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You May Not Be Interested In Rare Earths, But Rare Earths Are Interested In You

Posted May 25, 2021

Byron King

By Byron King

You May Not Be Interested In Rare Earths, But Rare Earths Are Interested In You

Once again, today’s title is a riff on that famous comment by Leon Trotsky regarding war.

In the past week, we’ve used the “interested in you” theme to discuss copper and pipelines. That is, we’ve looked at how current developments in these seemingly basic industrial sectors touch your life — and with copper, even offer a chance to make some money.

Today we’ll discuss rare earths elements (REEs), which also are literally all around you (see below).

While we’re at it, REEs might also be a way to preserve wealth and make money in the tumultuous, inflationary times that loom on the horizon. You’ll see the issue in a moment.

Then again, lack of REEs is a situation that’s becoming a very real problem, too. Because without REEs, much of the technology all around us could come crashing down on our collective head.

Let’s dig in…

First, a quick trip down memory lane. As in, did you study chemistry in high school or college?

Don’t worry… This isn’t advanced chemistry class. No slide rules required. (Oh wait, what’s a slide rule?)

All you need is a rudimentary understanding of the periodic table.

As in… Just know that the periodic table exists and a few broad details. And voila, here’s a copy, courtesy of the U.S. Geological Survey…

periodic table

Okay, back to school. Do you remember chemistry class?

At least in the olden days, every chemistry classroom had a copy of the periodic table hanging on the wall. Maybe you’d stare at it and try to figure out what all those little letters and number mean.

And then there was the chemistry teacher up in front, discussing protons, electrons, oxygen, hydrogen, carbon, nitrogen, acids, bases and much more.

See? It’s coming back to you (and not in a bad way I hope).

When you look at the periodic table, perhaps you recall those noble gases on the far right: helium, neon, argon, etc. And perhaps you remember that they go into balloons and light bulbs, right? Not so hard, eh?

Unlike all the other atoms on the chart, noble gases have electron structures that don’t bond with other atoms. They’re inert and don’t form compounds. Those were always the “easy” elements, remember?

Meanwhile, do you remember your chemistry tests? Two hydrogens plus oxygen make water. Sodium and chlorine form table salt. Iron and oxygen make rust.

And do you recall how you sometimes wondered what would be on the next test?

Of course, back in school there was always this one kid, right? He (or she) was the one who raised a hand and asked the teacher about the elements at the bottom of the chart?

The teacher replied that the two rows at the bottom are called lanthanides and actinides. And the kid would then ask what do we need to know? As in, are they on the test?

And then, do you remember? The teacher would look at this precocious student, sigh a bit and say something like, “Don’t worry. Those elements are pretty advanced for this level. Not the kind of material we cover. They’re not on the test.”

And everybody in the classroom let out a collective “Whew!”

Because you dodged that bullet, right? You didn’t have to learn anything about lanthanides. They weren’t on the test.

Except now, fast forward to today. We live in a different world.

It turns out that those lanthanide elements at the bottom of the periodic table are actually rather important. They comprise the rare earth elements that a lot of people talk about.

And now, today…  They. Are. On. The. Test.

Why do you have to know about lanthanide elements? Or to say it another way, what’s with those rare earth elements (REEs)?

Well, you may or may not realize this, but your life is very much controlled by REEs.

Indeed, absent REEs you have no modern existence.

Seriously, without REEs your advanced lifestyle these days would be zero, zippo, nada. You may as well be living in 1821, not 2021.

The blunt fact is that you that you are surrounded by lanthanides. And pretty much everything that makes modern life possible has some basis in them, meaning REEs.

Your smartphone and computer? Won’t work without REEs.

Television and all the cable or wireless hookups? REEs, amigo.

The light bulbs in your house and office? Probably REE-based anymore, unless they’re from an old stash of tungsten filament. But once the old bulbs are gone, you’re living with REEs.

Your refrigerator and microwave oven? REEs, absolutely.

The electric power in your wires? Ha! Absent REEs you won’t have electricity. Thermal power plants use REEs in the electronics and generating systems. And solar and wind power use even more REEs in the electronics and related components.

Your car? Won’t work without REEs. And if it’s an electric car, that goes almost without saying. 

Even if it’s a gasoline car, absent REEs you won’t have fuel. Because refineries require REEs in the processes of cracking petroleum.

How about agricultural equipment that helps farmers grow food? REEs.

Or equipment that harvests food and processes it? REEs.

The logistical system that keeps food fresh and distributes it to stores? REEs.

If you think that you’ll just drop out, go live in a log cabin and burn wood, I have some news to break: most flints in fire-starting kits are made of… yes, REEs. (“Mischmetal” to be exact; a German word that means a mix of several REEs.)

Need I go on?

Perhaps this is a surprise. Maybe you didn’t already know how critical REEs are to pretty much everything.

Then again, it’s not like our modern world really explains itself to everyone. You have to dig out the information, although it’s there if you know where to look.[1]

Along these lines (and usually when you see news articles about REEs), it’s in the context of how we need REEs for military and defense equipment.

Consider just one, fairly typical headline on the topic from a mainstream media outlet, CNBC: “U.S. Army will fund rare earths plant for weapons development.”[2]

Well, yes. The U.S. requires REEs for all manner of advanced military equipment, ranging from submarines to aircraft to space satellites. It’s a long list of just about everything.

These REE needs vary widely, too.

It may just be a fraction of an ounce of REE in one electronic application or another to make the circuitry work. But absent REEs, those circuits won’t do squat.

Or it might be a few pounds of REE in the guidance fins of a missile. Or about 1,000 pounds of REE in the overall construction of an F-35 fighter jet. Or many tons of REE in the drive motors and/or sonar transducers of a nuclear submarine.

You’ll find REEs in unexpected places too, like futuristic tank armor. In fact, a few years ago I visited the Army Research Lab in Aberdeen, Md. and learned how REs alloy with various kinds of steel. Just a small amount of REE additive (essentially “mischmetal,” like from lighter flints, above) can improve the strength of armor plate by significant levels.

And here’s something else that’s beyond astonishing.

For all the REEs that go into that vast array of products, and for as critical as REEs are to empowering the modern lifestyle, it’s all a recent development by historical standards.

That is, most REE elements were discovered in the late 1700s and through the 1800s. That was in those olden days of basic science. But REE applications didn’t begin to come to market until about the 1960s and 70s. Not long ago at all.

If you’re of a certain age, you may recall one of the first uses of REE in mass market products. It was the old RCA color television set, which used the element europium to bring out the color red in a cathode ray tube.

RCA

Of course, today’s flat screen televisions are leaps and bounds ahead of the old RCA. But again, absent REEs in today’s products, you’re not going to watch anything.

This brings us back to chemistry class, and how that periodic table is laid out.

To help understand things, I like to point out those noble gases that I mentioned above. Let’s look at the element Xenon, atomic number 54.

To make a long story short, just understand that xenon has a full, filled-out electron structure. All the electrons are firmly parked in the electron shell. That’s why it’s an inert gas. The outer electrons of xenon don’t bond with other atoms.

Now try this… Start adding protons and neutrons to the xenon nucleus. And add corresponding electrons to the outer structure of the atom. You’re moving up the periodic table, into elements with higher atomic numbers. In fact, you’re into the lanthanide series, the REEs.

Due to the miracle of quantum physics, these new, higher numbered elements begin to do astonishing things. In other words, those additional electrons begin to deliver effects we can use.

The useful effects in all of this include enhanced magnetic properties, or improved electronic or optical properties. It’s why REEs are critical to strong permanent magnets, or as phosphors in new lighting systems, and much more.

These quantum chemistry properties make REEs unique too.

When people say that we can somehow substitute some other element for REEs, generally they don’t understand the chemistry. Because the only reason you have a certain effect from a certain RE element is because of that element’s unique electron structure.

There’s no substituting element X for element Y in the arena of REEs. Maybe you can use less of something and still get about the same field effect. But if you need, say, neodymium for a certain kind of magnet, or gadolinium as a certain kind of phosphor, then you need that exact element and not something else.

Which gets us to the source of REEs. Where do they come from? (Answer: originally, from supernovas of many billions of years ago. But let’s stick with planet Earth.)

Well, you’ll hear people say that REEs are relatively “common” in the Earth’s crust, which is not entirely wrong. Just mostly wrong in the sense of our ability to extract them.

In terms of crustal abundance, REEs are more common than silver, for example. But in terms of ore deposits for REEs, they’re a tough item to extract. It gets back to chemistry.

In the early days of REEs, back in the 1950s and 60s, much of the world’s supply of REEs came from a very uncommon ore deposit at a place called Mountain pass, Calif.  Indeed, the europium in old RCA television sets was likely mined from Mountain Pass.

But then in the 1980s, along came… China.

You know the drill. China has some areas with REE-bearing ores. Plus low wages. Little environmental protection. State-levels of tight industrial planning and control. And over not too long a time, China essentially undercut the REE business in the U.S. and the very few other working resources in the rest of the world.

By 2010, just a decade ago, China ran about 94% of global REE output. Today, it’s a mere 85%, depending on whose numbers you want to believe.

The point is, when it comes to REE the issue now is China-China-China.

China dominates production and most upstream output of REE-based products. This means mines, mills, refineries, early-stage manufacturing of oxides, salts and powders. They have the people, plants, equipment, research pipelines, schools and more.

The rest of the world? Hardly anything. Sure, a plant here or there. But make no mistake; China has the world over a barrel when it comes to REE.

For all the happy-talk about revising a REE sector in the U.S., Canada, the rest of the West, etc., it’s a steep, hard climb. There are precious few people in the West with the chemical and metallurgical skills to make a go of it. Most of the world’s leading people in the field speak Chinese as their first language.

Meanwhile, the issue is easy to understate and misunderstand.

After all, China’s REE sector probably scales in the range of about $20 billion per year, which doesn’t sound like all that much in a world of multi-trillion-dollar U.S. government deficits.

But China’s $20 billion REE sector supports a global range of products (from television sets to sonar transducers) that add up to multi-trillions.

China controls the REE pipeline, period. And REE could very well become the next Pearl Harbor for both the U.S. and the West.

Of course, there are (haphazard) efforts to rebuild a REE sector in the West, but it’s a generational issue if things go right. And things seldom go right, although in another article, I’ll give you some investable thinking, if not some hope.

For now, just appreciate all the truly dumb policymaking and failed leadership in Washington, D.C., over many years, that brought us all to the edge of this sharp cliff.

I’ll leave it at that…

And on that note, I rest my case.

That’s all for now… Thank you for subscribing and reading.

Best wishes,

Byron King

Byron King
Managing Editor, Rich Retirement Letter
WhiskeyAndGunpowderFeedback@StPaulResearch.com

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[1] Absent REs, Products Affected, Business Insider

[2] US Army Will Fund Rare Earths Plant for Weapons Development, CNBC

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