auto industry fears rare earth supply squeeze

http://www.reuters.com/article/idUSTRE6AF4N020101116

(Reuters) - Car industry experts foresee problems if exports of rare earth metals from China needed for car production are threatened, they told the Reuters Global Autos Summit, as data showed 2010 Chinese imports could dry up.

Rare earth metals like neodymium are used in the powerful magnets in electric motors for cars. China produces 97 percent of the world's rare earth metals, which are also used in the production of other high-tech and defense products.

Rare earth mineral exports from China could dry up for the rest of the year, according to data cited by China's Ministry of Commerce on Tuesday.

Frost & Sullivan senior consultant Nicolas Meilhan told the Reuters Summit a shortage of rare earths could pose a problem, but the full effects would only start to be felt once electronic vehicle (EV) sales increased.

Rare earths are used in rechargeable batteries for electric and hybrid cars, including Toyota's (7203.T) popular Prius hybrid.

"I think it's a huge problem because those metals are used for electric motors. Any car with an electric motor will use these rare earth metals," he added.

"It could be that we'll have some supply problems there, probably not in the next couple of years but if EVs start to represent a significant part of sales then maybe we'll have to find other countries with rare earth metals," Meilhan said.

If no other sources could be used, the car industry would find alternative substances, Meilhan said.

"Those materials are the most adapted to these technologies. Of course you'd be in a position to find some alternatives," he said, although performance could be affected.

Valeo (VLOF.PA) Chief Executive Jacques Aschenbroich told the summit rare earth supply could be a short-term problem, but new supply sources could emerge if the materials were not available from China.

"Every time you have a kind of a control or a very high increase in prices, some mines somewhere else than China will open up again, because then the price becomes more attractive," Aschenbroich said.

"I think it could be a short-term problem and not a long-term problem. I don't think there will be a lack of availability of products in the few years to come. I think that some additional sources of supply will come."

Aschenbroich said the availability of some electronic components was a more immediate worry. "Short-term, that is much more of a headache than rare earths," he said.

He added: "I don't expect China will cut off the supply and make the products absolutely unavailable in the market. It might happen but I don't think it is the most credible scenario."