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OM in the News: Recycling is a Necessity at Hitachi

January 13, 2011

Neodymium. You say you never heard of it?  If you worked at Japanese firms Hitachi, Mitsubishi, Panasonic, or Sharp, your companies would be spending a lot of time trying to find this product, called a “rare earth”. Rare earths are light-weight, malleable  metals that are essential to hybrid cars, cell phones, and hard disk drives. (Toyota Prius batteries use neodymium to power the car).  Hundreds of  other Japanese manufacturers also depend on them. And they had all counted on China, which produces 97% of the world’s supply of neodymium, dysprosium, didymium, and other rare earths, as the supplier.

But the latest issue of Businessweek (Jan.11,2011) describes how China has cut its exports of rare earths by over 3/4, driving up prices more than four-fold this past year. (Neodymium is now at $40/lb.) China wants to free up supplies for its own manufacturers, as well as reign in a very toxic industry.

So what is Hitachi doing ? The firm, which makes everything from nuclear power plants to home appliances to the Prius batteries, uses 600 tons of rare earths per year. The answer is recycling (Supp.5). Hitachi’s new facility in Matsudo City carefully saws open A/C compressors to retrieve rare earth magnets inside. It takes 2 workers 8 minutes to get to the prize inside each used air conditioner—4 wafer thin magnets containing 30 grams of rare earth metal. A separate conveyor belt feeds used disk drives into a massive machine, which pops out rare earth metal ready for harvesting. Other Japanese companies are following Hitachi’s lead in mining discarded products such as washing machines. The bottom line: China’s decision has prompted a whole new recycling industry.

Discussion questions:

1. Why did China cut its supply? What were its motives?

2. How might recycling of rare earths impact the world and its economy?

3. Why are rare earths so important and what other sources are going to be available?

3 Comments leave one →
  1. January 14, 2011 8:25 pm

    Interestingly, today’s Wall Street Journal (Jan.14,2011), p.B1, provides an update to this Businessweek article. The headline reads “Toyota Tries to Break Reliance on China”. Basically, the company realizes it needs a new approach to lessen the dependence on rare earths from China and is close to a breakthrough motor for electric cars that uses no rare earth metals.

  2. January 21, 2011 6:48 pm

    With the US Energy Department saying that American manufacturers will be vulnerable to supply disruptions for at least the next 15 years, it is interesting to see the reaction to tightening supplies of rare earth materials. Toyota, in a classic move to proactively manage their exposure to supply chain risk, is developing motors for their next-gen hybrids that require less/no rare earth metals. Others are moving manufacturing for green energy to China to alleviate the impact of quotas.

    This issue, and how companies react to it, is becoming more important; something that was underscored by China’s move to expand their control over the mines that produce these important materials (see NY Times link).

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