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Roskill: Rare Earths; an industry in transition from fossil fuels to the green economy

Roskill Information Services Ltd
·3-min read

The transition to a ‘green’ economy has seen many commodity markets change focus, such as the impact of the rechargeable batteries on the lithium or cobalt markets, though the transition experienced by rare earths has been more complex. The rare earths market is not only tackling fundamental changes in the dominant end-use markets, transitioning to one dominated by magnet applications, but also adapting to the changing elemental requirements with greater focus being placed on rare earth magnet elements.

London, U.K, Feb. 10, 2021 (GLOBE NEWSWIRE) --

Historically, the rare earths market has focussed on the supply of materials for catalyst applications, which formed 25% of total demand in 2013, though this has fallen to 20% in 2020, both as a result of Covid-19 related impacts on the automotive and petroleum industry and the growth in magnet applications. Rare earth magnets have seen significant growth in demand within two major end-use applications, drivetrains for electric vehicles and wind turbines for renewable energy generation. Rare earth demand from wind turbine applications has increased by 16%py since 2013, as a result of significant expansions to wind turbine installations within China. Drive train applications have displayed even greater growth at 20%py since 2013, with sales of hybrid and electric vehicles increasing by 53.5%py over the same period.

Demand growth for rare earths is forecast to increasingly be dominated by magnet applications, forming over 35% of total demand by 2030, with once major end-use applications, such as catalysts and polishing powders falling to 17% and 11% respectively. The strong and persistent growth in demand is expected to place significant strain on the supply of rare earths, with tight supply for the main magnet elements already forming in 2020.

The supply of rare earths has a unique challenge in balancing the production volumes of 16 different co-products against demand, which does not match natural distribution of elements. This has created significant oversupply in the industry, as producers have targeted production of higher value rare earth elements. As demand for rare earths has shifted, producers have increasingly targeted production of ‘magnet’ elements, such as neodymium (Nd), praseodymium (Pr) and dysprosium (Dy), though not all existing rare earth operations are suited to maximising production of these elements. Rare earth refined supply is reported to have totalled 147.5kt REO in 2020, though elements used in magnet applications formed only 27% of supply. The oversupply of elements, such as lanthanum and cerium, has caused them to offer little or no economic support to operations, particularly where mixed or semi-processed rare earth products are marketed.

China remains the major supply centre of rare earths at both the mined and refined stages of the supply chain, though Chinese dominance has been eroded in recent years. China accounted for 55% of mined supply and 85% of refined supply in 2020, though this has fallen from more than 95% in both categories during 2013. Major producers in Australia, the USA and Myanmar have increased the proportion of non-Chinese mine supply in recent years, though much of this material continues to ultimately flow into the Chinese domestic market.

The reliance on China has caused concern in major markets, principally the USA, EU and Japan, who are dependent upon Chinese supply, which is increasingly integrated downstream. The development of regional supply chains in these major regions has seen direct investment in developing rare earth mines and facilities, though the development of downstream demand remains a critical step in constructing a self-sustaining market, made increasingly difficult by Chinse dominance of rare earth demand and pricing.

CONTACT: David Merriman Roskill Information Services Ltd +44 20 8417 0087 Merriman@roskill.com