---

  Permanent Rare Earth Magnet Industry >>

  Rare Earth Separation and Processing Industry >>

---

Products engineered from REOs are used in the production of fluid catalytic cracking ("FCC") catalysts for crude oil refining and in auto catalysts. According to Roskill, estimated demand of REOs used in catalyst applications in 2016 was 29,000 tonnes with approximately 65 to 70% used for FCC catalysts and approximately 20 to 25% for auto catalysts. FCCs are a comparatively commoditized product, while auto catalysts are a comparatively higher value, specialized product

REOs are ideal inputs for engineered auto catalyst solutions as the thermal stability provided by REEs enhances the performance and extends the durability of the catalyst, allowing it to operate more efficiently at high temperatures. These functional materials are highly specialized and vary from customer to customer, uniquely engineered depending on their requirements. Developing auto catalyst applications requires close collaboration with customers and long lead times, providing existing producers with a competitive advantage. In some cases, these lead times can be over three years due to the testing and qualification processes required by customers.

Complex auto catalysts use a combination of rare earth-based functional materials and PGMs to minimize and control exhaust emissions. Rare earth-based functional materials provide thermal stability that augments the catalytic activity of PGMs. Umicore, Johnson Matthey, BASF and Cataler Corporation are the leading global manufacturers of these complex auto catalysts.

Tightening air emission standards are a significant driver of growth in the industry. For example, both China and India are adopting E.U. emission standards V and VI. These E.U. standards define the acceptable limits for exhaust emissions of new vehicles sold in the E.U. and EEA member states. The emission standards are defined in a series of E.U. directives staging the progressive introduction of increasingly stringent standards.

The chart below provides an overview of anticipated government regulation of air emissions, based on data compiled by the International Council of Clean Transportation, an independent non-profit organization that provides technical and scientific analysis to environmental regulators. The new European driving cycle ("NEDC") is a driving cycle designed to assess the emission levels of car engines and fuel economy in passenger cars (which excludes light trucks and commercial vehicles). The increasingly complex catalyst innovations will be required for auto catalyst manufacturers to comply with stricter emission standards. This in turn requires companies to innovate new technologies and develop new functional materials in collaboration with auto catalyst manufacturers to meet expected demand.

Stricter emission regulations, lower battery costs, widely available charging stations and increasing consumer acceptance are expected to drive strong momentum for the increased penetration of electrified vehicles (hybrid, plug-in, battery electric and fuel cell). However, it is important to note that a large portion of electric vehicles include hybrid electric vehicles, which utilize a combination of ICEs and batteries. According to Bloomberg, 92% of new vehicle sales will include ICEs (including HEVs) in 2025 and 57% of new vehicle sales will include ICEs (including HEVs) in 2035. This means that in 2035, approximately 65 million new vehicle sales will still include ICEs. As a result, it is expected that demand for auto catalysts will remain strong for the foreseeable future.

Umicore highlights stricter government regulations as the key driver of global emission-control catalysts, leading to market growth for complex auto catalysts of a 7.8% CAGR from 2015 to 2020. The highest growth regions are expected to be emerging markets such as China (24.6% CAGR) and India (28.9% CAGR). According to Johnson Matthey, growing demand for complex auto catalysts will be driven by increasing numbers of vehicles (including HEVs), and stricter regulations. Johnson Matthey, anticipates market growth of approximately 5% per year from 2015 to 2025 for light duty vehicles and approximately 10% per year for heavy duty diesel over the same period.