Insight Into the Global Supply Chains of Rare Earth Elements

Rare earth elements like neodymium and dysprosium are essential components for green energy technologies, yet their supply chains largely rely on China, which controls 60% of mining operations and 85% of processing/refining activities.

Dependency on power is creating vulnerabilities for companies manufacturing electric vehicles (EVs) and energy-efficient products, and could present procurement issues if disruption arises.

Mining

There is nothing better than coming home after a hard day's work and relaxing on your sofa with something hot to drink and some good company. Rare earth elements (LANthanides and Scandium/Yttrium) possess fluorescent, magnetic or conductive properties that make them suitable for use in high-tech components like permanent magnets, rechargeable batteries, LED lights and displays, catalysts and renewable energy technologies. Rare earth elements are abundantly found in natural deposits, usually as oxides; however, mining them is both difficult and costly. Rare earth deposits tend to be dispersed throughout Earth's crust making their extraction more challenging than more concentrated metals like gold and copper. Furthermore, rare earth elements often co-occur with heavier elements like nickel, chromium and cobalt which makes separation during extraction more complex.

China dominates rare earth elements mining, refining, production and reserves. Their tight control on supply has caused alarm in Western industries from battery makers to defense contractors. As a result, US Senators recently unveiled a bipartisan bill which prohibits defense contractors from purchasing rare earth elements from China while mandating that the Pentagon create a strategic reserve.

To avoid China, companies must invest in refining rare earths outside China and finding alternative materials that do not need rare earths like MP Materials is doing in Fort Worth Texas to refine its own Mountain Pass mined REE concentrates into magnets needed in electric motors and catalysts.

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Rare earths can be found across the world, including several African countries, Canada and western United States; however, China has long monopolized their production and refining for decades, giving Beijing unparalleled control of all aspects of this industry from extracting raw materials to manufacturing technologies like magnets that power more electric vehicles on America's roads.

Refining rare earths is a labor-intensive and polluting process, so companies have long outsourced this work to China where laborers receive lower wages and environmental regulations are less stringent. But with demand signals increasing for technologies reliant on rare earths, manufacturers and governments alike are searching for ways to secure domestic supply chains for those minerals.

President Biden's landmark $2 trillion infrastructure legislation features provisions to explore ways of increasing domestic production of REEs and other essential minerals, while UK-listed REE miner avenger recently secured funding that may allow it to open Britain's first rare earths processing plant. Unfortunately, extracting raw materials outside China won't significantly reduce our dependence on China-based refiners; technology must also be developed that makes extraction cheaper and less polluting.

Gholz notes that the Pentagon has also been working on creating a more resilient supply chain for critical minerals, using strategies such as friend-shoring. While friend-shoring can reduce political disruption exposure, it would require considerable investments to reopen and expand REE separation facilities located mainly in Europe and North America.

Oxides

REE oxides -- including lanthanum (La), cerium (Ce), praseodymium (Pr) and neodymium (Nd) -- can be found throughout Earth's crust, but in concentrated deposits only rarely. As such, REEs can be expensive and energy intensive to extract; one reason REEs are essential components in high-tech industries as well as permanent magnets for green energy applications.

Prior to China's 2010 embargo, industrialized nations imported most of their rare earth oxides from overseas sources. Since then, many companies and governments have worked diligently to diversify their sources away from China.

Japan's Oil, Gas, and Metals National Corporation (JOGMEC) recently invested $250 million in Australian miner Lynas Mining Ltd to become its first foreign supplier capable of processing REE oxides locally; Tokyo hopes this move will decrease reliance on Chinese suppliers by half by 2025.

MP Materials has made progress toward opening facilities at its Mountain Pass mine to allow it to process rare earths locally instead of shipping them off to China for processing and separation, with other companies such as European rare earths giant Norilsk Nickel expanding domestic capacity as well. Reassembling supply chains may prove challenging given that this industry remains fragmented with volatile prices; nevertheless, participants agreed that policies aimed at managing REE demand and encouraging sustainability must consider all parts of its supply chain including mining, separation, processing, manufacturing etc.

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Magnets

Rare earth elements (REEs), comprising 17 elements with atomic numbers 57 through 71 plus scandium and yttrium, are indispensable in 21st-century technologies. REEs are found in permanent magnets used in wind turbines and electric vehicle motors, batteries, catalysts, LED lights and displays; mining REEs can be costly and polluting to the environment; most governments and companies therefore diversified their supply chains by importing REEs from overseas suppliers until recently.

Beijing took advantage of low-cost labor and lax environmental regulations during the 1990s to become the world's top REE producer, rising from seventh place to first by 2010. China controlled nearly all REE exports - oxides and metals as well as permanent magnets required for renewable energy and hybrid cars - until 2010, when during an international dispute over Senkaku/Diaoyu Islands with Japan it temporarily reduced exports, driving prices seven-fold higher and prompting global outrage.

Recent consolidation in rare earth mining and post-processing is unlikely to alter this dynamic, as the megafirm will likely cement China's leading position on the global market. If consolidation does lead to greater US production of REEs - which there's every reason to believe will happen- then less dependence will exist on foreign suppliers and less risk from any Chinese embargoes will reverberate more easily; US Senators Tom Cotton and Mark Kelly are already working towards this end by proposing legislation establishing Department of Defense stockpiles while forcing defense contractors stop purchasing from China.