to-magnets” plan to produce rare earths and take steps needed to make commercial products.

The problem, said Green, was that rare earth engineering largely had relocated to China.

‘A vulnerable position’

Molycorp promised last year to overcome this obstacle. But last week, Molycorp appeared to throw in the towel, said Ed Richardson, president of the U.S. Magnetic Association.

Molycorp acquired Neo Material Technology, a Canada-based company with its major manufacturing facilities in China. One of Neo Material’s China-based subsidiaries that Molycorp most wanted is Magnequench, the former American company that makes refined magnet powders, Richardson said.

Things had come full circle.

Except now, Richardson said, “the United States is in a vulnerable position with China.”

President Obama, he noted, spoke of green energy and made no reference in his Tuesday speech to the importance of rare earths to national defense. Richardson said Republican lawmakers are not fully aware of the situation either.

Sen. Lisa Murkowski, R-Alaska, sent out a news release with a simple solution: “If the president wants to address China’s dominance in critical minerals production, he should support changes to U.S. federal minerals policy to allow domestic mining.”