Cost of Fluorescent Lamps Continue to Rise:  Rare Earth Update

In a time when inflation is supposed to have been beaten to death, according to government numbers and Federal Reserve Board officials, dramatic price increases are unusual for most of the American public.

“In the name of fighting pollution, China has sent the price of CFL bulbs soaring in the U.S.,” begins a Sept. 15 NY Times article. The article continues:

“Chinese officials here at the conference said the government was worried about polluted water, polluted air and radioactive residues from the rare earth industry, particularly among many small and private companies, some of which operate without the proper licenses. While rare earths themselves are not radioactive, they are always found in ore containing radioactive thorium and require careful handling and processing to avoid contaminating the environment.

Most of the country’s rare earth factories have been closed since early August, including those under government control, to allow for installation of pollution control equipment that must be in place by Oct. 1, executives and regulators said.”

According to The Daily Reckoning's recent report on China’s rare earth business, “…many of the mines were operating illegally, dumping loads of toxic chemicals into the soil and the water supply. What’s more, the black market accounted for up to 40% of China’s rare earth production.”

The information in the Daily Reckoning report by Byron King may indicate that the Chinese effort to close down rare earth mining operations is not a ploy, but a response to reasonable concerns.

Several facts that might be missing from the debate:

• While we in the electrical distribution industry have been hit with immediate price increases, the rare-earth shortage created by China’s action must also be wreaking havoc on production of wind turbines and more.
• Elevating the price of any commodity creates motivations for exploration to find additional supplies. See a Sept. 15 Industry Week article about rare earth “deposits” in Afghanistan. Earlier this month, the Pittsburgh Tribune-Review reported, “Gareth Hatch, co-founder of Technology Metals Research LLC, said he is tracking 381 rare earth projects outside China and India, involving 244 companies in 35 countries.”
• There is always the final gambit for various manufacturers—move operations to China. The aforementioned Pittsburgh Tribune-Review includes a key section:

“Although it would not discuss reasons for moving much of its lighting division to China, General Electric Corp. produces compact fluorescent lamps, or CFLs, which use several rare earth phosphors.

Cree Inc., America's leading light emitting diodes, or LED, manufacturer, moved about half of its manufacturing capacity to China. LEDs typically use rare earth phosphors.

And California-based Intematix Corp., which produces rare earth-based phosphors for LEDs and CFLs, moved a large portion of its manufacturing to Suzhou, China, citing access to raw materials as a factor in its decision.”

• There is another potential solution to the problem—the passage of time. A Financial Times article on China and rare earths says:

“Beijing’s controls spurred global miners to accelerate rate earth production outside China and some analysts think the industry could be oversupplied in a few years time as a result.

China gained a monopoly decades ago as lax environmental standards made it very cheap to mine rare earths there.”

Source:   TED Magazine / Distributor News 9-27-2011