Demand from the new energy sector – particularly the uptake of electric and hybrid vehicles, and also from the wind power segment – is redefining the fundamental supply and demand balances of rare earths. The growing importance of such applications, alongside China’s dominance – both upstream and downstream – have significant ramifications for the sector and are even influencing the US-China trade war.

 

In nature, rare earth elements (REEs) – representing a suite of 15 elements known as the lanthanides and including yttrium – are usually found concentrated together during geological processes and are inherently extracted as a package. Used in a variety of high-tech and advanced material applications, rare earths typically offer increased efficiency and performance compared to alternatives.  

 

UK-based research and consultancy firm Roskill estimates that global consumption of rare earths will exceed 130kt in 2018, off the back of robust demand from e-mobility and wind power for high-tech batteries and magnets. Indeed, lanthanum-based nickel-metal-hydride (NiMH) batteries and neodymium-iron-boron (NdFeB) permanent magnets have both experienced double-digit growth in recent years as a result of demand from the new energy sector – particularly in relation to the uptake of electric vehicles (EVs), plug-in hybrids (PHEVs) and hybrid electric vehicles (HEVs), collectively known as xEVs.  

 

Magnets are the biggest draw 

 

Growing demand for NdFeB magnets in wind turbines and xEV drivetrains made magnets the leading rare earth application – ahead of catalysts (lanthanum-based fluid catalytic cracking and cerium-based auto catalysts) – as of 2016.  

 

This year, Roskill estimates that magnets account for over 25 per cent of the demand, while catalysts fell below the 25-per-cent mark in 2017.  

 

Meanwhile, batteries have seen the highest growth-rate in 2018 and today account for just under 10 per cent of rare earth demand, although are facing growing replacement by lithium-ion batteries, which is suppressing their growth potential.

 

Neodymium: King of the rare earths

 

The electrification of the automotive industry is redefining the fundamental supply and demand balances of rare earths. Due to the improved efficiency in converting battery energy into torque, rare earth magnets have become the formulation of choice in this generation of xEVs. And an increase in the consumption of high-efficiency magnets used in the drivetrain of xEVs will underpin strong growth in rare earths over the next decade.

 

Neodymium and praseodymium (NdPr) are the key rare earths used in NdFeB magnets, and a growing demand will shift the natural imbalance of rare earths further away from the high-volume supplied lanthanum and cerium. Roskill estimates the neodymium supply and demand balance to have moved into equilibrium as of 2017, and neodymium is forecast to remain in a tight market throughout the next decade as the global supply-side looks to keep up with xEV growth. There are, however, efforts globally to relieve the high-surplus lanthanum and cerium imbalance by substituting these for a portion of the neodymium composition in lower-quality magnet applications. 

 

All roads lead to China

 

Rare earth supply is dominated by China, which this year accounted for around 80 per cent of global production. 

 

Lynas in Australia is the second largest producer of rare earths and the leading producer outside of China, having joined the supply chain in 2013 – at a time when China accounted for over 95 per cent of global production. 

 

Rare earths from Lynas may have offered a source for raw materials that circumvent China, but the Chinese have also invested heavily in developing its downstream processing and manufacturing industry.

Much of the rare earth magnet manufacturing capacity has moved to China, with only a handful of producers remaining elsewhere. 

 

As a result, new rare earth producers outside of China – Rainbow Rare Earths (with its Gakara Rare Earth Project in Burundi, East Africa) and Northern Minerals (with three projects in Western Australia and the Northern Territory) – that are joining the supply chain this year will be looking to China for off-take partners.

 

In September 2018, the USA backpedalled rare earths out of the finalised trade tariff list on Chinese imports, realising America’s reliance on Chinese processing, refining and manufacturing capacity for rare earths and its products. Unless there is an investment in downstream production capacity, much of the new rare earth production entering the market will most likely be processed in China.

 

Roskill will release its 18th edition of the Rare Earths: Global Industry, Markets and Outlook to 2028 report this month. For further information, visit: https://roskill.com/market-report/rare-earths/