Phosphor—a critical component

in fluorescent lamps
Navigating through market fluctuations
2 Phosphor—a critical component in fluorescent lamps
What are rare
earth oxides?
Global supply issue and the impact on phosphor
based fluorescent lighting

There are 17 rare earth elements (REEs). These elements, distributed in rare
earth oxide (REO) form, are critical to a variety of high-tech products and
manufacturing processes, including catalytic converters, petroleum refining, color
TV and flat panel displays, permanent magnets, batteries for hybrid and electric
vehicles, medical devices, and phosphor powders used in fluorescent lamps.

Light Rare Earths Heavy Rare Earth

Major End Use Major End Use
(more abundant) (less abundant)

Phosphors, hybrid engines, Phosphors,

Lanthanum Terbium
metal alloys permanent magnets
Phosphors, auto catalyst, Permanent magnets,
Cerium Dysprosium
petroleum refining, metal alloys hybrid engines

Praseodymium Magnets Erbium Phosphors

Auto catalyst, petroleum

Red color, phosphors,
Neodymium refining, hard drives in laptops, Yttrium
ceramics, metal alloy agent
headphones, hybrid engines

Samarium Magnets Holmium Glass coloring, lasers

Phosphors, red color for

Europium Thulium Medical x-ray units
TV and computer screens
Catalysts in
Gadolinium Magnets Lutetium
petroleum refining

Scandium Aerospace components Ytterbium Lasers, steel alloys

Promethium Nuclear batteries

U.S Department of Energy 2010 Critical Materials Strategy Summary. http://www.energy.gov/news/documents/Critical_Materials_Summary.pdf;

“GTSO: Goldman Sachs Analyst Predicts ‘Severe’ Rare Earths Deficit.” BusinessWire.com. 6 May 2011.

Phosphor—a critical component in fluorescent lamps 3

 “Over the past eight months,
FOB prices of various light
rare earth elements (LREEs)
have spiked by between
300% and 2500%.”1

REO phosphors in
fluorescent lighting
Material Lighting Phosphors Rare Earth Oxides (REOs) are a critical component of
fluorescent based lighting systems. The global shortage of
Lanthanum
• these materials is currently having a direct impact on phosphor
Cerium
• availability and pricing.
Praseodymium
Neodymium Linear fluorescent (TL), Compact Fluorescent Non–Integrated
Samarium (CFLni), and Compact Fluorescent Integrated (CFLi) phosphors
Europium
• are all experiencing unprecedented shortages in global supply,
Rare Earth Elements

Gadolinium resulting in Philips price increases of over 300% as of July 2011.

Scandium
As a result of REO shortages, the cost is increasing and is
Promethium
having a direct impact on a global and industry wide scale.
Terbium
• Experts predict that these shortages will continue through
Dysprosium 2014 until new sources of supply will be able to ease the
Erbium current situation.2
Yttrium
• With manufacturing costs on the rise, Philips is forced to
Holmium
implement pricing actions on all Fluorescent based lighting
Thulium
products. Philips has executed global procurement programs
Lutetium to insure sourcing and is undertaking all strategies to best
Ytterbium mitigate cost increases.

Source for chart: U.S Department of Energy 2010 Critical Materials Strategy Summary. http://www.energy.gov/news/documents/Critical_Materials_Summary.pdf
1) Chan,Vincent. “Baotou Rare Earth,” Equity Research. Credit Suisse. 13 April 2011.http://doc.research-and-analytics.csfb.com.
2) U.S Department of Energy 2010 Critical Materials Strategy Summary. http://www.energy.gov/news/documents/Critical_Materials_Summary.pdf;
“GTSO: Goldman Sachs Analyst Predicts ‘Severe’ Rare Earths Deficit.” BusinessWire.com. 6 May 2011.

4 Phosphor—a critical component in fluorescent lamps

 Price trend of REO phosphors used in
fluorescent lighting in the last 3 years
Price vs. Time
1400

1200

1000 Europium
Terbium
800
USD/kg

600

400

200

0
Apr 03

Oct 03

Apr 04

Oct 04

Apr 05

Oct 05

Apr 06

Oct 06

Apr 07

Oct 07

Apr 08

Oct 08

Apr 09

Oct 09

Apr 10

Oct 10

Apr 11

Price vs. Time

180,000

160,000

140,000 Yttrium
120,000 Lanthanum
Cerium
(RMB/ton)

100,000

80,000

60,000

40,000

20,000

0
Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Oct 09

Jan 10

Apr 10

Jul 10

Oct 10

Jan 11

All REO phosphors are near critical or in critical supply

Short Term Criticality (0–5 years)

4 Dysprosium
Critical
Importance to clean energy (low to high)

Near critical
Cerium Neodymium
Lanthanum Europium Terbium Not critical
3 Gallium
Tellurium Indium Yttrium

Cobalt
Lithium Praseodymium
2

Samarium
1

1 2 3 4
Supply risk (low to high)

Source for top and middle charts: China Commodity Marketplace, Sealand Securities, Mar 2011.
Source for bottom chart: U.S Department of Energy 2010 Critical Materials Strategy. http://www.energy.gov/news/documents/criticalmaterialsstrategy.pdf

Phosphor—a critical component in fluorescent lamps 5

 Rare earths: A dwindlin
Since the 1990s, the low cost of mining operations in China, combined with costly environmental and
permit regulations in the US and other nations, has driven almost all non-Chinese rare earth operations
out of business. China mines and produces about 97% of the world’s supply of rare earth metals, and
announced it is cutting its exports because of its own rising demand and new environmental restrictions.1

• World demand for rare earth elements is estimated at 134,000 tons per year, with global production
around 124,000 tons annually2

• World demand is projected to rise to 180,000 tons annually by 2012, and by 2014 may exceed
200,000 tons per year2

• China’s output may reach 160,000 tons per year (up from 130,000 tons in 2008) in 2014,
still a capacity shortfall of 40,000 tons per year2

China controls 97% of the world supply of REO

Global rare earth oxide production trends

140 Bastnasite–Carbonatite Era

120 Bayan–Obo Mine, etc.

Market Transition (China)

100
Output (kt of REO)

Mountain Pass Mine

80 (United States)

Monazite Placer Era

60 (South Africa, Brazil,
Australia, India)
40

20

0
1949 1959 1969 1979 1989 1999 2009
Other Countries United States China

Source of graph: Tse, Pui-Kwan. China’s Rare Earth Industry. US Geological Survey. U.S. Department of the Interior. 2011.
1) Hanson, David J. Concern Grows Over Rare-Earths Supply. Chemical & Engineering News, 89(20), May 16, 2011.
2) Congressional Research Service. Energy Policy. Rare Earth Elements: The Global Supply Chain. By Marc Humphries. CRS Report For Congress, 2010.

6 Phosphor—a critical component in fluorescent lamps

ng resource

Global demand is expected to exceed Chinese supply

Supply/demand forecast (1000 tons/annum)

200

180

160

140

120

100

80

60

40

20

2008 2009 2010 2011 2012 2013

Global demand (1000 ton/a) Chinese supply (1000 ton/a)

Source: Chan,Vincent. “Baotou Rare Earth,” Equity Research. Credit Suisse. 13 April 2011. http://doc.research-and-analytics.csfb.com

Phosphor—a critical component in fluorescent lamps 7

 Phosphors utilizing REOs
are second in demand only
to magnets Global value of REMs by applications
Other

Glass

Ceramics

Polishing

Catalysts

Metal Alloys

Phosphors

Magnets
Source: 2008—Chan,Vincent. “Baotou Rare Earth”,
Equity Research. Credit Suisse. 13 April 2011.
http://doc.research-and-analytics.csfb.com 0 100 200 300 400 500

Consumption value (USD/year)

8 Phosphor—a critical component in fluorescent lamps
Media coverage of REO
global supply issue
“Supplies Squeezed, Rare Earth Prices Surge”
New York Times, May 2, 2011
“At the beginning of this year China reduced its rare earth export quotas to all countries, while raising export taxes on
some rare earths to 25 percent, from 15 percent previously.”

“China May Further Reduce Rare Earth Quotas, Goldman Sachs Says”
Bloomberg. May 4, 2011
“We suspect that export quotas will shrink further… The market will remain in ‘severe’ deficit this year and next…
We are of the view that rare earth prices have not yet peaked.”

“GTSO: Goldman Sachs Analyst Predicts ‘Severe’ Rare Earths Deficit”

BusinessWire.com, May 6, 2011
“The global rare earths market likely faces a 18,734 metric-ton deficit of the rare metals this year, equivalent to 13.2
percent of worldwide demand…. the market for rare earths will remain in severe deficit in 2011 and 2012, and that
prices will trend higher over the next 18 months.”

“Rising Demand for Rare Earth Elements Leads to Doubling of Prices |

Gadget Manufacturers See Soaring Costs for Rare Earth Minerals”
Tech News Daily, May 3, 2011
“The doubling in rare earth prices over the past four months comes on top of a fourfold price increase in 2010—
and the pressure won’t lift anytime soon.”

U.S. Department of Energy 2010 Critical Materials Strategy Summary

www.energy.gov/news/documents/Critical_Materials_Summary.pdf
“Several components of the clean energy technologies…depend on materials at risk of supply disruptions in the short
term (0–5 years). Those risks will likely decrease in the medium (5–15 years) and long term.”

Phosphor—a critical component in fluorescent lamps 9

 A quick recap
• Technology-driven companies such as Philips are dependent on Chinese export decisions,
as there are few other main suppliers
• Severe supply deficits are expected to occur over the next few years as China increasingly
lowers export quotas
• As a result in supply deficit concerns, prices of these needed minerals have skyrocketed and
has led to increases in product costs

The future outlook How does this affect you?

Many analysts believe current shortages may be either eased
or alleviated by 2013–2015 as new mines and processing
facilities come online, but there is no certainty to this prediction.1
As a world leader in lighting, Philips continues to lead the way in
making improvements in areas that remain within our control.
With this commitment in mind, Philips makes every effort to
aggressively pursue optimization of designs which require REO,
reduce waste in the manufacturing process, recycle various
materials, and explore additional opportunities intended to
defray cost increases experienced from REO materials.These
vigorous initiatives continue to deliver improvements, but are
not enough to offset the ongoing and substantial cost impact
resulting from the current global REO supply and escalating
demand pressures.
1) U.S Department of Energy 2010 Critical Materials Strategy Summary.
http://www.energy.gov/news/documents/Critical_Materials_Summary.pdf
• Expert opinions vary, however, market conditions will remain
unstable for the near future
• Fluorescent based lighting products will have continued
price fluctuations
• Philips Lighting is working diligently to relieve the current
supply issues on phosphors
• Philips Lighting is committed to:
— Sound supply chain practices on a global scale in order
to secure materials
— Keeping you updated and informed on all market
conditions and changes
• Philips Lighting highly values you, our customer, and
appreciates your patience as we together work through
these market conditions
• Please stay in contact with your local Philips Lighting
Account Manager for any questions and updates, or for more
information please visit www.philips.com/phosphor

10 Phosphor—a critical component in fluorescent lamps

Many analysts believe current
shortages may be either eased
or alleviated by 2013–2015 as
new mines and processing
facilities come online, but there
is no certainty to this prediction.1

Phosphor—a critical component in fluorescent lamps 11

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