Cutting Gasoline Usage by 20% in One Decade: A Mandate for More Rare Earths
In President Bush’s State of the Union address, he proposed a 20% cut in gasoline usage by the year 2017. This includes, of course, the increased use of gas-electric hybrid vehicles. Bush stated, “For too long our nation has been dependent on foreign oil. This dependence leaves us more vulnerable to hostile regimes, and to terrorists, who could cause huge disruptions of oil shipments.''
A little more than a week ago, Arnold Schwarzenegger signed an executive order called the Low Carbon Fuel Standard for California, which requires fuel suppliers to reduce carbon dioxide emissions in vehicles by at least 10% by 2020.
Estimates are that the Low Carbon Fuel Standard will triple California’s renewable fuels market and add up to 7 million alternative fuel or hybrid vehicles to the state’s highways.
Additionally, the DRIVE Act (Dependence Reduction Through Innovation in Vehicles and Energy) introduced on January 18 by 25 senators is estimated to be able to save America 2.5 million barrels of oil per day by 2016 and 10 million barrels per day by 2031. It sets a target for car manufacturers that 50% of their new vehicles be flexible fuel (FFV), alternative fuel, hybrids, plug-in hybrids or fuel cell vehicles by 2012.
All of these proposals and legislation show that alternative energy, which was considered a fad 20 or 30 years ago, is finally becoming reality.
But there’s one commodity that’s necessary for any of these manufacturers to increase their hybrid vehicle count: rare earth elements or REEs.
Two rare earths, cerium and lanthanum, are used in nickel-metal hydride batteries, also known as NiMH batteries. Twenty-seven percent of NiMH batteries are used in retail electronics, and 15% of these batteries are used in cordless phones.
But 37% of NiMH battery applications are used in hybrid electric vehicles.
That percentage is growing immensely. From now until at least 2010, rare-earth usage in NiMH batteries will increase at a 39.3% clip annually. That’s an increase of 117.9% in only three years!
Recent estimates concerning global demand for hybrid vehicles in 2010 is set at 2 million.
A typical hybrid vehicle will contain about 16 kilograms of rare earth elements, namely cerium and lanthanum (12kg of these rare earths are in the hybrid’s NiMH battery, accounting for 30% of the battery’s weight).
According to global demand, the world will need at least 25,000 tons of rare earth by 2007 just to keep up with supplying NiMH batteries to the hybrid automobile industry.
Global annual demand for rare earths, taking into consideration its other uses, is expected to be 200,000 tons, compared to the current count of 130,000 tons. So the hybrid industry will be leading one-eighth of the total demand in rare earth supplies. But that should increase incrementally in the next few years.
As of recent data, only 7,200 tons were needed in 2005 for NiMH batteries for hybrids. You’re looking at a rare earth demand growth rate of 247% in the next four years, in the hybrid industry alone!
President Bush’s State of the Union proposal, a Democratic Congress pushing hybrid vehicles, and Governor Schwarzenegger’s initiative at setting the standard for other states to follow the road of decreasing dependence on foreign oil will mean one very important thing: rare earth elements will become even more in demand than ever.
I invite you to read my report on the small micro-cap Australian mining company that has the richest deposit of rare earths in the world. It’s set to provide a transparent line of REE supply globally as the public continues to get real about low emissions and hybrid technology and as vehicle manufacturers continue to increase their production of NiMH batteries and hybrid vehicles.
Ann Sosnowski
Editor-in-Chief
Diligent Investor MicroCap Hot Sheet |
