On September 21, 2011, John Galyen, president of Danfoss North America, a leading manufacturer of high efficiency electronic and mechanical components and controls for air-conditioning, heating, refrigeration and motion systems, testified before the U.S. House of Representatives Committee on Foreign Affairs, Subcommittee on Asia and the Pacific, on the growing concern over China’s monopoly of rare earth elements. Rare earths are a group of 17 elements whose unique properties make them indispensible for a wide variety of current and emerging high-technology applications such as highly efficient motors, wind turbines, hybrid cars, and lighting products.
After several years of aggressive pricing and rapid growth, China is currently the source of 97 percent of the world’s supply of rare earth elements but holds only 35 percent of the world’s known reserves. In July 2010 China cut export quotas by 40 percent and tightened quotas again in 2011, causing price shocks for manufacturers all over the world.
Galyen testified, “The global demand just for magnets containing rare earth elements is expected to increase 10 to 16 percent by 2012. Worldwide demand for rare earth elements is expected to exceed supply by 40,000 tons annually unless major new sources are developed. Rare earth elements play a decisive and growing role in our nation’s economic performance. And as the recent national focus on America's debt has made clear, our economic performance is the most important key to our future as a nation.”
For Danfoss, two elements - Dysprosium and Neodymium - are critical to production of high-efficiency variable speed compressors and the oil-free centrifugal compressors produced by Danfoss Turbocor.
Galyen further testified, “As a result of the reduced export quota, manufacturers like Danfoss are experiencing 800 percent increase in the price of magnets used in our compressors and protracted lead times, going from 8 weeks to 6 months.” Galyen stated that we are seeking alternatives to these rare earths - both in terms of suppliers and technologies, but it will take time for alternatives to come to fruition.
He concluded with a request to the subcommittee, “Until alternatives come online, we ask Congress to consider short-term and long-term actions to minimize the destructive impact on cost and availability including: reducing import duties, enacting temporary subsidies until new mining starts up, establishing a collaborative approach with China to increase export quotas, file a claim in the WTO to pressure China to increase quotas and federally fund research of alternative materials.”
Other witnesses testifying before the subcommittee included Mark Smith, chief executive officer, Molycorp; Robert Strahs, vice president and general manager, Arnold Magnetic Technologies; and Christine Parthemore, fellow, Center for a New American Security.