The Daily Energy Report for Tuesday April 13, 2010 talks to Noah Lehrman, N. American Committee Chairman of the Minor Metals Trade Association about the U.S. ability to control its energy security.
Noah Lehrman: The MMTA serves as an arena for all segments of the Minor Metal and Rare Earth communities. From producers through merchants through consumers as well as various logistical support staff and policymakers to get together to have forum on various issues confronting these materials. From supply concerns to new technical developments and also to provide an arena for the development of better statistics governing the production and consumption, better norms and standards for material across geographic regions. Provide venues for mediation of contract terms should any need arise amongst our members. Provide security for storage facilities and approvals there. And also provide a unified voice for the industry to consult with policymakers in government for issues arising on trade on the environment and on security. This is a model we developed originally in Europe, and over the past year, we’ve been expanding into North America with tremendous results.
Minor metals are key for a lot of renewable technologies. Materials like indium, gallium, and selenium are some of the drivers behind photovoltaic thin films along with tellurium which is also in other solar technologies. The rare earth elements play a key role in wind turbines and power generation through the magnetics in their generators. And other elements like cobalt and lithium which are part of energy storage in batteries play a role in just about every renewable technology you have, whether it’s wind or solar or other environmental technologies such as hybrid cars. These materials are playing a role in a wide swath of technologies within renewables on top of their traditional roles in such industries as optical electronics for flat-panel displays. And it’s this new exponential growth in solar which is really presenting some really interesting supply issues.
A lot of these materials, however, are facing a very specific balance between supply and demand in their former applications such as in flat-panel displays. We’ve seen obviously in the last year with the global economic situation, a relaxation in a lot of that consumer demand than pressure. So we’ve seen a lot of pricings come down from their historical highs. A good example is indium which we saw in historical high levels of seven hundred to a thousand dollars per kilogram. And we’ve seen come down in the past year of low levels to around three hundred per kilogram. As we’ve seen the economy recover, and as we’ve seen part of the Recovery Act includes stimulus that creates for solar cells in the United States and in other areas around the world outside of Western Europe, we’ve seen indium already start to see quite a resurgence. We’ve seen it rise to five hundreds over the last several months. And even this past week, we’ve seen indium prices rise from five hundred to five-twenty to five-forty to five-sixty level. And we see a return to seven hundred level certainly on the horizon and perhaps even higher to a thousand.
I think that kind of brief picture is indicative of a lot of these materials where you have this kind of narrow balance which is now being tipped by new technology. Also, some of the interesting factors is a lot of the countries which are traditionally sources of these materials have become great consumers, and the big one in that is China which used to be the saving grace for a lot of metals. And by company had some metals, our founder, Danny Lehrman, was one of the first to introduce Chinese chrome into the United States in the late 1970s after trade opened up. And at that point, that was a completely new source raw material for the aerospace industry which is also undergoing a lot of growth and pressure on raw materials and was looking for new sources.
Nowadays, everyone’s trying to figure out how to deal with China that instead of supplying the rest of the world, it’s consuming more and more. And it’s a very interesting issue because a lot of that is being driven by the natural growth of the standard of living in China which brings more and more consumption to China relative to the rest of the world, and therefore it’s natural that more and more production of technology will be taken place in China. So more and more of their raw materials will be staying there. And that’s a natural function of market economies. And the way to respond to that, I think, needs to be with market solutions.
I think a big one will be companies taking initiatives on their own to secure their supplies over the next several years. My perspective and something we’ve done in Hudson Metals is help companies lock in forward-fixed pricing on a lot of raw materials while we currently have the situation where materials are at lower levels historically because of the recent crisis. A lot of materials which have come down a lot, come down by a factor of three, have doubled since then, but still have plenty of ways to go before catching up to where they were. Let alone the fact that we now are seeing increasing pressure.