Seeking Alpha

Ford (F) says it’s cutting consumption of rare earths used in its hybrid and electric...

Ford (F) says it’s cutting consumption of rare earths used in its hybrid and electric cars by 500K lbs./year and will save hundreds of dollars per car in the process. But shares of rare-earth leader Molycorp (MCP +5.6%) shoot higher anyway, adding to gains a day after China announced a 40% cut in the number of permits to mine rare earths. REE +5.7%, AVL +4.5%.
Comments (8)
  • jbde
    , contributor
    Comments (665) | Send Message
     
    In the LI batteries, not the magnets in the motors!
    So they want to have less efficient batteries, that's fine.

     

    Ford is starting to have issues and will no doubt shoot themselves in the foot with this move.

     

    Meanwhile Japanese car makers are moving full tilt to produce the most efficient EV's on the market, using the best components, substances and processes possible.
    14 Sep 2012, 10:01 AM Reply Like
  • kmi
    , contributor
    Comments (3992) | Send Message
     
    Toyota is also exploring rare earth alternatives for its Prius products. Are you short Ford?
    14 Sep 2012, 01:38 PM Reply Like
  • jbde
    , contributor
    Comments (665) | Send Message
     
    No, not short F.

     

    Yes Toyota is 'trying' and so did the refiners try to reduce Lanthanum in cracking.
    It's like the whole move we heard a couple of years ago to 'replace' copper, but prices have moderated and new supply is scheduled by 2015.
    The fact remains, that sometimes the best solution is simply the best solution. And as prices rise, production while be attractive: expansion follows and increased supply will bring prices back in line.

     

    We are seeing it with rare earths and MCP's operations are [to be] the most efficient in the world. Not the Chinese nor Mt Weld / LAMP.

     

    The Chinese are faced with huge capex to modernize not to mention the massive environmental cleanup costs. Also the consolidated manufacturers have to pay ever increasing water, power and chemical costs as their vast needs outstrip any available funding to be self-sufficient.

     

    Lynas has gone to Malaysia for cheap labor, and look how that is going. It's still about available water, chemicals and power. And of course a population that welcomes you instead of trying to find every means to get rid of you for taking advantage of a 'poor little country' in which to ply your toxic trade.

     

    Now that brings us to MCP that has made the investment to become as self-sufficient as possible as to water, chemicals, power and that new thing - disposal. As such MCP will achieve the lowest costs per kg of any producer as current fixed costs [primarily labor] get spread over increasing production.

     

    Chinese costs are rising and thus their margins are being threatened by lower prices. Those who say the Chinese could force out competition with price are smoking something. It's MCP that will soon be the threat. As they ramp production they of course will be adding supply and that will likely mean lower prices - but that is good news for MCP and bad news for the Chinese and Lynas. Customers win by being able to continue to use the best solution at reasonable prices. TWT what actually will happen, but right now, the company in the best position is MCP.

     

    While LAMP now has its TOL [keyword is 'temporary'], whether or not the costs can be controlled is another story as ore has to be shipped in order to be processed. What if local labor, electric, water and disposal costs rise? What if there is an epidemic [i.e. strike]? Also one little environmental hiccup and it could be over for 'an extended period of time.'
    16 Sep 2012, 10:35 AM Reply Like
  • kmi
    , contributor
    Comments (3992) | Send Message
     
    My understanding is MCP is still at least a year out before ramping production to meaningful levels and I'm definitely not as well informed as you on REs but the question in my mind here is why you think that non RE based magnets are so inferior and not a market-worthy approach on the part of Ford, and by extension, Toyota.

     

    My understanding is that some industries/products have zero flexibility to migrate away from REs but specifically vis a vis magnets, RE alternatives are viable.

     

    I play the battery/EV story via lithium oriented companies (SQM and FMC) more than through the REs.
    16 Sep 2012, 02:58 PM Reply Like
  • jimdice
    , contributor
    Comments (9) | Send Message
     
    Of all the global automakers, Ford is the furthest behind in electric car technology. The general reviews of the electric Ford Focus, which was only produced in small numbers last year, was quite poor. There were very little design changes to the model, and the technology was simply crammed into any space to make it work. Their upcoming model will use this technology, but it will use significantly less technology than other comparable models. Hence, it will have a lesser need for rare earth elements and other critical elements.
    14 Sep 2012, 11:43 AM Reply Like
  • Jack Lifton
    , contributor
    Comments (411) | Send Message
     
    The Ford press release is full of spin. But the brief SA summary here is also rotating at high speed.

     

    First of all the nickel-metal hydride battery that Ford has been successfully using for nearly 10 years WITHOUT A PROBLEM in its well made, well engineered HYBRIDS uses on the average 2.3 kg of LANTHANUM per battery and very little of any other rare earth metal. Therefore the press release is telling you that IF FORD WERE TO MAKE AND SELL 100,000 HYBRID EVs per year without using the proven reliable NiMH battery it would then not use 243,000 kg or, approximately 500,000 lbs of LANTHANUM. LANTHANUM price today is less than $20/kg and DROPPING. But let's use the $20 figure. This means that each NiMH battery contains $46 of lanthanum. Watch out at this point for the spinning propeller! The same battery uses FIVE TIMES AS MUCH NICKEL, AND NICKEL SELLS FOR THE SAME PRICE AS LANTHANUM TODAY! So, in fact, it's not the 500,000 lbs of lanthanum that has Ford's bean counters worried it's the 2,500,000 lbs of NICKEL that accounts for more than 80% of the cost of the metals in a proven, reliable, long lasting in many cycles NiHM battery.
    Please also note that Lithium-ion batteries are very very expensive to build and that this has NOTHING to do with the price of lithium.I hope the Ford bean counters know that the most efficient Li-ion chemistry is Li-COBALT, and that COBALT is MUCH MORE EXPENSIVE THAN NICKEL.

     

    I have always believed that in an era of CAFE rules and arbitrary government mandates WEIGHT is the controlling factor. But I wonder if these Li-ion batteries being discussed here are actually lighter in weight, since they require more manufacturing engineering and it results in multiple safety systems being required for fire suppression and cell breakdown management.

     

    Magnets: My partner in TMR informed me this morning that the magnets that Ford is to be utilizing to thrift the use of dysprosium are only made in Japan, so that Ford will remain dependent on Japanese access to Chinese dysprosium in any case.

     

    This brings me to Molycorp, which is, of course, hurt by Ford;s reduction of its use of lanthanum, because lanthanum is a principal product of Molycorp. It accounts for some 25-28% of the output of Mountain Pass.

     

    In addition to that you must note that the Chinese restriction in the number of licenses is not to restrict the total amount of rare earths produced but to CONSOLIDATE its more than 129 legal mines into just a dozen or so COMPANIES! Just one of those companies Baotou Heavy will now have under its control a group of REE mining companies that not only has the capability of producing 50,000 mt of light rare earths per year but has the capacity to produce MANY TIMES that amount from combined reserves and resources much larger in net rare earths contained than either Mountain Pass or Mt Weld.

     

    The Chinese are consolidating their REE industry to make it SAFER, ENVIRONMENTALLY FRIENDLY, and MORE PRODUCTIVE and therefore COMPETITIVE. Share traders who do not take this into account are very foolish or do not themselves own the shares and are simply churning for commissions or short term profits at the margins.

     

    Ironically it is the Chinese demand for nickel and cobalt that is driving Ford's moves while the misunderstanding of resource economics drives a company's share prices up as its strongest competitors act to reduce costs and improve efficiency.
    14 Sep 2012, 12:32 PM Reply Like
  • User 149860
    , contributor
    Comment (1) | Send Message
     
    Wrong... get it straight. Move from nickel metal hydride reduces usage of rare earth materials, plus the Li ion is more efficient, lighter, more powerful. PLUS using less rare early in the magnets in the motors. Resulting in a less expensive car, which happens to get 47mpg... best in class... better than prius. Relying on rare earth while the world is running out of supply, and china not sharing with rest of the world would be shooting yourself in the foot. Seems to me the japanese are now playing catch-up to Ford.
    14 Sep 2012, 01:13 PM Reply Like
  • froggey77
    , contributor
    Comments (2768) | Send Message
     
    User
    It's also trickier, unproven and prone to failure in heat.
    106 have lost capacity in the areas where they were selling them for over a year. (a few are 2012s)

     

    Real World Battery Capacity Loss

     

    http://bit.ly/RDLQlC

     

    Next summer I expect they will hear from every southern state.
    According to a Phoenix local news report. an " insider" said Nissan was thinking about pulling every Leaf from the dealers in the area.
    1 Oct 2012, 06:08 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|