If you’ve watched the news recently, you may have heard the controversy surrounding China’s export restrictions on a number of resources, including rare earth elements. What may not be fully clear is how this affects you as a consumer of electronics, and lighting products in particular. We’ve put this together as a quick overview to let you know what’s happening, and what to expect going forward.
First, let’s look at what rare earth elements are, and what they’re used for: Rare earth element is the common name for a set of 17 chemical elements. They are critical in the production and operation of a wide range of consumer electronics, and are also used in the phosphors that create light in a number of different light bulb types, including fluorescent, LED, and mercury vapor.
Contrary to their name, rare earth elements actually aren’t all that rare. Most of the elements are found in various places around the world, and historically they were mined in those places as well. However, in the past 30 years the mining of these elements has increasingly been centered in China due to lax environmental regulations and low costs of extraction that exist in that country. Currently, 97% of rare earth elements are extracted in China.
Recently, China’s Ministry of Commerce has decided to heavily restrict exports of rare earth elements. Exports were cut by 70% at the end of 2010, and they’re expected to be cut even further. The Chinese government says that they are cutting exports to protect their domestic supplies. There is some speculation that another factor may be to artificially increase the market value of these elements, in order to capitalize on their near-monopoly in extraction. Either way, the end result is the same: Demand is increasingly outpacing supply.
So, what does this mean for us, and for you? Long term, it means that rare earth extraction facilities are being opened (or re-opened) around the world, including here in the United States. In addition, in September 2010 the U.S. House of Representatives passed the Rare Earths and Critical Materials Revitalization Act, which aims to provide incentives for domestic production of rare earth elements. Analysts seem to agree that there is no cause for concern that we will run out of these elements anytime soon, but it will take some time for supply and demand to balance out again.
Shorter term, it does mean that there will be price increases on the products that contain rare earth elements. This includes LEDs, neodymium incandescent, and some mercury vapor bulbs, but we expect that the most widespread increases will be on linear and compact fluorescent bulbs. The first round of price increases is just beginning to come our way, so there is a small window of opportunity to purchase product before the increases take effect. We’re capitalizing on this window and we suggest that our customers do the same. If you use any of these products and you have the space to store some extras, now would be a great time to stock up.
This story is still developing, so check in here and our Current News section for updates. If you have additional questions, talk to one of our Lighting Specialists at 888-455-2800