APPENDIX 3C. RARE EARTH PHOSPHOR AVAILABILITY AND PRICING

TABLE OF CONTENTS

3C.1 INTRODUCTION AND PURPOSE.............................................................................3C­1

3C.2 APPLICATIONS ...........................................................................................................3C­1

3C.3 RARE EARTH MARKET.............................................................................................3C­2

3C.3.1 Market Size ........................................................................................................3C­2

3C.3.2 Supply ................................................................................................................3C­3

3C.3.3 Long­Term Supply.............................................................................................3C­3

3C.3.4 Demand..............................................................................................................3C­4

3C.3.5 Pricing................................................................................................................3C­5

3C.4 PHOSPHOR SUPPLY IMPACTS ................................................................................3C­5

3C.5 PHOSPHOR PRICE IMPACTS....................................................................................3C­6

3C.6 CONCLUSIONS............................................................................................................3C­7

REFERENCES ..........................................................................................................................3C­9

LIST OF TABLES

Table 3B.3.1 Supply and Demand Projection for Key Phosphors............................................3C­5

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APPENDIX 3C. RARE EARTH PHOSPHOR AVAILABILITY AND PRICING

3C.1 INTRODUCTION AND PURPOSE

“Rare earth phosphors” are a key component of general service fluorescent lamps (GSFL)

performance. Within GSFL, cathodes seal the inside of each lamp end emit a flow of electrons

that react with mercury vapor already present in the lamp. The reaction results in the emission of

invisible ultraviolet (UV) radiation. To convert the UV radiation into visible light,

manufacturers coat the inside of the lamp’s glass with powdered phosphors. Phosphors are

elements that fluoresce when struck by UV rays, generating visible light.

For some less efficacious GSFL, manufacturers coat the lamp with “halophosphors.”

Halophosphors are more abundant and much less costly than rare earth phosphors, but also less

efficient and produce a lower quality light. Coating a lamp with a layer of rare earth phosphors

in addition to or instead of halophosphors can increase efficacy, while dramatically improving

color quality and lumen maintenance. The blend of phosphors used by the manufacturer

determines, in part, the color correlated temperature (CCT) and the color rendition index (CRI).

Generally, in high­performance GSFL, manufacturers employ a blend of three rare earth

phosphors: Yttrium (Y), Europium (Eu), and Terbium (Tb). Such “triband” or “triphosphor”

lamps have become common practice in high performance GSFL technology.

During the comment period, some manufacturers expressed concern that stringent

efficacy standards would necessitate increasing mixes of the more costly rare earth phosphors in

the lamp coating. Manufacturers argued that stronger standards­induced demand would drive up

the price of rare earth phosphors which are already in short supply. They added that continued

growth in the compact fluorescent lamp (CFL) market will also consume future supply,

jeopardizing the cost­effectiveness of the standards. Depending on the lamp type, rare earth

phosphors can be the highest input cost of a GSFL.

To address these concerns, the Department of Energy (DOE) analyzed the rare earth

phosphor market, seeking to understand the potential impact of the standards on supply and

demand, pricing, growth, and innovation. This appendix reflects DOE’s findings.

3C.2 APPLICATIONS

Rare earths are commercially defined to include 17 elements that have similar chemical

properties. Rare earths are mined primarily from bastnasite, monazite, and xenontime ores, and

ion­adsorption clay. Naturally mixed in with many other elements, rare earths must be

concentrated through a series of separation processes to distill the rare earth elements from the

ore. The two principal means of separating rare earths are solvent extraction and ion exchange,

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either of which can yield purities up to 99.999%.1 After the mining company extracts and

concentrates the rare earth elements, the mining company or a third party usually further

processes it into a mixed rare earth powder.2

Rare earths have found an increasing range of practical applications in recent decades.

Phosphors are a subgroup of the rare earth element market. Aside from phosphor applications,

rare earths are used in automotive catalysts, metals and magnets, petroleum catalysts, glass

polishing, and ceramics. Currently, there are few, if any, suitable substitutes in most

applications.

Various sources estimate that phosphors represent 4 percent to 15 percent of the rare

earth market by quantity; the most recent estimates typically range between 7 percent and 11

percent.3 Within this phosphor subgroup, there are three main applications: televisions (plasma,

LCD and cathode ray tube), tri­phosphor fluorescent lamps, and x­ray intensifying screens.

The most important rare earth phosphors are Y, Eu, and Tb, which are used to emit light

at the wavelengths (and therefore colors) to which our eyes are most sensitive. These three

elements are used in different combinations of phosphors to emit blue, red, and green light. Tb is

used for green light, while Eu and Y are used for blue and red. Very high levels of purity are

necessary for these phosphors in lighting applications, which increases the cost to lamp

manufacturers. Eu and Tb must be greater than 99.99% pure and Y 99.999%.

3C.3 RARE EARTH MARKET

Historically, unstable supply and demand and significant price fluctuations have been the

norm in the rare earth market. The 1980s saw rapidly increasing demand, followed by

substantial oversupply in the 1990s.4 Prior to China’s entry into the market in the early 1990s,

most production came from the United States. By the late 1990s, China’s low­cost supply had

driven down prices. China’s market power contributed to the dramatic changes the market has

since experienced. Most recently, limited supply and demand growth has driven prices of Eu, Y,

and Tb up sharply after years of oversupply and relatively lower prices characterized the market.

3C.3.1 Market Size

A Roskill report estimates the overall value of the rare earth market at $1.25 billion.5

According to a Rhodia presentation, the 2007 phosphor portion of the rare earth market totaled

about $670 million6, while an earlier Roskill report put the 2000 total rare earth phosphor market

at $300 million.7 That implies a 12.2 percent compounded annual growth rate (CAGR) in the

rare earth phosphor market from 2000 to 2007.

Of Rhodia’s $670 million estimate for the 2007 phosphor market, lamps accounted for

$355 million ($30 million of which was halophosphor). The presentation also predicted the

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phosphor market will grow to $925 million by 2012, a 6.8 percent CAGR. Lamps will account

for approximately 60 percent of that growth.8

The total rare earth oxide supply (market size is generally defined in terms of oxides) was

142,000 metric tons in 2007. Europium, terbium, and yttrium phosphor was 300, 300 and 4,500

metric tons, respectively.9

3C.3.2 Supply

Most rare earth elements are not actually rare. However, large, economically viable

deposits of important rare earths (like Terbium and Europium) are more scarce because they are

mixed with other minerals and require a costly purification process to isolate. Portions of

different rare earths vary greatly in deposits. These ratios often do not correspond to the ratios of

rare­earth phosphor required in their applications. Therefore, to get enough of the rarer, more

important elements, mining companies must produce large amounts of more widespread metals.10

China now dominates rare earth supply, accounting for more than 95 percent of world’s

rare earth production.11 That market position, coupled with Chinese policy changes, has created

significant potential for supply disruptions in the short run.

Beginning early this decade, China began to take steps to curb production of rare earths

and thereby increase prices. Additionally, the desire to preserve the resource and address

environmental concerns has constrained Chinese supply. Recently, the country instituted mining

quotas, which have been continually reduced. “Over the 3 years to 2007, China reduced the

annual export quota from 48,500t REO [rare earth oxide] to 42,500t REO ­ equivalent to an

average reduction of 3.5% [per year]. If this trend continues at the same rate, exports will total

39,000t REO in 2010, compared with forecast non­Chinese consumption of 50,000t.”12 In the

meantime, short­term production outside China has not increased to make up for the latter’s

lower output and the increasing worldwide demand. Current production of the key phosphors

terbium and europium is not sufficient to meet near­term consumption demand.13 This has

spurred a number of mining projects to take shape around the world, as higher prices have

enticed greater market entry.

3C.3.3 Long­Term Supply

While China has been more restrictive in its export policies, the existing Chinese reserves

represent a small portion of all the undeveloped reserves worldwide. According to the U.S.

Geological Survey, “Undiscovered resources are thought to be very large relative to expected

demand.”14 The USGS estimated that 88 million tons of proven economically viable reserves of

rare earths exist, 61 million tons of which are outside China.15 For perspective, Rhodia expects

global supply to be 190,000 tons by 2010, up from an estimated 142,000 tons in 2007.16 The

USGS concludes that “world reserves are sufficient to meet forecast world consumption well

into the next decade. Several very large rare­earth deposits in Australia and China have yet to be

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fully developed.” Rare earths price surges and the need for non­Chinese production has driven

increased interest in new rare earth mining and production projects. Several projects listed

below are in early phases of development around the world. Many of these projects have proven

reserves that are many times larger than China’s recent export quotas.

Molycorp, Inc.’s rare earth mine in Mountain Pass, CA is an example of rare earth

production in response to recent change in prices. Just 10 years after generating more than 40

percent of worldwide rare earths revenue, the mine shut down operations in 2000 “due to record

lows” of rare earth prices.17 The mine only remained open for the concentration, purification,

and sale of its previously mined stocks.18 In 2007, amid increasing rare earth prices, the

company announced it planned to resume mining operations with sales of rare earths beginning

as early as 2008.19 The mine has some 20 million metrics tons of rare earth reserves (more than

400 times China’s most current export quota)20

Australia also has the potential to become a major rare earth supplier. Lynas

Corporation’s Mt. Weld project in Western Australia is expected to ramp to full capacity by

2011.21 Lynas’ planned production is 21,000 tons per year of rare earth oxide, about 7 percent to

9 percent of total 2007 global supply based on various estimates.22,23 The total resources

available at the mine, measured by rare earth oxide, are 917,000 metric tons (769,000 tons of

which is proven and economically viable).24

Also in Australia, Afurara Resources’ Nolans project has identified 577,000 metric tons

of indicated and inferred REO. The company plans to reach 50 percent production capacity by

2011 and full capacity, or 20,000 metric tons, by 2013. That amounts to roughly 10 percent of

worldwide supply at that time.25 Alkane Exploration Ltd.’s Dubbo Zirconia Project in Australia

may begin producing Yttrium by mid­2010. A feasibility study indicated an annual yield of

1,200 tons of Yttrium and other rare earths is possible.26

In Canada, Avalon Ventures Ltd.’s Thor Lake site may be able to produce 4,000 to 5,000

metrics tons of REO per year.27 The deposit appears to be relatively rich in terbium and

europium. Great Western Minerals Group has a rare earth deposit in Saskatchewan at Hoidas

Lake with REO measured reserves of some 3,500 tons and indicated reserves of another 12,000

tons.

3C.3.4 Demand

While supply capacity appears restricted in the near term, demand for rare earth

phosphors is projected to grow rapidly. Macro trends towards energy efficiency and larger

display technologies have driven growth in phosphor demand. Displaybank projects the number

of LCD and plasma televisions to grow 12 percent to13 percent annually from 2007 to 2015,

with the average panel size growing 15 percent. The growth in CFLs is also contributing to

phosphor demand. Lynas Corporation projects demand for rare earth phosphors for use in CFLs

to grow from 1,600 tons in 2004 to 3,779 tons by 2010, or 15 percent annually.28 Rare earth

demand from China itself is also sapping supply, growing at 25 percent annually from 2004 to

2007, according to Roskill.29

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A Rhodia presentation forecasted Eu, Y, and Tb demand to grow 50 percent, 47 percent

and 40 percent, respectively, from 2007 to 2012. The table below represents Rhodia’s demand

and supply projections for each of the key phosphors.30

Table 3B.3.1 Supply and Demand Projection for Key Phosphors

Element Year Supply Demand

In Metric Tons

Eu 2007 300 300

2012 450 450­500

Tb 2007 300 300

2012 420 420

Y 2007 11,700 7,500

2012 14,000 10,600

3C.3.5 Pricing

Historically, prices for rare earths, particularly the key three phosphors in lamps, have

been extremely volatile. Recent price estimates have already proven well off the mark. Tb, Eu,

and Y have seen dramatic prices increases recently, with Tb in the shortest supply and the most

expensive. Similarly, Yttrium is the most abundant and the cheapest. DOE consulted a range of

industry sources to determine the appropriate market prices for the three phosphors.

The key phosphors have all experienced dramatic prices increases recently. Chinese

policy of limiting supply, environmental concerns, increases in tariffs and others taxes, demand

growth, and speculation have all contributed to price increases. According to Rhodia, the prices

of Y, Tb and Eu have increased roughly 45 percent, 420 percent and 53 percent, respectively,

since 2000. Much of the price increases occurred in the last two years.31 Additionally, in June

2006 China established a 10 percent tariff on rare earths. For key phosphors, the tariff is now 25

percent.

3C.4 PHOSPHOR SUPPLY IMPACTS

To analyze the impact of efficacy standards on manufacturer phosphor requirements

compared to total rare­earth phosphor supply, DOE determined the increased national need for

rare­earth phosphors that would result from higher GSFL efficacy standards. To calculate this

increased demand, DOE first estimated the mass of each rare earth phosphor used in each lamp

type (e.g., 4­foot T8 medium bipin) for three series of rare­earth phosphor lamps— 700, standard

800, and high­performance 800. Next, using its shipments analysis, DOE estimated the total

quantities of each phosphor required to meet the shipment demands. DOE compared these results

(for 2012) to industry projections of phosphor demand to evaluate how standards may affect the

overall supply­demand balance.

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In interviews, manufacturers provided estimates for the mass of rare earth phosphor per

high performance 800­series 4­foot T8 medium bipin (MBP) lamp. They also reported the

quantity of rare earth phosphor that is necessary to improve a 700­series lamp to the level of a

high performance 800­series lamp. By using the relative efficacies of the 700 series, 800 series,

and high performance 800 series and industry curves relating phosphor thickness to efficacy,

DOE derived estimates for the amount of rare earth phosphor used in the three series of 4­foot

T8 MBP lamps. DOE also estimated (based on manufacturer interviews) the relative proportions

(by weight) of each phosphor used in the lamp coating (Eu, Tb, and Y). DOE extrapolated the

estimated 4­foot MBP rare­earth phosphor requirements to 8­foot single pin (SP) slimline, 8­foot

recessed double contact (RDC) high output (HO), 4­foot miniature bipin (MiniBP) standard

output (SO), and 4­foot MiniBP HO lamps using relative lamp surface areas.

DOE’s analysis evaluated the impact of each trial standard level on the phosphor markets.

DOE estimates that raising the minimum efficacy requirements for GSFL would increase the

global demand of these phosphors. DOE expects 2012 Tb demand to increase by up to 31

percent under amended energy conservation standards relative to the base case. DOE estimates

that Eu demand could increase by 10 percent, while Y demand would likely increase marginally.

These estimates reflect the upper bound of demand increases over all trial standard levels and

shipment scenarios. For further detail on trial standard levels and GSFL shipment forecasts, see

chapter 9 and chapter 10 of this TSD, respectively.

3C.5 PHOSPHOR PRICE IMPACTS

Given the historically volatile prices of rare­earth phosphors and the unpredictable future

determinants of supply and demand (such as Chinese policy, additional mining operations, and

future technological changes), DOE has not developed supply and demand curves to estimate

future phosphor prices. However, DOE recognizes significant price increases are possible given

the expected increase in demand, particularly for Tb and Eu. Therefore, to analyze the impact of

higher phosphor prices on the consumer, DOE also conducted a sensitivity analysis to address

the potential increases in end­user lamp prices attributable to greater phosphor input costs. That

is, DOE compares the life­cycle cost (LCC) savings due to purchasing higher efficacy GSFL (as

calculated in chapter 8) to LCC savings under scenario with higher phosphor prices.

As discussed earlier, DOE determined the quantity of each rare­earth phosphor required

to manufacture each phosphor series of GSFL. DOE then determined the cost of the rare earth

phosphors to the manufacturers for each lamp type, considering the quantity of each phosphor

required and the current estimated cost of each phosphor type. Next, by applying manufacturer

and retail markups, DOE analyzes how an increase in phosphor prices may affect LCC savings

for a consumer of each lamp type.

4­foot T8 MBP lamps account for the majority of phosphor costs over the analysis period

at high standard levels. For this product class, DOE calculated that rare earth phosphor costs are

approximately $0.52 per high performance 800 series T8 lamp at current phosphor prices. Using

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a combined manufacturer and retail markup of 2.28, DOE estimates rare earth phosphors account

for approximately $1.19 of the per­unit cost to the consumer. Because purchasers of all 4­foot

MBP baseline lamps for all events in the commercial sector show LCC savings of at least $10.69

upon purchasing high performance 800 series lamps, phosphor prices could increase 9 times (and

more in most cases) before commercial consumers would experience negative LCC savings for

this product class. In the residential sector, for events that show positive LCC savings in the base

case, consumers could sustain even larger phosphor price increases before they experience

negative LCC savings.

For 8­foot SP slimline lamps, phosphors prices could increase by a minimum of 400

percent before any commercial or residential consumers experienced negative LCC savings in

almost all non­voluntary events. The only exception is for the 60W T12 baseline in the lamp

failure event. In general, phosphor prices for this product class could increase by at least 7.5

times before most baseline lamps in most events would begin to show negative LCC savings.

For 8­foot RDC HO lamps, phosphor prices could increase by more than 450 percent

before commercial or residential consumers experienced negative LCC savings in all events for

the 110W T12 baseline lamp. However, for 95W baseline lamp, the lamp failure and ballast

replacement events already show negative LCC savings. Phosphor prices could increase 7.5

times before LCC savings in any other events would become negative.

For 4­foot T5 MiniBP SO lamps, phosphor prices could increase more than 250 percent

before any commercial or residential consumer experienced negative LCC savings for any event.

For 4­foot T5 MiniBP HO lamps, where LCC savings are positive at current phosphor prices for

all events except lamp failure, only a 90­fold increase in phosphor prices could jeopardize

positive LCC savings.

3C.6 CONCLUSIONS

While higher­efficacy standards on GSFL may require more rare earth phosphors, the

above analysis indicates that there would be sufficient supply to meet the increased demand.

Large deposits of rare earths exist outside of China, notably in Canada and Australia, which

could make up for any supply shortage induced by amended GSFL energy conservation

standards. In fact, restrictive Chinese export policies, which have put upward pressure on

phosphor prices, have already spurred additional mining projects globally. If prices continue to

climb, DOE expects the economics of mining rare earths to encourage more projects, and make

less concentrated rare earth deposits economically viable, which will increase supply.

Additionally, research continues on acceptable substitutes and more effective combinations of

rare earth phosphors for use in energy efficient lamps and televisions. There is also a movement

to recycle phosphorous materials to meet some of the growing demand. While there has been

recent price volatility in the rare­earth phosphor market, the above analysis shows that the price

of phosphor could continue to increase and most consumers who, under current phosphor prices,

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experience positive LCC savings would continue to do so. For these reasons, DOE does not

believe standards, and their potential impact on phosphor prices, will affect product availability.

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REFERENCES

1 http://www.metall.com.cn/re/markets.htm

2 http://www.gwmg.ca/rare­earths/faq

3 See, for example: A. V. Naumov, "Review of the World Market of Rare­Earth Metals", Russian

Journal of Non­Ferrous Metals, Vol. 49, No. 1, pg. 14­22, March, 2008:

http://www.arafuraresources.com.au/market.html and

http://minerals.usgs.gov/minerals/pubs/commodity/rare_earths/mcs­2008­raree.pdf.

4

Ferrous Metals, Vol. 49, No. 1, pg. 14­22, March, 2008.

A. V. Naumov, "Review of the World Market of Rare­Earth Metals", Russian Journal of Non5 http://www.roskill.com/reports/rare

6 Jean­Pierre Cuif, Rhodia Silcea ­ Electronics BU, "Is there enough rare earth for the "green

switch" and flat Tvs?", Phosphor Global Summit 2008, March 2008.

7 http://findarticles.com/p/articles/mi_qa5348/is_200201/ai_n21307831

8 Ibid 6.

9 Ibid 6.

10 James B. Hendrick, "2006 Minerals Yearbook", U.S. Geological Survey, May 2008.

11 Ibid 4.

12 http://www.roskill.com/reports/rare

13 Ibid 10.

14 James B. Hendrick, "Mineral Commodity Summaries", U.S. Geological Survey, January 2008.

15 http://minerals.usgs.gov/minerals/pubs/commodity/rare_earths/mcs­2008­raree.pdf

16 Ibid 6.

17 http://www.molycorp.com/operational_excellence/rehistory.asp

18 Ibid 10.

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19http://www.molycorp.com/molycorp_cares/news/molycorp_restart_mountain_pass_rare_earth_operations.asp

20 Gordon B. Haxel, Sara Boore, and Susan Mayfield, "Rare Earth Elements­­Critical Resources

for High Technology", U.S. Geological Survey, 2002.

21 Nicholas Curtis, "Investor Presentation", Lynas Corporation, July 2008.

22 Ibid 10.

23 Ibid 6.

24 Ibid 10.

25 Alistair J Stephens, "Singapore Asia Mining Conference", Afurara Resources Ltd., 2008.

26 Ian Chalmers, "The Dubbo Zirconia Project", Alkane Exploration Ltd., May 2008.

27 Ibid 10.

28 http://www.lynascorp.com/application.asp?category_id=1&page_id=10&app_id=2

29 Ibid 12.

30 Ibid 6.

31 Ibid 6.

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