EVALUATING UNITED STATES AND WORLD CONSUMPTION OF NEODYMIUM, DYSPROSIUM, TERBIUM, AND PRASEODYMIUM IN FINAL PRODUCTS by Matthew Hart A thesis submitted to the Faculty and the Board of Trustees of the Colorado School of Mines in partial fulfillment of the requirements for the degree of Master of Science (Mineral and Energy Economics). Golden, Colorado Date _______________ Signed: _________________________ Matthew Thomas Hart Signed: _________________________ Dr. Roderick G. Eggert Thesis Advisor Golden, Colorado Date _______________ Signed: _________________________ Dr. Roderick G. Eggert Professor and Director Division of Economics & Business ii ABSTRACT This paper develops scenarios of future rare-earth-magnet metal (neodymium, dysprosium, terbium, and praseodymium) consumption in the permanent magnets used in wind turbines and hybrid electric vehicles. The scenarios start with naïve base-case scenarios for growth in wind- turbine and hybrid-electric-vehicle sales over the period 2011-2020, using historical data for each good. These naïve scenarios assume that future growth follows time trends in historical data and does not depend on any exogenous variable. Specifically, growth of each technological market follows historical time trends, and the amount of rare earths used per unit of technology remains fixed. The chosen reference year is 2010. Implied consumptions of the rare earth magnet metals are calculated from these scenarios. Assumptions are made for the material composition of permanent magnets, the market share of permanent-magnet wind turbines and vehicles, and magnet weight per unit of technology. Different scenarios estimate how changes in factors like the material composition of magnets, growth of the economy, and the price of a substitute could affect future consumption. Each scenario presents a different method for reducing rare earth consumption and could be interpreted as potential policy choices. In 2010, the consumption (metric tons, rare-earth-oxide equivalent) of each rare-earth- magnet metal was as follows. Total neodymium consumption in the world for both technologies was 995 tons; dysprosium consumption was 133 tons; terbium consumption was 50 tons; praseodymium consumption was zero tons. The base scenario for wind turbines shows there could be strong, exponential growth in the global wind turbine market. New U.S. sales of hybrid vehicles would decline (in line with the current economic recession) while non-U.S. sales iii increase through 2020. There would be an overall increase in the total amount of magnetic rare earths consumed in the world. Total consumption of each rare earth in the short-term (2015) and mid-term (2020) scenarios could be between: 1,984 to 6,475 tons (2015) and 3,487 to 13,763 tons (2020) of neodymium; 331 to 864 tons (2015) and 587 to 1,834 tons (2020) of dysprosium; 123 to 325 tons (2015) and 219 to 687 tons (2020) of terbium; finally, zero to 871 tons (2015) and zero to 1,493 tons (2020) of praseodymium. Hybrid vehicle sales in non-U.S. countries could account for a large portion of magnetic rare earth consumption. Wind turbine and related rare earth consumption growth will also be driven by non-U.S. countries, especially developing nations like China. Despite wind turbines using bigger magnets, the sheer volume of hybrids sold and non-U.S. consumers could account for most future consumption of permanent magnets and their rare earths. iv TABLE OF CONTENTS ABSTRACT . iii LIST OF FIGURES . viii LIST OF TABLES . xii ACKNOWLEDGMENTS . xv CHAPTER 1 INTRODUCTION . 1 CHAPTER 2 BACKGROUND: RARE EARTHS, WIND TURBINES, HYBRID VEHICLES . 11 2.1 General Background . 11 2.2 Historical Background of Rare Earth Magnets . 16 2.3 Historical Background of Wind Turbines and Hybrid Electric Vehicles . 20 2.3.1 Wind Turbines . 20 2.3.1.1 Government Legislation . 21 2.3.1.2 Market Growth and Technological Design . 23 2.3.2 Hybrid Electric Vehicles . 27 2.3.2.1 Modern History and Technological Design . 28 2.3.2.2 Government Legislation . 29 CHAPTER 3 LITERATURE REVIEW . 31 3.1 Hykawy, Thomas and Casasnovas. “Rare Earth Elements – Pick Your Spots, Carefully” . 31 3.2 Bauer et al. “Critical Materials Strategy” . 34 3.3 Roskill “Rare Earths & Yttrium: Market Outlook to 2015, 14th ed. 2011” . 39 3.4 Alonso et. al “Evaluating Rare Earth Element Availability” . 45 v CHAPTER 4 METHODOLOGY AND DATA . 50 4.1 Methodology . 50 4.1.1 Identifying the Scope . 51 4.1.2 Estimating Consumption . 53 4.2 Data Sources and Limitations . 68 4.3 The “Ideal” Study . 72 CHAPTER 5 SCENARIOS: UNITED STATES AND WORLD CONSUMPTION OF WIND TURBINES . 75 5.1 Base Scenario . 75 5.1.1 Historical and Base Scenario Consumption in the U.S. 75 5.1.2 Historical and Base Scenario Consumption of Nd, Dy, Tb in the U.S. 79 5.1.3 Historical and Base Scenario Consumption in the RoW . 82 5.1.4 Historical and Base Scenario Consumption of Nd, Dy, Tb in the RoW . 85 5.2 Alternative Scenarios . 87 5.2.1 United States . 88 5.2.2 Rest of World . 96 5.3 Further Discussion: Wind Turbines . 101 CHAPTER 6 SCENARIOS: UNITED STATES AND WORLD CONSUMPTION OF HYBRID VEHICLES . 104 6.1 Base Scenario . 104 6.1.1 Historical and Base Scenario Consumption in the U.S. 104 6.1.2 Historical and Base Scenario Consumption of Nd, Dy, Tb in the U.S. 109 6.1.3 Historical and Base Scenario Consumption in the RoW . 110 vi 6.1.4 Historical and Base Scenario Consumption of Nd, Dy, Tb in the RoW . 111 6.2 Alternative Scenarios . 112 6.2.1 United States . 112 6.2.2 Rest of World . 119 6.3 Further Discussion: Hybrid Electric Vehicles . 123 CHAPTER 7 DISCUSSION: RESULTS, GOVERNMENT POLICIES, CONSUMPTION CONSTRAINTS . 124 7.1 Discussion of Results . 124 7.2 Discussion of Government Policies . 137 7.3 Discussion of Constraints on Short-term Rare Earth Consumption . 141 CHAPTER 8 CONCLUSION . 144 REFERENCES CITED . 149 APPENDIX A SAS OUTPUT – BASE SCENARIOS . 157 APPENDIX B SAS OUTPUT - REGRESSION RESULTS . 160 APPENDIX C DATA TABLES FOR COMPARISON OF PROJECTIONS FROM RELEVANT PUBLICATIONS . 162 APPENDIX D SUMMARY OF HISTORICAL DATA . 163 vii LIST OF FIGURES Figure 1.1 Breakdown of rare earth demand by market (2011, est. tonnage). 4 Figure 1.2 Breakdown of rare earth demand by market (2016, est. tonnage). 5 Figure 2.1 Historic rare-earth-oxide production. 15 Figure 2.2 Physical magnetic properties of dysprosium at various concentrations. 18 Figure 2.3 Cumulative United States installed wind capacity, 1995 to 2007. 24 Figure 2.4 Comparison of traditional and direct-drive wind turbines. 26 Figure 2.5 Rare earth element use in hybrid electric vehicles. 28 Figure 4.1 Supply chain for rare earth elements, specifically the hybrid vehicle. 51 Figure 5.1 Annual wind turbine installations in the United States (1999 to 2010). 76 Figure 5.2 Annual predicted new wind turbine installations (United States, 1999 to 2010). .. 77 Figure 5.3 Base scenario, annual new U.S. installations of wind turbines (2011 to 2020). 78 Figure 5.4 Annual consumption of neodymium, dysprosium, and terbium (United States, 1999 to 2010). 80 Figure 5.5 Base scenario, annual consumption of neodymium, dysprosium, and terbium (United States, 2011 to 2020). 81 Figure 5.6 Annual wind turbine installations in the rest of world (1990 to 2010). 83 Figure 5.7 Annual predicted new wind turbine installations (RoW, 1990 to 2010). 83 Figure 5.8 Base scenario, annual new RoW installations of wind turbines (2011 to 2020). 85 Figure 5.9 Annual consumption of neodymium, dysprosium, and terbium (Rest of world, 1990 to 2010). 86 Figure 5.10 Base scenario, annual consumption of neodymium, dysprosium, and terbium (Rest of world, 2011 to 2020) . 87 viii Figure 5.11 Alternative U.S. consumption of neodymium in wind turbines (2011 to 2020). 88 Figure 5.12 Alternative U.S. consumption of dysprosium in wind turbines (2011 to 2020). ..