Nov-2020

Rare earths weaponised: the impact on FCC units from an escalation in global trade tensions (ERTC)

Most refiners with FCC units do not need to be reminded of the chaos and financial pain resulting from the monumental 30-fold increase in rare earth metal prices in 2010-2012.

Tom Ventham
Unicat Catalyst Technologies & G. W. Aru

Article Summary

This event caused an inexorable rise in the prices of FCC fresh catalyst, which contains lanthanum oxide, and of FCC SOx reduction additives, which typically contain cerium oxide. China accounts for over 90% of global production of rare earths,³ and export restrictions during this period led to this unforeseen jump. Although rare earth prices have since returned to a stable baseline level, the impact of Covid-19 in 2020 has left many refineries in a more precarious position, and the threat of a repeat rare earth price shock will send chills through most refiners with memories of the previous episode.

The dominance of China as the world’s majority rare earths supplier has been slow to change, even following the experiences in 2012, and recent trade tensions have led to well-publicised reports that rare earths could be used as a bargaining chip.^1,4 Cerium oxide, which is a key component in effective FCC SOx additives, accounts for 20% of the total rare earths exported from China in 2019, with 20% of this amount destined for the USA.2 It is in the U.S. where almost all SOx reduction additives are produced for use in western markets, including by companies that otherwise have catalyst manufacturing operations or a corporate presence in Europe or the Middle East. It is this reliance on sustaining a cordial trade relationship between China and the U.S. that should be seen as a major threat to refiners who have been reliant on SOx reduction additives produced in the U.S., using cerium oxide exported from China, to achieve cost-effective FCC SOx control.

Should this leverage of restricted rare earth exports from China come to fruition, it is end-user refineries that will endure the consequences of rapid price escalations. It would be sensible for these refiners to reduce their exposure to this existential threat and consider the likelihood that if rare earth prices rise, they should have access to a diverse range of solutions that de-risk this painful scenario. Based on historic patterns, when quotas have been enforced it has been on the export of raw materials. Quotas have not been applied on finished products exported from China that contain rare earths.

High-quality FCC SOx reduction additives produced in China using formulations that are commensurate with those of western suppliers present an attractive opportunity for those looking to diversify their supply chain options. By identifying and partnering with manufacturing locations in China with a track record of producing several types of SOx additives for the domestic market, and by implementing a complete local, highly experienced and independent quality control, technical support, and logistics network, we have been able to supply refiners in North America and Europe continuously for over a year. Commercial data from trials have shown that our SOx reduction additive, Ultra SOxBuster®, has outperformed the current top-selling SOx reduction additive. As well as future-proofing against potential market upsets stemming from the rare earths sector, this SOx additive proves to be cost-effective compared to current incumbents offering immediate savings to the refiner, especially in markets such as Europe where transportation and duty costs make the price position already even more attractive when compared to U.S.-made alternatives. Moreover, some refiners in Europe are currently using SOx additives with known human health hazards declared in their respective Safety Data Sheet. Ultra SOxBuster® additives have been shown to be non-hazardous to human health. In Europe, hazardous substance substitution rules exist. The refiner can investigate if the current SOx additive in use should be replaced by a safer material which is also a proven, more cost-effective, and superior performing SOx additive.

References
1 https://uk.reuters.com/article/us-usa-trade-china-rareearth-explainer/u-s-dependence-on-chinas-rare-earth-trade-war-vulnerability-idUKKCN1TS3AQ
2 https://chinapower.csis.org/china-rare-earths
3 www.nytimes.com/2011/11/17/business/global/prices-of-rare-earth-metals-declining-sharply.html
4 www.bloomberg.com/news/articles/2019-05-29/china-gears-up-to-weaponize-rare-earths-dominance-in-trade-war

This short article originally appeared in the 2020 ERTC Newspaper, produced by PTQ / DigitalRefining.

You can view the digital issue here - https://online.flippingbook.com/view/1029582