Dysprosium – The Dark Horse in the REE Stakes

We have often likened the REE space to a horse race. Usually the metaphor was regarding the companies in the field and attempting to predict which shall make it to the finish line and which shall end up getting sent, metaphorically-speaking, to the glue factory.

However, in another respect the Lanthanide Stakes has ended up being perceived as a two-horse race amongst the elements in the series with all the other runners, excepting Neodymium and Praseodymium being scratched before the starting gun. Of course this reflects yet again the short-termism of the analytical community who have trouble remembering the day before yesterday let alone the uses to which Lanthanides were put in the 1950s or, heaven forbid, the 1910s. Rare Earths were around before they arrived and will be here well after they are gone.

The usages are continually morphing and, who knows, even the fevered imaginings of one Praying Mantis-like Vancouver newsletter writer who claimed in 2010 that Cerium would save the global water supply from contamination may yet be proven right. One of the horses that should not have been scratched from the race though is Dysprosium as it is still up and running and dare we say it, racing up on the outside and potentially giving those wagering on deposits slanted towards Dysprosium their moment of glory in the Winner’s Circle.

These thoughts have been prompted by the publication of a report by Adamas Intelligence dedicated to Dysprosium alone and its outlook. This in itself is a rarity as the reports on the space have usually covered the whole suite of Lanthanides. Copies of this are now filtering around the Rare Earth space like a samizdat novel by Solzhenitsen back in the days of the USSR.

Who Uses It?

The main use, indeed the overwhelming application, for Dysprosium oxide consumption each year is for production of NdFeB permanent magnets. From 2013 through 2017 Adamas Intelligence estimates that over 99% of global Dysprosium oxide (or oxide equivalent) went into the production of NdFeB magnets.

Dysprosium is commonly added to NdFeB permanent magnet alloy for use in applications involving elevated temperatures (above 80 °C) and/or strong demagnetization fields.

With the addition of Dysprosium (and often Terbium) to NdFeB, the maximum operating temperature of the material can be tripled (up to 240 °C), making NdFeB the ideal material for an ever-growing list of end-uses and applications.

From 2013 through 2017 Adamas Intelligence estimated that electric mobility and industrial applications were the greatest demand drivers of Dysprosium oxide (via use of Dy-containing NdFeB), followed by wind power, and vehicle accessory motors.

The Report

The key findings of the Adamas report were:

  • An ongoing government-led crackdown on illegal rare earth mining in China has led to a 34% reduction in global dysprosium oxide production since 2013
  • Looking ahead, Adamas Intelligence believes that China’s production alone will be insufficient to support global demand growth
  • In fact, by 2025 China’s demand for dysprosium oxide for electric vehicle traction motors alone will amount to 70% of the nation’s current legal production level, emphasizing the imminent need for new supplies
  • Outside of China, there are a handful of advanced rare earth development projects with potential to add significant quantities of dysprosium oxide production annually by 2025
  • If automakers, motor manufacturers, and other end-users of high-temperature NdFeB do not act today to secure long-term supplies, they will soon find themselves amidst a sellers’ market scrambling for rare earth motor metals the same way many are scrambling today for battery metals

Let’s look at these challenges.

The first two challenges are linked. They are to some degrees the cause and the effect. China has, surprisingly let its garden of Rare Earths go to wrack and ruin. The oft quoted comment of Deng Xiao Ping is that Rare Earths will be to China as oil is to Saudi Arabia. However, if Saudi Arabia let its domination slip away by underpricing its product and then letting its sources of production decay into environmental disasters or hastening their demise through high-grading or illegal mining then we might agree that they are alike. China has, like Saudi Arabia, from time to time sought to manipulate lower the price of Rare Earths (or oil) to maintain dominance. But while Saudi Arabia is in no danger of running out of product, China is in a danger zone with respect to Rare Earths.

That production has declined by the extent that Adamas claim is no surprise but that prices have not risen commensurately, or indeed exponentially, is probably a product of the Chinese suppression of prices (combined with a frittering away of stockpiles/reserves) to ensure that the wicked West don’t get traction with projects destined to create REE independence from the Chinese mothership. In itself that is a reckless short-termist policy because the Chinese are transfer pricing scarce Rare Earths to the West in exchange for a transitory dominance. After all, ask yourself the question, who now knows or care that the English city of Manchester was once the dominant force in the global cotton trade? Sic transit gloria mundi.

The chart produced by Adamas (below) tells the story better than a thousand words could. As can be noted a market that was in surplus due to illegal mining is now just in deficit and the deficit is going widen either significantly or enormously depending on one’s view on EV take-up and efforts by users to reduce the Dysprosium component in their product formulas.

Adamas_dys

Just as the Chinese surge in EV demand is seen as the great hope of the Lithium, Cobalt and Neodymium/Praseodymium producers, thus a problem is born for all those outside the attempts by the Chinese government to create a “Closed Circle of Prosperity” (read , circling of the wagons) with regards to resources needed to fuel this boom.

Obviously the Chinese will want their Dysprosium to go into their EVs before any other export markets are served. Adamas is arguing that the Chinese will essentially be using most of what they produce for themselves leaving other international auto manufacturers (and other Dysprosium applications) unserviced. Essentially non-Chinese sources will need to be the main ones for non-Chinese users of Dysprosium. The only serious new source of Dy is the Brown’s Range project of the ASX-listed Northern Minerals.

Adamas Intelligence estimates that, from 2013 through 2017, the global consumption of Dysprosium oxide (or oxide equivalent) for BEV traction motors increased at a blistering CAGR of 54%, from 11 tonnes to 61 tonnes, while global consumption for PHEV traction motors increased at a CAGR of 31%, from 23 tonnes to 68 tonnes.

Collectively, BEV, PHEV and hybrid electric vehicle (HEV) traction motors were responsible for just 18% of total global Dysprosium oxide consumption in 2017 but, at the current rate electric vehicle sales are growing, are poised to become the dominant end-use of Dysprosium oxide by 2025. This is why we would posit that Dysprosium is the dark horse in the Lanthanide Stakes.

The next assertion of Adamas on the number of projects outside China as being a “handful” we would challenge. The term handful implies five and frankly we cannot name five projects that might be in production by 2020. The only two that seem destined to produce in the short-term are Rainbow Rare Earths and Northern Minerals. While we admire the determination of other survivors, imminent production is not likely.  As for Rainbow we are rather bemused to be unable to find a resource statement for the Gakara deposit that might elucidate its Dysprosium content. The fact that Nd/Pr are the only words on Rainbow’s lips we can only presume they are Dy-light. Therefore as Agatha Christie would put it, “then there was one”.

Finally we get to the fifth finding that the automobile sector will be scrambling. Well, it couldn’t happen to a better collection of short-sighted managers in our opinion.  Lazy, feckless and shiftless are words that come to mind. The mantra is that “Just-in-time will provide”, as if “just in time” was some sort of divine providence. Instead it is (was?) a cargo cult that shall henceforth be failing to deliver. Adamas claim the buyers will be “scrambling”. But scrambling where? If there is none available outside China and the Chinese won’t let go of what they have they can scramble as much as they like and they will look like hamsters running futilely in their wheel in the cage. The time to back projects is now if the crunch is to be avoided.

It reminds us of nothing as much as the film Oliver and the eponymous character proffering his empty gruel bowl and asking “Please sir, can I have some more?”

oliver_bowl

We know what the Chinese answer will be….

Conclusion

So the Great Dysprosium Crisis of 2020 will come as a “surprise” to the powers that be. And yet the warning signs are there for everyone to see. The Adamas report is a red flag  so large they could fly it in Tiananmen Square and yet when they will be searching for who to blame when no supply is available the cry will go up “how were we to know?”. Ever was it thus is the corporate suites of the Western corporations who are supposedly the custodians of shareholder value.  They were warned.

4 thoughts on “Dysprosium – The Dark Horse in the REE Stakes

  1. Second go round for Adamas, who could forget their forecast of massive deficit DyO & Yttrium for 2016, just as prices crashed once the speculative element was flushed.

    Reality is China’s DyO inventory opened 2017 @ 526t and closed @ 493t. Production for the year was 1050t of a potential 3170t, in line with numerous reports thru the year of operations running at 30% capacity.

    The big kicker is the 1410t DyO purchased during H1 by the State Reserve Board and placed into storage in an effort to boost flagging prices. That effort proved very temporary, from Jan $204.68 FOB kg values rose to $243.84 in May, then collapsed back to $177.81, and currently sit around that level.

    In fact from $841.28kg Jan 2014 DyO values have fallen further each year for four years, a very different scenario to Adamas’s “deficit” picture.

    Equally unfortunate, Adamas timing on the theory of Chinese contraction of “illegals” couldn’t be worse with almost same day announcement of Chinese H1 mining quotas showing a 40% increase over H1 2017, coincidentally in line with the long speculated 40% of “illegals”/over production. That 40% increase adds a potential 3850t of Chinese HRE production for the first half 2018, and should H2 quotas maintain the same level as they have done each year to date the full year has the potential to add 7700t HRE production in 2018.

    Hardly the stuff of deficits, LT falling values, 30% operating rates, 1410t into state storage, and “illegal” production drawn into the mainstream & tax net.

    1. Thanks for your thoughts Tim. As per my recent presentation at the Murdock Capital event in New York, there is a brutal war of misinformation going on. You would sustain its Adamas but many others would hold that it is the Chinese who are misinforming on quantities being shifted around in a “now you see it, now you don’t” shellgame. The Chinese do have “form” on this dark art….

      1. Interesting theory. I do agree that there is a brutal war of misinformation happening right now and time will tell who is the true master of the “dark art”. Considering the highly inaccurate forecasts that have been published to date I am certain I already know.

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