Volatility in rare earth materials presents opportunities in nanotech

Many analysts have warned that the demand for these materials is rising much faster than available supplies



Rare earth materials are fundamental to the manufacture of modern lightweight rechargeable batteries, high-efficiency motors and optical telecommunications equipment. Many analysts have warned that the demand for these materials is rising much faster than available supplies.


Unfortunately, these supplies are geographically concentrated in ways that allow political manipulation to magnify the uncertainty in the market for rare earth materials. For example, in a recent news report, it says: “China, which produces about 97 percent of the global supply of rare earth minerals, cut its export quotas by 35 percent for the first half of 2011 versus a year ago, saying it wanted to preserve ample reserves.”


Worldwide production of important rare earth materials is modest and slow-growing. For instance, lanthanum, used in nickel-metal hydride batteries, is limited to 30,000 tonnes per year; samarium, a primary component in high-strength samarium-cobalt magnets used for electric motors in generators and electric vehicles, is limited to 700 tonnes per year; erbium, used in optical fiber amplifiers for optical telecommunication networks, is limited to about 500 tonnes per year. In all these three cases, projections for use of these materials exceed present worldwide production within a few years. These concerns have led to volatility in the futures markets for these materials, impacting manufacturing costs for the market sectors that depend on these materials.


Nanotechnology to the rescue?


Yes! Most materials rely on the fixed basic properties of the 110 elements in the periodic table, but nanotechnology can create a much longer list of basic building blocks. Through controlled nanofabrication methods, it is possible to build quantum dots and nanowires out of most elements, and also with precise control over the size and shape of the nanostructures. The important new feature is that the properties of the nanostructures depend on the material that they are made from and there can be a very strong dependence on size and shapes. So, by changing the size and shape of nanostructures, we are making new building blocks.


Over modern history, mankind has been very clever at finding ways to squeeze interesting characteristics out of the relatively short list of available elements. Rare earth-based products, such as nickel-metal hydride rechargeable batteries are excellent examples of this sort of conventional engineering. However, looking ahead, it is increasingly possible to replace these specialty atoms with engineered nanostructures. Based on these emerging capabilities, scientists and engineers are developing a list of nanotech alternatives to conventional materials engineering. The most important early opportunities for nano-engineered material replacements will be in the applications where the scarcity or cost of the conventional materials is causing problems, such as rare earth-based products.


Rechargeable batteries: nickel-metal hydride batteries are the most common energy storage technology for portable electronics and electric vehicles, and are dependent on limited supplies of lanthanum, cerium, neodymium and praseodymium. Lithium-ion and lithium-polymer batteries are attractive alternate technologies, and nanotechnology is playing a central role in addressing manufacturing costs, safety, and performance in lithium-based batteries.


Electric motors and generators: high-strength samarium-cobalt magnets are key elements in the most efficient electric motors, which are used in wind turbines, electric generators and electric vehicles. The natural arrangement of samarium-cobalt atoms in crystals produces these important magnetic properties. Nanotechnology researchers are looking to produce non-natural arrangements of less scarce materials to generate “rare earth-free” high-strength magnets.


Optical telecommunications: erbium-doped glass fibres are used to amplify optical signals in telecommunication networks. Erbium atoms embedded in glass provide the nonlinear optical properties that enable optical amplification. Nano-engineered quantum dots of simple metallic elements can be substituted for the erbium atoms in this application.


In all three of these cases, and many more, nanotechnology is providing alternate pathways to important materials and device capabilities. Nanotechnology investors should look for opportunities to participate in the development of these alternate pathways, especially in cases like those highlighted above.


Nanotechnology replacements for rare earths


Investors should look for breakthroughs in large and small companies providing alternates to the rare earth materials. Development of nano-structured electrodes, nano-phosphate materials and nano-engineered ceramic membranes will enable faster transition to lithium-based batteries. Nano-engineered magnetic crystals and “rare earth-free” magnets can allow replacement of samarium-cobalt magnets in electric vehicles and generators. Metallic quantum dot-based optical amplifiers can eliminate rare-earth doping of optical fibres. In all of these sectors, nanotechnology can eliminate rare-earth dependence for high-growth applications.


That said, while nanotechnology poses a unique opportunity, it is complex and requires experience and expertise to decipher what is real and what is not. Investors should seek help from advisors with proven nanotechnology expertise.



Thomas Kenny is Cedrus Investment’s chief emerging technology advisor and a Stanford University professor.


27 May 2011


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