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The hunt for rare earth

The global shortage of rare earth elements, resulting from China’s increasingly strict export quotas, has brought the role of the buyer and product manager to the fore like never before. Andy Pearson visited Havells Sylvania to find out how the lighting manufacturer is coping with the crisis in raw materials supply

Last August, global lighting manufacturer Havells Sylvania announced price increases to its fluorescent lamp and luminaire products, with immediate effect.

Havells Sylvania was not alone. Other major manufacturers, including GE and Philips, also announced significant price increases for fluorescent lamps, following a steep increase in the price of the rare earth elements used in the lamps’ phosphor coatings.

Currently 95 per cent of the world’s rare earth metal mining and oxide production comes from China. But increasingly strict export quotas have restricted the trade in this precious commodity and pushed up prices by as much as 1,000 per cent.

There are 17 rare earth elements in total, each with unique properties and each sourced primarily from China. “In 2009 the Chinese government imposed a quota restriction of 50,000 tonnes. In 2011 they reduced that quota to 30,000 tonnes and for 2012 that quota is expected to be reduced still further, although by how much is not yet known,” explains Max Bittner, sourcing director for Havells Sylvania.

Anuj Vasu, senior strategic business manager for fluorescent lamps, adds: “Lanthanum, terbium, europium and yttrium are used in the production of phosphor coatings for linear fluorescents, compact fluorescents and LEDs. The most difficult to source are europium and yttrium, because of their limited availability. These are used to make red phosphor.”

New applications

Apart from China’s export quotas, growth in demand for rare earths for use in mobile devices is driving up prices for lighting manufacturers, who use them in fluorescents

Phosphor specialists
Havells Sylvania does not manufacture the phosphor coatings itself. Like other major manufacturers, it buys rare earths after they have been refined and turned into phosphor coatings by specialist producers.

“We buy pre-mixed phosphors and single-colour phosphors,” explains Vasu. Phosphor manufacturers are based mainly in China but there are processing plants in Japan, the US and Europe and phosphors are traded on the open market.

All manufacturers are affected by the quota restrictions. However, Bittner says that not all suppliers have the same price levels and it is possible to negotiate prices up to a point. “A variation in prices of 10 per cent is possible between suppliers,” he says. But the situation can change rapidly, because phosphor producers are not guaranteeing prices for more than about four to six weeks.

“Prices have stabilised at a high level in the past month,” says Vasu. Before then, he adds, prices fluctuated, with some actually showing a reduction, but prices for rare earths are still very high compared with prices at the start of 2011. In the short term, both Vasu and Bittner expect prices to increase still further as a result of quota restrictions.

New mines
New mines outside China are starting to open up. But these mostly produce so-called ‘light’ rare earths, not the ‘heavy’ variety needed to manufacture coatings for lamps and, for this year at least, they are unlikely to have any significant impact on the lighting sector.

“It is not possible to predict at this moment whether new mines outside China will lead to a decrease in the price in the medium to long term for the lighting industry,” says Bittner.

Havells Sylvania has European and Asian sourcing teams who work together to secure the best options for both EU and Asian manufacturing plants by agreeing on the best time to buy in phosphor supplies.

“Our decision on when to buy is based on monitoring price trends, on stock levels and on feedback from our Asian sourcing team, who are regularly in touch with phosphor suppliers,” says Vasu.

He was not prepared to divulge how long Havells Sylvania’s current phosphor stocks would last or whether the company had secured long-term contracts. However, he does admit that, if Havells Sylvania fails to secure a supply of rare earths, then “it would affect production and the supply of finished products”.

New applications

Apart from China’s export quotas, growth in demand for rare earths for use in mobile devices is driving up prices for lighting manufacturers, who use them in fluorescents

Despite the increased cost of phosphors, Vasu says Havells Sylvania will not be modifying its products nor changing its range to reduce or eliminate its dependence on rare earths, because “this would adversely affect our customers”. Instead, the company is striving to reduce the cost of the items it can influence.

“We’re optimising the line efficiency to keep the production cost as low as possible,” says Vasu. But, even with this approach, he expects prices for fluorescent lamps to continue to increase in the short term at least.

Havells Sylvania senior vice-president Nick Farraway says it is difficult to say how the situation will develop in the coming months and years. “We are confident that in the near future phosphor prices will remain inflated,” he says. In the short to medium term, Farraway says Havells Sylvania “will continue to monitor”.

More competition
In the longer term Farraway expects the situation to improve. “We’re likely to see more competition with other phosphor sources coming back on stream but the market is unlikely to return to previous price levels,” he says.

The increased cost of phosphors has been the most significant factor in the doubling of the price of some fluorescent lamps since mid-2011.the situation in order to deliver best value to customers and, in parallel, optimise our manufacturing processes to identify opportunities to control costs”.

As a result of the increased cost of rare earths, major global manufacturers like Havells Sylvania are starting to see changes in the types of lamps being specified. For example, sales of halogen energy-efficient lamps such as Sylvania’s Classic Eco have benefited from the challenges facing the fluorescent market.

Farraway says the increased cost of fluorescent lamps and the decreasing price of technologies such as LED will lead to significant changes in the lamp market. “As the price of LED technology gradually drops, there will be an accelerated transition to replacement options for fluorescents, which will eventually become the standard,” he says.

“As the price of LED technology gradually drops, there will be an accelerated transition to replacement options for fluorescents, which will eventually become the standard,” Nick Farraway, senior vice-president, Havells Sylvania

Recycling

The technology is not yet developed enough to extract rare earth elements from recycled lamps in sufficient quantities to make an impact

Why recycling has not solved the rare earth crisis
Recolight is a leader in the field of recycling discharge lamps in the UK. The organisation is responsible for recycling lamps from collection points around the country, in addition to those disposed of under the Lumicom scheme, which subcontracts its responsibilities for recycling discharge lamps to Recolight. Nigel Harvey, chief executive of Recolight, explains how the organisation is working to recover rare earths.

“Over the past four years, we have funded the recycling of some 100 million lamps. Recolight has a commitment to increasing recycling and recovery rates and targets for both are rising as the Waste Electrical and Electronic Equipment Directive is amended. We have responded by ensuring the separate collection of phosphor powders. The powders contain the rare earths and typically account for up to 4 per cent of recycled lamp weights, depending on lamp type. Last year we put in place arrangements to ensure that the powders resulting from the lamps collected through the Recolight network are collected and stored.

“We are currently investigating options for extracting the rare earths from these powders. The process is complex, and involves sophisticated separation technologies. It is not made any easier by the fact that, when collected, waste lamp containers inevitably contain multiple brands, many of which use different phosphor compositions. There is still work to do be done on several fronts before this will result in the availability of rare earths back into lamp industry. The key issue is, for the time being, to ensure that the powders are bulked up while this work continues. This is already happening.

“Recolight offer a free lamp recycling service to businesses and consumers. Using this service gives those disposing of waste lamps the confidence that the rare earths will be recovered as the technology reaches operational capacity.”

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