Capitalizing on the Demand for Rare Earth Metals

Each electric vehicle battery contains several pounds of rare earth materials. But extracting and refining these minerals is costly, time consuming, and potentially harmful for the environment.

As with the oil industry, developing new sources of critical minerals may take years, leaving them exposed to supply chain disruptions.

China’s dominance

Beijing's rare earth production dominance is the result of years of aggressive industrial policies designed to outstrip other nations. China invested heavily in research and development (R&D), technology acquisition, talent education and R&D investment - all critical elements in manufacturing everything from smartphones and electric vehicles to military weapon systems. China now ranks among the world's leading suppliers of rare earth elements (a collection of 17 minerals).

China's strategic use of rare earth minerals raised alarm in several major countries, particularly those who relied on Chinese exports for advanced commercial technologies. Beijing's imposition of REE export controls as well as their use as an instrument of retaliation against Japan over territorial disputes highlighted the susceptibility of global supply chains to single actors.

China's dominance will likely decline over time as market dynamics allow new players to compete. Las Vegas-based MP Materials operates a rare earths separation facility in Mountain Pass, California which separates valuable terbium and dysprosium elements from lower value elements like lanthanum. Furthermore, this facility has the unique capability of producing high-purity concentrate and distributing it directly to refineries - something no other facility in existence anywhere can do on such an extensive scale - making MP Materials an invaluable partner for companies specializing in mining or processing rare earth minerals.

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Africa’s role

China produces 60% of rare earth minerals produced globally and refines 80%, and serves as the global supply chain leader. China benefits from strong political will and state subsidies to enhance its mining industry, though Beijing has occasionally threatened to restrict or block rare earth exports, prompting nations that import them to look elsewhere such as Africa for sources.

The United States is taking measures to limit its dependence on China for rare earth supply, discussing potential projects in Africa as an effort to do just this. Australia and Japan, two other major players on the market, are also working hard on finding alternative sources that may lessen China's dominance over their markets.

African nations hold enormous potential in contributing significantly to the global supply of rare earths. South Africa, Madagascar and Malawi all boast extensive deposits of neodymium, praseodymium and dysprosium deposits; South Africa's Steenkampskraal mine boasts some of the highest quality grades worldwide for production of rare earth elements.

However, Africa is yet to tap its full potential of deposits; mining exploration budgets in Africa trail behind those of Canada and Australia; most exploration focuses on gold rather than the green metals needed for producing clean energy sources.

Technology trends

Rare Earth Metals (REEs) comprise 15 of the periodic table's 15 Lanthanides as well as Scandium and Yttrium, collectively referred to as Rare Earth Elements. While their name suggests otherwise due to their low concentration in minerals and difficult-to-separate properties, these metals play an integral part of modern technology ranging from smartphones, computer hard drives and flat-screen TVs through wind turbines and electric vehicles - REEs play an indispensable role.

Western nations have found it challenging to break into the rare earths market, with several ambitious production plans ultimately abandoning due to environmental considerations associated with mining and refining REEs which contain radioactive thorium and the uranium compound yttrium oxide.

As these challenges persist, there has been a growing interest in diversifying suppliers away from China for rare earth elements (REEs). Technavio anticipates several countries will emerge as alternate providers such as India, South Africa, Australia, Vietnam Malaysia and Indonesia as potential replacement suppliers - these countries offer advantages over China such as lower labor costs and abundant raw materials; additionally they boast flexible and transparent regulatory environments which encourage industry growth. Some companies have invested in domestic processing and separation capacity which they hope will propel future market expansion.

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Diversification

Rare earth prices are determined by supply and demand in general; however, if one country controls most production and decides not to sell it quickly runs out; that could be disastrous as new sources take years to develop. China significantly restricted rare earth exports in 2010 for domestic manufacturing needs as well as environmental concerns, leading to panic buying that sent prices skyrocketing; Japan, the US, and EU all lodged complaints at the World Trade Organization over China's actions.

China has used its control of rare earths to wield immense power over global high-tech industries. While Beijing continues its reign over this sector, major economies are trying to reduce their reliance on China by diversifying imports and creating more environmentally sustainable production processes.

Molycorp recently reopened their Mountain Pass Mine in California to extract cerium, an essential ingredient used in permanent magnets. Partnering with Chinese firms for processing, distribution and refining may give foreign manufacturers access to technical knowledge while mitigating risk of sudden interruption in supply; but these efforts may not be enough to offset China's looming chokehold on global markets.