COLUMN-Recycling pioneers race to close the rare earths scrap gap: Andy Home

By Andy Home

LONDON, Sept 12 (Reuters) - How can the West break its dependency on China for rare earth magnets?

The question has taken on new urgency after China restricted exports earlier this year, sending shockwaves through Western manufacturing chains.

The race to build domestic mine-to-magnet supply chains has accelerated, particularly in the United States, where the Department of Defense is taking a direct stake in MP Materials MP.N, operator of the country's only rare earths mine, and guaranteeing a floor price for its products.

But part of the solution is lying in plain sight all around us in the form of old laptops, power tools and smartphones.

Given the criticality of rare earths in today's high-tech world, it's astonishing that less than 1% are recycled.

That may be about to change.

TECHNICAL BREAKTHROUGHS

The low recycling rate reflects a combination of technological and economic challenges.

Dismantling magnet motors, removing the rare earths and reprocessing them can be both manually and energy intensive. The concentration of rare earth elements in the final product is often so low that it is simply not worth it.

Automotive shredders, for example, will strip copper and aluminium out of end-of-life vehicles but the rare earth magnets end up in a steel mill, where they are lost to slag destined for landfill.

Several companies, however, seem to have cracked the problem using an array of technologies.

Canada's Cyclic Materials announced in June a $25-million investment in a recycling facility in Ontario to convert 500 metric tons per year of magnet-rich feed-stock into mixed rare earth oxide.

Cyclic has signed deals for the supply of end-of-life motors with Lime, the company behind the ubiquitous shared e-bike, and SYNETIQ, the UK's leading automotive salvage operator.

Proprietary dismantling and processing technologies recover not just the rare earths but all the other metals such as copper, which will be sent to Glencore's GLEN.L Horne smelter in Quebec for refining back into cathode.

American Resources Corp's AREC.O ReElement Technologies division is pioneering the use of chromatography to separate metals from both rare earth magnets and end-of-life lithium-ion batteries at its plant in Indiana.

The company, which has this month been awarded a $2-million grant from the Department of Defense, claims its technology uses 75% less energy and generates 70% less carbon emissions than existing recycling processes.

A multi-party collaboration, including Western Digital WDC.O, Microsoft MSFT.O and Critical Materials Recycling, has piloted acid-free dissolution technology developed by the Department of Energy's Critical Materials Innovation Hub to recover rare earths from hard drives collected from Microsoft data centers.

MP Materials itself is branching into the rare earths recycling business via a $500-million tie-up with Apple AAPL.O.

MAGNET POWER

This recycling revolution is only now starting to transition from pilot to commercial-scale operations.

But the new technology comes with a much lower price tag than new mines and primary processing plants. It can also deliver units faster.

Moreover, if the West wants to break free of China's rare earths chokehold, it will need both primary and secondary supply streams to have a hope of catching up with booming demand from the clean energy sector.

Internal combustion vehicles need only a handful of small magnet motors for ancillary functions such as sensors and audio systems. But permanent magnets are core components for most electric and hybrid vehicles, translating into a five-fold increase in rare earth requirements.

Rare earth magnets are also critical inputs for wind turbines, a sector that has been super-charged by the shift to renewable energy.

Global demand for permanent magnets is expected to triple over the next decade, according to consultancy McKinsey.

Usage of core magnet rare earth elements - neodymium, praseodymium, dysprosium and terbium - is forecast to grow from 59,000 tons in 2022 to 176,000 tons in 2035.

TAPPING THE URBAN MINE

On the basis of the currently announced project pipeline, magnet rare earths supply is set to fall short of demand by 60,000 tons, or roughly 30% of usage, in 2035, according to McKinsey.

The caveat is that this assessment excludes China, which doesn't issue forecasts and regulates rare earths production via quotas.

Even though the West is trying to loosen China's rare earths grip, McKinsey sees only a gradual diversification of supply, warning "current pipelines and trajectories are likely to fall short over the next five to ten years".

Which leaves China as the most likely player to fill any global supply shortfall, extending the West's rare earths dilemma into the next decade.

Scrap could be an important lever in the global balance of rare earths power. McKinsey expects the scrap pool both to keep accumulating and to shift from smaller magnets in electronic devices to larger magnets in electric vehicles and wind turbines.

By 2035 the rare earth value stream could generate 40,000 tons of pre-consumer scrap and 41,000 tons of post-consumer scrap. The former will mostly reside in China, the world's largest processor, but the latter will be widely geographically distributed.

Tapping that urban mine would both help the West meet burgeoning demand and build out domestic supply chains.

Indeed, to quote McKinsey, "powering the energy transition's motor begins with understanding scrap pools" and the technology to exploit them.

The race to do so is now on.

The opinions expressed here are those of the author, a columnist for Reuters.