Rare earths revisited: Monopoly broken but security issues remain

imagesAs readers of my blog know, I have an abiding interest in rare earth metals, since they are such a fundamental source of technology for use in computers, TV and other displays, windmills, medical imaging….the list goes on and on.  As a quick review, these elements (divided into “light” and “heavy” so-called lanthanides) are found abundantly in nature as metal oxides in different amounts and concentrations. They are almost exclusively produced in China, where they are found in large amounts and where the complex processing and separation of the oxides has long been perfected.imgres As industrial use blossomed, China’s monopolistic position allowed that country over a short period of time, to raise prices to unsustainable levels ($ 100-200 per kg) as it imposed export quotas on these metals.

An article in the July 27th issue of Chemical and Engineering News brings the situation up to date. Two companies, Molycorp in the U.S. and Lynas in Australia, decided to  invest large amounts of capital to produce rare earth metals, using the high global pricing to justify these investments. When the World Trade Organization declared Chinese export quotas to be illegal, the price of many of the metals dropped precipitously to the range of  $ 2/kg to $ 18/kg!  Molycorp, which was starting to produce at low levels, recently declared bankruptcy and Lynas is facing a similar problem, as well as local environmental opposition to its Malaysian rare earth refinery for Australian oxides, based on the fact that rare earth oxide concentrates from some ores contain some radioactive thorium and uranium.

Molycorp has the additional problem that its Mountain Pass, Ca. mine ores primarily contain oxides of cerium and lanthanum, which are used in catalytic converters and for various polishing applications and command the lowest prices. The ores also contain  neodymium and praseodynium in reasonable quantities and this metal is more attractively priced, used in electric motors, sensors and disk drives. Gadolinium, yttrium, dysprosium and terbium and europium are even more attractively priced and it turns out that these oxides are found in some Alaskan ores, apparently attracting some other investors.

So, China still has the monopoly on rare earth metals, though it is no longer able to realize “monopolistic” pricing. Instead, it has priced these metals at a low enough level (while exporting as much as possible) to try and force its competitors out of business.

The good new for the U.S. is that it is presumably building up a national stockpile of these valuable materials just in case China decides to play more games. Since the technology for separating these oxides is quite complex, it will be difficult for producers outside of China to match Chinese economics. This certainly seems like a case for protecting a domestic industry, which is certainly allowed by the WTO.

 

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Projecting carbon fiber composites for mass auto market: Several factors are involved

imagesThis blog has periodically posted articles on the growing use of carbon fiber composites, noting their strength and light weight, relative to steel, and their downside of high cost.  These materials are now in prime use in large airliners and in expensive cars, but have only slowly started to penetrate the mass automobile market. CarbonContinued research, both in government-sponsored laboratories and by companies such as BMW and Teijin is promising lower manufacturing costs and car companies are obviously interested in greater use of composites to meet the new CAFE requirements, reducing fuel consumption via lower weight cars.. Projections are, in fact, showing much greater use in cars over the next decade(lowest field in graphic). Research in going on in several areas, including use of lower purity (less expensive) polyacrylonitrile, other monomers, lower production costs and cycle times, etc.

Another factor is, however, at work. The objective of the fuel economy  standards is reduced total carbon dioxide emissions, which relates both to specific fuel consumption (miles per gallon of fuel) and and total miles driven. Car manufacturers get credit for the production of electric cars and hybrids, which obviously act to lower the total emissions of the entire fleet. Megatrends are also changing driving habits. Thus, using cars for personal transportation in the developed world is undergoing substantial change, and production of much smaller cars is increasing.  Also, online shopping and telecommuting will reduce the use of personal cars.  All of this this will affect the number of large passenger cars that are not hybrids or electric and will have to be taken into account as the large car manufacturers contemplate the fleet size and mix of cars they will produce by 2020 and beyond.

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Aircraft biofuel blending becoming a reality

UOP While there is considerable controversy regarding the Greenhouse gas emission-related benefits of biofuels, a number of air lines, notably United, are starting to use a “natural” jet fuel produced by a process patented by UOP. The fact that this biofuel is produced from waste rather than from crops is significant as no hydrocarbon-related fuels or chemicals are used for the specific purpose of making the fuel. While carbon dioxide is, of course, emitted into the atmosphere when the biofuel burns, this carbon can be assumed as again being absorbed into plants through photosynthesis, completing the cycle, so that no net carbon dioxide is emitted as would be the case for crude oil-based jet fuel. UOP claims that use of its bio jet fuel can reduce GHG emissions by 65-80 percent

The UOP Green Jet process had its origins in DARPA-conducted research to produce military  jet fuel from renewable sources. In the basic process. natural oil or greases  and deoxygenated and isomerized to produce green Diesel. With selective cracking, jet fuel is produced.

AltAir Fuels will retrofit part of an existing petroleum refinery to make 30 million gallons per year of advanced biofuel from non-edible natural oils and agricultural wastes. This fuel can blend up to 50% with fossil kerosene. Fulcrum Bioenergy has developed a process that turns municipal waste (household trash) into sustainable aviation fuel and will supply United Airlines, which has invested in Fulcrum’s refinery. Fulcrum’s president claims it can produce bio jet fuel for around one dollar per gallon – half the cost of what United paid for jet fuel last year.  British Airways is in a joint venture to build a biofuels refinery near Heathrow airport. Cathay Air Lines and Alaska Airlines are likewise engaged in a plan to make and/or blend natural jet fuel into traditional fuel.

A Middle East firm Petrixo Oil and Gas claims it will use the UOP process to produce one million tons per year of biofuels at a cost of $ 800 million in the United Arab Emirates. (Feedstock source not identified).

Behind these developments is a government push to reduce airlines’ carbon emissions. The Obama administration has set out guidelines to achieve key reductions, recognizing that airline GHG emissions are rising at a fairly rapid rate.

So, let’s put this in context. The good news is that it is now apparently possible to make blendable jet fuel economically from natural materials and, more interestingly, from municipal waste and crop wastes. And there is a net carbon benefit in doing this. There is really no bad news, except for the fact that there are immense logistical challenges in making biojet fuel production a major industry. While it was quite easy to develop a “gasohol” industry from corn, given the fact that corn was already available in huge quantities in silos and could easily be diverted to fuel instead of foodstuff use. This would be impossible to do with municipal waste or even agricultural waste, where many thousands of tons would have to be collected from many sources and brought to refineries. greatly increasing the production costs and the carbon emissions. For specific locations and situations, however, there is an economic and carbon footprint-related reason to build a certain amount of biojet fuel capacity.

 

 

 

 

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Tidal Power: How close to reality?

imagesProduction of electricity from the difference between high and low tide has been an area of interest since for centuries water turbines have turned in many areas of the world to drive heavy wheels used to grind wheat or make gunpowder. Electricity-producing turbines are installed in tidal basins that capture water at high tide and release it at low tide. Tidal power plants with a capacity around 250MW have been installed in LaRance, France(1966) and in Korea(2011). A similar-sized plant is completing construction in Swansea, South Wales and there is now renewed interest in this technology, which would take its place next to solar and wind as the most basic form of renewable energy. The one billion Pound Sterling plant, which takes advantage of one of the largest high tide/low tide height differentials in Europe, is based on a man-made lagoon where a seawall encloses 11.5 square miles of ocean off the coast.

The initial cost of power generation from a plant of this kind is high at around $250 per megawatt hour versus $ 210 from wind and $ 150 from fossil fuels. However, economics of scale can bring the cost down to that of wind power. If Swansea builds five more tidal lagoons the projected cost of power will be comparable to nuclear and the plant would then produce about 8 percent of the U.K.’s demand for electricity. If the cost of solar power had not been coming down so dramatically, the U.S.,with promising locations, would have been looking at tidal power more seriously as interest in renewable, zero carbon, energy has grown in recent years. Canada could long have installed tidal power at the Bay of Fundy (largest known tide differential globally with studies showing three locations that could each provide between 1000 and 3000 MW), but the country has built much lower cost hydropower generation so no reason to build high capital cost tidal power plants.

The downside for tidal power plants is possible effect on marine life, but the LaRance plant in northern France has not been a problem in that respect.

 

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Finally: Synthetic silk!

imagesHistorically, garments and other textiles were made from natural fibers, principally cotton, wool and silk. Of these, silk was the most prized for its strength, dyeability, and smooth, non-slippery texture. But its supply was very limited as it was the product of the silkworm (Bombyx mori)  and mostly came from China. Chemists, starting in the nineteenth century, experimented on the production of so-called manmade fibers including rayon and, later, nylon, polyester, lycra and acrylic. But none of these fibers have the unique properties of silk, the most desirable fabric for ladies fancy garments. Its chemical structure allows silk cloth to retract incoming light at different angles, producing different colors.

Some five years ago, a group of researchers decided to reverse engineer natural silk to replicate the unique properties of this fiber with certain proteins, leading to a somewhat secretive Bay area startup called Bolt Threads. According to Bloomberg Business News (June 8-14th, 2015) the new firm raised $ 40MM from two venture capital firms. The process uses genetically modified yeast, simple carbohydrates converted to excretable proteins through fermentation. The inventors claim that by slightly modifying the genetic makeup of yeast cells and tweaking the way it spins the proteins into threads it can engineer fabrics to specified levels of durability, softness and strength.

Bolt is working with partners to do fermentation in 4000 liter tanks and Unifi, a yarn manufacturer will spin Bolt’s fibers into apparel-ready yarn and textiles. The company is aiming at high-performance apparel and expects to have products late in 2016. The product will be pricey at first, but costs will come down as production levels increase.

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Ellen Kullman’s big win needs applause

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After a long, bruising battle with hedge fund Trian Partners and Nelson Peltz, Dupont’s management headed by CEO Ellen Kullman soundly defeated an attempt by the investment fund to gain seats on the DuPont board with the stated purpose of breaking up this storied company for a presumed financial gain to investors. Activist investors have recently been successful in gaining board seats to change companies’ strategies (Example: Dow). While it is true that in some cases investors have had a beneficial effect on companies’ strategies, the “raid” on DuPont had to be strongly countered to preserve the currently structured firm as it continues to innovate and lead its industry. One of my recent posts describes how another iconic firm, ICI, eventually disappeared after breaking into pieces and abandoning its traditional long range strategy, combining businesses that throw off cash with novel and specialty businesses that need cash to carry out research. Trian’s contention that DuPont’s research was not providing adequate return was soundly rejected by a number of the large funds holding DuPont stock. Their view evidently was that DuPont’s historical success in bringing new products to market gave them more confidence in DuPont’s management than in Trian Partners. And DuPont’s shareholders are happy with DuPont’s financial performance: 214% total shareholder return (12.31.08-12.31.13) versus 184% S&P chemicals and 128% S&P 500.

DuPont is a $ 36 billion company with strong positions and focus in Agriculture and Nutrition, Industrial Biosciences and Advanced Materials. As arguably the leading chemical science company, its “innovation engine generated sales of more that $ 10 billion from new products commercialized between 2010 and 2013!”  Much of DuPont’s efforts is oriented toward global population growth, renewable energy, protecting the environment and creating novel advanced materials for an increasingly urban world.

We should also consider the fact that leading European, Japanese and Chinese chemical firms are not at risk from activist investors and, like DuPont are investing heavily in research, with long range objectives. It would be tragic to lose the leadership of DuPont: continuing to innovate in its chosen areas.

As some of you know I have been very active at the Chemical Heritage Foundation in Philadelphia. Our Joseph Priestly Society seminars and luncheons frequently feature leading executives from the chemical industry. We were pleased to invite Ellen Kullman as a keynote speaker a couple of years ago and applaud her for her success in managing iconic DuPont and winning the battle with Trian Partners.

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Shell Arctic Drilling: Considerations urge caution

 

imagesThe Obama administration appears to have given green light to Shell Oil Company to resume its plan to drill in the highly oil-rich Chuchki Sea in the Arctic offshore Northern Alaska. This follows an aborted effort to commence this program in 2012 when poor preparations and mistakes led to junking the two drilling vessels then sent to the area. In particular, a containment dome designed to cap runaway wells failed a crucial test. Environmental groups have stated that an oil spill in the drilling area would or could be more costly to inhabitants and wildlife than the BP Deepwater Horizon spill offshore Louisiana is 2010, which has already cost BP and others over forty billion dollars. The International Business Times said, “The Chuchki Sea is prone to icy waters, major storms and waves that can reach 50 feet high. In the event of a spill or accident the closest Coastc Guard resource with necessary equipment is more than 1000 miles away. The Alaskan coast nearby has no roads leading to major cities or ports for hundreds of miles”. Compare this to the BP spill area immediately accessible to all types of assistance – yet spilling crude oil for weeks as a result of human error and equipment failure

An almost unprecedented campaign by people and a number of organizations is underway to try and stop Shell from this initiative. Interestingly, one group is appealing to Shell shareholders asking them to consider whether they believe Shell should be risking this amount of money or more to bolster the company’s relatively modest reserve of proven oil. In 2012, Shell stated that it had $ 6,196MM bbls of proved reserves versus 12,816MM bbls. for ExxonMobil. 10,050MM bbls for BP and 16,773MM bbls, for Russian Rosneft. Drilling down on the Shell number, it includes 1,763MM bbls, for “synthetic crude oil”, which must largely be crude derived from Canada’s tar sands. So, Shell is really lagging behind its rivals in establishing proven “normal” crude oil. Remember also that Shell was castigated not many years ago for overstating its reserves, leading to management changes as I recall.

Looking at these figures, one might ask, is the Shell Arctic initiative a sort of “Hail Mary”  pass to try and ramp up Shell’s crude oil reserves? That may be a harsh judgment? If Shell believes that its approach is as safe as an be, how do we know that all the appropriate authorities have totally vetted the proposed drilling and recovery systems to assure double or triple backup protection against unforeseen events, accidents, human error, etc?

At this time, crude oil price is around $ 50-60, far too low for justifying Shell’s potential investment. With the U.S. continuing to produce more and more oil from shale it is difficult to project when oil will steadily sell at over $ 100/bbl, Renewables are cutting into oil demand creating downward pressure on crude oil.

All of this makes me wonder whether this is a good time to go ahead with Arctic drilling. Perhaps that’s worth another look in 5-10 years.

 

 

 

 

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