Volatility in the rare earth materials

markets as an investment opportunity in nanotechnology

Read our article in the Cayman Financial Review Magazine, eversion 


There are exciting
nanotech approaches to many of the high-growth sectors that presently rely on
rare earth materials.  

Rare earth materials are fundamental to the
manufacture of modern lightweight rechargeable batteries, high-efficiency
motors and optical telecommunications equipment. Many analysts have warned that
the demand for these materials is rising much faster than available supplies.

Unfortunately these supplies are geographically concentrated in ways that allow
political manipulation to magnify the uncertainty in the market for rare earth

For example, in a recent (12/29/2010) Reuters report, “China, which
produces about 97 per cent of the global supply of rare earth minerals, cut its
export quotas by 35 per cent for the first half of 2011 versus a year ago,
saying it wanted to preserve ample reserves.”  

Worldwide production
of important rare earth materials is modest and slow-growing. For example,
lanthanum, used in nickel-metal hydride batteries, is limited to 30,000 tons
per year; samarium, a primary component in high-strength samarium-cobalt
magnets used for electric motors in generators and electric vehicles, is
limited to 700 tons per year; erbium, used in optical fibre amplifiers for
optical telecommunication networks, is limited to about 500 tons per year.

all these three cases, projections for use of these materials exceed present
worldwide production within a few years. These concerns have led to volatility
in the futures markets for these materials, impacting manufacturing costs for
the market sectors that depend on these materials.  

to the rescue?

Yes! Most materials
rely on the fixed basic properties of the 110 elements in the periodic table,
but nanotechnology can create a much longer list of basic building blocks.
Through controlled nanofabrication methods, it is possible to build quantum
dots and nanowires out of most elements, and also with precise control over the
size and shape of the nanostructures. The important new feature is that the
properties of the nanostructures depend on the material that they are made from
and there can be a very strong dependence on size and shapes. So, by changing
the size and shape of nanostructures, we are making new building blocks.  

Over modern history,
mankind has been very clever at finding ways to squeeze interesting
characteristics out of the relatively short list of available elements. Rare
Earth-based products, such as Nickel-Metal Hydride rechargeable batteries are
excellent examples of this sort of conventional engineering.

However, looking
ahead, it is increasingly possible to replace these specialty atoms with
engineered nanostructures. Based on these emerging capabilities, scientists and
engineers are developing a list of nanotech alternatives to conventional
materials engineering. The most important early opportunities for
nano-engineered material replacements will be in the applications where the
scarcity or cost of the conventional materials is causing problems, such as
rare earth-based products.  

Rechargeable batteries:
Nickel-Metal Hydride
batteries are the most common energy storage technology for portable
electronics and electric vehicles, and are dependent on limited supplies of
lanthanum, cerium, neodymium and praseodymium. Lithium-ion and lithium-polymer
batteries are attractive alternate technologies, and nanotechnology is playing
a central role in addressing manufacturing costs, safety, and performance in
lithium-based batteries.  

Electric motors and generators:
samarium-cobalt magnets are key elements in the most efficient electric motors,
which are used in wind turbines, electric generators and electric vehicles. The
natural arrangement of samarium-cobalt atoms in crystals produces these
important magnetic properties. Nanotechnology researchers are looking to
produce non-natural arrangements of less scarce materials to generate “rare
earth-free” high-strength magnets.  

Optical telecommunications:
Erbium-doped glass fibres are used to amplify optical signals in
telecommunication networks. Erbium atoms embedded in glass provide the
nonlinear optical properties that enable optical amplification. Nano-engineered
quantum dots of simple metallic elements can be substituted for the erbium
atoms in this application.  

In all three of these cases, and many more,
nanotechnology is providing alternate pathways to important materials and
device capabilities. Nanotechnology investors should look for opportunities to
participate in the development of these alternate pathways, especially in cases
like those highlighted above.  

replacements for rare earths

should look for breakthroughs in large and small companies providing alternates
to the rare earth materials. Development of nano-structured electrodes, nanophosphate materials and nano-engineered
ceramic membranes will enable faster transition to lithium-based batteries.

Nano-engineered magnetic crystals and “rare earth-free” magnets can allow
replacement of samarium-cobalt magnets in electric vehicles and generators.
Metallic quantum dot-based optical amplifiers can eliminate rare-earth doping
of optical fibres. In all of these sectors, nanotechnology can eliminate
rare-earth dependence for high-growth applications. 

That said, while nanotechnology poses a unique opportunity, it is
complex and requires experience and expertise to decipher what is real and what
is not. Investors should seek help from advisors with proven nanotechnology

Investments has an established track record and commitment to continued focus
in the nanotechnology sector, including nanotechnology investment products and
two nanotechnology indexes used both as a benchmark and investment tool. Cedrus
offers a balanced team of financial and technology experts, who are now poised
to guide to new investments in nanotechnology replacements for rare earth
materials and other areas within nanotechnology. 

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Thomas Kenny

Thomas Kenny is a Full Professor in the Department of Mechanical Engineering at Stanford University. He currently leads research on emerging nanotech opportunities, participates in analysis of companies included in the Cedrus Nanotechnology Index, supports Cedrus clients in selecting and analyzing nanotech investment opportunities, and produces original investor reports.     

Dr. Thomas W. Kenny
Chief Emerging Technology Advisor
Cedrus Investments Limited
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