Ronald W Thiessen, President & CEO of Northern Dynasty Minerals says “a challenge looms on the horizon, threatening the future of electric and hybrid vehicles, as well as many other nascent alternative energy technologies: an exploding market could lead to a critical worldwide shortage of rare earth elements (REEs), raw materials required for manufacturing. Lanthanum and neodymium, both REEs, are essential components in Lithium-ion and nickel-metal hydride batteries -the key technology enablers in the development of these vehicles. Cars also require some 2 kg of neodymium – another REE with production currently a mere 17,000 t/y. Even though hybrids and clean energy technologies consume a small fraction of worldwide output of these metals, we are already seeing strains on global supplies. A price hike caused by supply shortage could lead to prohibitive cost increases for hybrid purchasers.

“Though the technology for electric and hybrid cars is still in its infancy, many signs point to the fact that we are bearing witness to the birth of the next generation of cleaner, greener, energy efficient automobiles – vehicles less dependent on oil then their predecessors.

“The number of vehicles on the road is projected to quadruple to 3 billion in the next 40 years. China alone could see as many cars on its roads in 2050 as exist on the planet today. But today’s cars are major consumers of oil – reliant on petroleum to produce energy – and global conventional oil and petroleum reserves are diminishing, while unconventional resources are just starting to be developed. Some experts estimate that up to 90% of global conventional oil has been found, while others expect a peak within the coming decades. In North America, transportation is the biggest consumer of oil, responsible for up to two-thirds of all use. In turn, gasoline accounts for two-thirds of the total oil utilized for transportation in the US. An additional constraint on our conventional production of gasoline is the fact that no new oil refineries have been built in the US since the 1970s, and many in industry attribute our gasoline shortage to refining capacity issues.

“As such, it is necessary the automotive industry find a way to construct a new breed of vehicles powered by electric batteries and reliant on energy sources other than oil and gas. Focus must switch to energy conservation concerns and heavy investments made in the search for alternative sources. The industry must develop new modes of energy source and storage to diversify away from the constraints of current conventional oil reserves and refining capacity issues, thus reducing vulnerability to future world oil price shocks and
supply shortages.

“And so, automakers are ushering in a new electrical era. The mining industry and battery producers will also feel effects as new technologies take off. While early models have been the product of specialty firms, the end of 2010 will see big, mainstream manufacturers debut lines of cars run solely on electric motors. The economic, regulatory and technological advantages of hybrid electric vehicles, plug-in hybrid electric vehicles and electric vehicles means we can likely expect dramatic growth in worldwide usage by 2020. Some predict that one third of cars manufactured in 2025 will feature some form of electrical power. Liquid petroleum based fuels could even eventually lose their position as  the primary motive force in the automotive sector.

“Rare earths are ‘rare’ in the sense that they aren’t often concentrated in easily mineable deposits, which is why most of the world’s supply comes from only a few sites. This year, China, responsible for producing 97% of the world’s REE supply, announced plans to drastically reduce REE exports. Eventually demand is set to outstrip supply by some 40,000 t/y unless new production comes online, but new REE mines and processing facilities could take as long as 10 years to reach this crucial stage. The key question is whether these deposits can be developed in a timely manner?

“The US has imported 100% of REE metals used in materials such as batteries and permanent magnets from China since the mid-1990s. According to the US Geological Survey, reliance on foreign minerals has grown significantly over the past several years – more than 50% of US supply of 43 different minerals and materials were imported in 2008. But within its borders, the US contains abundant undeveloped reserves of many critical minerals – including copper and REEs whose production could facilitate a robust clean technology manufacturing sector. If these deposits remain undeveloped, causing prices to spike due to a shortage in raw material supply, entire technologies beyond just hybrid vehicles could fail.

“It seems that electric cars are set to become more than a promising niche technology, offering both reduced dependence on foreign oil and decreased vulnerability to future price and supply shocks- with the added bonus of lower CO2 emissions. In the long run, it appears that the US’s biggest challenge might be its ability to ensure a stable supply of raw materials, in particular REEs, needed to manufacture the alternative energy technologies of the future.”