RARE EARTH

BRIEFING PAPER

GE Lighting

GE Lighting

What is the issue?

A shortage of the materials known as ‘Rare Earths’ (RE) on global markets is driving up prices of a whole range of goods, from TV and laptop screens to disc drives and catalytic converters. Rare Earths are also an essential component of fluorescent lighting products, and the meteoric increase in RE prices has led to a significant rise in manufacturing costs. For an idea of the scale of these rises, if rare earths were coffee, a latte-to-go that cost €1.50 just a few months ago would now cost almost €16! The situation remains

volatile and further price increases seem highly likely. This briefing paper provides a high level overview of the impact that rare earth shortages are having – and will continue to have – on GE Lighting and our products.

More than half of the phosphor used in linear fluorescent (LFL) and compact

fluorescent (CFL) products is derived from rare earths, and as many as five different rare earths are required to create the white light.

What are Rare Earths? Rare Earths are a group of 17 elements with unique properties that make them virtually indispensible in the production of a wide range of modern goods. Neodymium, for instance, is highly magnetic and used in cell phones, loudspeakers, hard drives and catalytic converters. Others are used in camera lenses, electric vehicles, rechargeable batteries, petroleum refining, defense technology and lighting. Despite the name, many of these elements are not all that rare; the problem is that they are not found in concentrations sufficient to make extraction commercially viable.

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What Rare Earths are used in lighting

products?

Why have prices risen?

Two factors have driven the rise in prices. Firstly, there has been a huge growth in consumption driven by mushrooming demand for consumer/electronic goods, and in rare earth-hungry applications such as hybrid/electric vehicles and wind turbines. And secondly, the world’s major producer, China – currently responsible for around 97% of global output – has been limiting production and imposing quotas on its exports every year. China’s limits on the export of Rare Earths tends to promote production of materials

elsewhere in the world.

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What’s the current situation?

Demand for some rare earths will undoubtedly outpace supply for some time to come but many actions are underway to help manage the situation. The United States, the European Union and other governments are working with China to ensure balanced and fair trade policies.

What impact has the shortage of Rare Earths had?

The Rare Earths shortage has had a dramatic impact on world prices.

According to the Financial Times, prices rose by a factor of between three and five between January and May 2011. Over the last 12 months, the prices of some Rare Earths – including Terbium and Europium, both used in fluorescent lamp phosphors – have increased by around one thousand per cent, others by even more. In June, it was reported that the price of some rare earths had doubled within just two weeks. This has lead to stockpiling by some dealers, driving up prices further still.

How does this specifically affect GE Lighting?

As a company for whom Rare Earths are an essential component of production, scarcity and rising prices will clearly have an impact, one that has been intensified in the EU27 countries due to energy efficient legislation driving increased use of rare-earth phosphor containing lamps.

However, it should be remembered that this isn’t just a challenge for GE Lighting; it’s a global issue, one that’s having an impact on manufacturers and users of all kinds of goods.

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Could this ‘lost’ production be replaced?

In the short term no; in the medium to long term yes.

Work is underway to open – or in some cases reopen – mines in the USA, Canada, Australia and Vietnam; and advances in recycling technologies could release many thousands of tons of materials currently ‘stored’ in old electronics and other products. In July 2011, Japanese researchers announced the discovery of what appears to be vast deposits of Rare Earths in the mud of the Pacific Ocean. However it would be some years before these would reach world markets.

For the foreseeable future though, the current situation will have a serious and detrimental impact on the availability – and cost – of Rare Earth materials.

What does the future hold?

No one can be sure what’s going to happen next. As already mentioned, the situation remains volatile and prices are likely to fluctuate over the coming months and even years. We have therefore taken a number of actions:

We have established teams across the company to help manage this unprecedented supply chain situation.

We are actively working to develop and procure lower Rare Earth content phosphor.

We are working to qualify an expanded base of suppliers.

We continue to work to secure the ample supply of materials.

We will do our best to manage these costs where we can, but rises on a similar scale to those seen in recent months will mean further significant price adjustments may be unavoidable.

GE Lighting