Rare earths prices remain high as automakers drive the demand

The automotive industry takes a major leap forward in the adoption of electric vehicle (EV) manufacturing, giving a push for Rare earth prices in the market. A lineup of battery-powered vehicles has been introduced by automakers such as Tesla, Ford, General Motors, Mercedes Benz, and Honda, among others in the last months.

Highlights

  • Prices for rare earth metals are expected to continue to skyrocket as demand for these commodities expands and with more investors in the automotive industry eyeing electric vehicles. 
  • Carmakers are getting involved in the mining business.
  • Electric car companies need to prepare ahead to address global supply chain challenges that would meet their long-term needs.
  • High prices may drive automakers to look for substitutes
  • The regional conflict between Ukraine and Russia will continue to pose logistics challenges for the mining sector.

The global rare earths elements market is projected to grow from $2,831.0 million in 2021 to $5,520.2 million in 2028 at a compound annual growth rate (CAGR) of 10.0% during the 2021-2028 period. This is according to Fortune Business Insights.

Rare earth elements namely, neodymium, praseodymium, dysprosium, and terbium are projected to have the biggest upside potential this year.

China dominates the production of rare earth elements, a group of 17 elements essential in the production of various equipment in healthcare, motor, consumer electronics, nuclear energy production, and military assets. Notably, these commodities are used to produce permanent magnets for wind turbines and electric vehicles and a bid to slash carbon emissions. 

According to data from the International Energy Agency, an EV require six times the amount of minerals such as lithium cobalt and nickel that a conventional car need. But these elements are significantly rarer thus the option to maximize rare earth. 

“The shift to a clean energy system is set to drive a huge increase in the requirements for these minerals, meaning that the energy sector is emerging as a major force in mineral markets,” IEA report said.

Rare earths

This has been explicitly demonstrated in the numerous projects to adopt EVs. Currently, there’s soaring demand for the elements matched by increasing prices in the market as well.

“Downstream sectors like new energy vehicles, wind turbines demonstrate strong demand, and large-scale magnetic material enterprises have been flooded with long-term orders,” SMM analysts said. “Major magnetic material companies are expected to expand their production capacity by 29,000 mt (metric tonnes) in 2022, generating demand for at least 7,800 mt of praseodymium and neodymium (PrNd) alloy.”

On the other hand, the supply side of the commodities remains tight, leaving carmakers to directly partner with the mining sector to get a line of materials in order to win the market share. 

Automakers such as Ford and Hyundai are all setting up their own manufacturing facilities placing them right in the middle of the supply chain. This big decision also positions them as one of the “green players”, at the forefront of the energy revolution. 

REE Alternative Sources

As prices for rare earths elements continue to balloon, manufacturers may work on exploring new alternatives for these, especially that Western competitors are contemplating their dependence on China’s supplies. 

For one, the price of neodymium oxide more than doubled during a nine-month period in 2020. Its price was still up 90 percent in 202 and continues to spike this year. 

One of the solutions that have been at the table for quite a time is to increase domestic supply in the United States and Europe. This might even help western countries dodge China’s monopoly of resources as political leverage. 

The Biden administration and the US Department of Energy have targeted to emerge as key producers for rare earths and stimulate the domestic supply chain through its whopping $2 trillion infrastructure legislation.

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Lynas, the only rare earths processor outside of China, has been in talks with the U.S. government for four years to establish heavy rare earth plants in Texas however final contract and funding approval from the US government remains pending. The Australian mining company believes that the new facilities are an essential foundation to diversify sources outside of China. States including Wyoming and California are also being eyed for rebuilding the supply chain of REEs. But even with promising reserves for the commodities that can be mined in the US, local refining and manufacturing capabilities are still out of the topic. 

Exploring substitutes for rare earth elements has been going on for years, in the hope to ease the demand for REEs, especially since some have raised the alarm about the trajectory of its demand and price compared with its limited supply capacity.

“Even though rare earths are terribly important, they’re not indispensable. Given enough motivation, enough resources, and enough brainpower, they can be designed out,” said Constantine Karayannopoulos, CEO of Neo Performance Materials.

Canada’s Mao Materials possess the only rare earth processing plant in Europe. 

Consequences of conflict to commodity distribution

Amanda Lacaze, CEO & Managing Director of Lynas Rare Earths, said on Bloomberg that an extended period of conflict remains a challenge for the global logistics systems. 

“Things like the Ukrainian situation are a real reminder that we need to be prepared for uncertainties,” said she also stressing that the global logistics systems haven’t recovered from the pandemic yet another crisis is posing threat to the industry. “We won’t have any specific logistics challenges for us because we don’t have business in that part of the world, but we will expect that if the conflict continues, or God forbids, it extends, our business world will suffer the same many logistics challenges.”

Even as the interconnectedness of global economies has unquestionably increased the international trade and cash flow, directly fostering development in many nations, it’s also worth pondering how a nation can mitigate incalculable consequences in the future of heavily relying on its resources on foreign lands. This not only pertains to products of the mining sector but also to the workforce, food, agriculture, and other essential raw materials.

3 Comments

  1. Ken Martins says:

    Why hasn’t the Moutain Pass mine in Southern California reopened? What holding that back? It would seem that even California’s heavy-handed government would be incentivized to help that process.

  2. Rare Earths Investor says:

    MP does have the (old Molycorp) US Mountain pass mine in production with all material sent to China for processing. They are looking to start their own US processing facility (as well as magnet making) in the US and have received strategic funding from the Biden Admin. MP also has a partnership with GM to help supply their magnet needs. We will see if all this materializes.

    1. Ken Martins says:

      Thanks for the feedback.

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