Rare Earth Elements: The Next Big Thing in Investing?

Rare Earth Elements, or REEs, consist of 15 lanthanide metals plus Scandium (Sc) and Yttrium (Y). REEs are essential components in many green energy technologies and production needs today.

But as China gains more control of this critical supply chain, many have expressed growing alarm at how tightly controlled this monopoly is. And time is running out for companies working to break it.

Demand for Permanent Magnets

As the world transitions towards cleaner energy sources, permanent magnet demand will skyrocket significantly - particularly high-performance neodymium-iron-boron (NdFeB) types that offer exceptional performance and compact sizes such as NdFeB magnets. Electric vehicles (EV), wind power and other green technologies all rely heavily on these magnets as vital inputs; NdFeB magnets in particular may see exceptional growth due to their superior performance and compact size.

Recently, several events caused an international surge in demand for rare earth metals and minerals. Prices of neodymium-iron-boron shot up several times its natural rate; countries began worrying about having access to enough material for weapons or other essential technologies; bold solutions were devised, such as opening up Amazon rainforest mining operations or exploiting resources in Greenland; Molycorp even reopened their Mountain Pass Mine before eventually going bankrupt and sending raw ore off to China for processing.

However, this price surge was short-lived. A complaint filed at the World Trade Organization from the United States, Japan and Europe resulted in China revoking their export restrictions and prices falling back down to 2009 levels - effectively making China profitable when producing rare earth oxides for magnet production.

Today, only a select few companies worldwide possess both the capacity and quality required to produce NdFeB magnets for elite end users such as Tesla or Siemens. Most are located in China - specifically Zhejiang province which serves as China's "common prosperity pilot zone." REE mining activities take place primarily within Inner Mongolia as well as seven southern provinces that specialize in lighter rare earths like neodymium.

Consumer goods and electronics represent the primary application area for rare earth permanent magnets, with an estimated market share estimated to exceed 27.0% by 2022. Magnets found here can be found in air conditioning compressors and fans, recorders, speakers, mobile phones earbuds microphones voice coil motors printer stepper motors fax rollers hard disk drives power tools among many others - all which use rare earth permanent magnets as key components. With more businesses shifting towards digitization this sector should see further demand increase over time.

Electric Vehicles

Electric vehicle (EV) adoption will likely drive demand for rare earth elements, since EVs employ permanent magnets crafted largely of neodymium and dysprosium; lithium-ion batteries, also comprised of rare earth materials like nickel and cobalt, are necessary.

As such, electric vehicles could provide an investment boom for companies and investors that produce the components required to construct them. Therefore, investors should research each company that manufactures components used in EVs in order to understand the full extent of any profit opportunities in this emerging industry.

Investment in high-growth industries can be risky, as investors may overpay for expected growth that doesn't materialize. But there are ways for investors to gain exposure to this emerging market without overpaying; Polypore International (PPO), for instance, produces lead-acid batteries for conventional vehicles as well as lithium-ion batteries used in electric cars.

Other companies specializing in battery cells or components used to produce them include CATL (China) and BYD Auto (China). Car-making firms that have made a serious commitment to electric vehicles (EVs), including Tesla (TSLA), Nio Inc. (NIO), and Nikola Corp. (NKLA).

Rare earth metals originally earned their name because they were hard to come by in nature. Cerium was isolated as the first rare earth element in 1803; however, scientists didn't begin finding more until later - specifically within an unusual black mineral found only in Sweden called ytterbyite.

At that time, separating rare earths was a labor-intensive and time-consuming process. It required repeated precipitation and crystallization processes as well as ion exchange methods and elution processes. Scientists divided them into two groups based on solubility in sodium double sulfates: cerium group and yttrium group; europium, gadolinium and terbium were often placed with either one of them or occasionally with both groups.

Since this division has since become outdated, the yttrium and cerium groups are considered respectively the light and heavy rare-earths.

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Clean Energy Generation

Rare earth metals have experienced strong demand from clean energy generation, specifically wind turbines and other renewable power generators. Climate change is forcing governments around the world to address it head on, driving an increase in renewable power generators; as a result, demand for magnets has seen prices spike even higher; now is an excellent opportunity to invest in rare earth elements producers.

Rare earth elements are abundantly used across consumer products, from television displays and lasers to PDAs, fluorescent lights, rechargeable batteries and green engine technology. Their presence also plays an integral role in manufacturing strategic military weaponry and high-tech manufacturing.

While introductory science books generally view rare earth elements as one collective group of substances, each has unique properties. Most rare earth elements are trivalent metals; however some such as cerium, praseodymium and terbium may also be tetravalent while yttrium, europium and ytterbium may even be divalent metals.

Due to their rarity, rare earth elements are costly and difficult to extract. Current extraction techniques require large amounts of ore and produce toxic waste; as a result, China now holds virtually monopoly control in this field, driving prices to record heights.

Multiple companies are working towards expanding the supply of rare earths. Nolans Australia aims for initial production by 2024 with its project that encompasses rare earths such as neodymium, praseodymium, yttrium cerium lanthanum zirconium niobium hafnium as well as zirconium, niobium and hafnium.

As it is essential to mine these materials sustainably, finding ways to do it responsibly requires finding sustainable mining strategies. Ion exchange is one such solution which removes harmful impurities. Recyclable components may also help lower environmental impact - ultimately the success of sustainable and socially responsible production will depend on whether consumers and manufacturers willing to pay more for products made ethically.

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The Green Revolution

Rare earths may sound exotic, but their 17 elements make up are essential to building a more environmentally sustainable economy. Watch this NOVA video to gain more knowledge about rare earths' history as well as visit a mine where rare earths are extracted.

Rare earth elements gained new scientific and geopolitical importance with advances in atomic physics during the 20th century. Separating them from each other as well as ore and minerals became an increasing challenge - made more difficult by similarity among lanthanide series elements (atomic numbers 57-71) making X-ray spectroscopy difficult or impossible to reliably distinguish them from one another.

In the 1940s, an innovative technique called ion exchange made it possible to isolate elements from ore and mineral compounds - an important advance - but it wasn't until 1950s when a full set of REEs had been identified and isolated - after which their applications multiplied rapidly from high-speed glass lenses and magnets to LCD screens and batteries.

This boom was fuelled by various trends, such as globalization and technological innovations that could use rare earths in innovative ways. Bell Labs produced an erbium-doped fiber amplifier during this period that allowed long fiber optic cables to carry data globally for cheaper long distance telephone calls and internet access, along with applications of rare earths like iPod magnets and cell phone neodymium magnets; energy-efficient displays; x-ray machines; production of titanium and zirconium alloys used in jet aircraft, nuclear power plants; spacecraft; production of titanium zirconium alloys used extensively throughout manufacturing industries including jet aircraft production, nuclear power plants; spacecraft; automobile production facilities etc.

China currently produces around 85% of rare earths globally, and their tight control has put pressure on other nations to find alternate sources. Some have proposed mining the moon while others suggest extracting rare earths from Amazon rainforest or scraping them from surfaces around Earth's surface - though perhaps the most promising source is Molycorp's former mine in California that has recently resumed producing rare earths again.