Rare earths around the globe

Rare earth metals, like every other commodity, have risen in interest and demand in recent times. There are few countries with sizable reserves of rare earth metals, and even fewer actively producing in sizable quantities. The three largest players are China, the US, and Australia, with China dominating the market by an enormous margin.

China produces roughly 57% of all mined rare earth metal oxide and holds 38% of the world's economic reserves. The country also processes 85% of all rare earth metal oxides into metals. By comparison, the US produces roughly 15% of the global total and holds 12% of reserves. Meanwhile, Myanmar produces 12% of global total and Australia contributes 9% of production from 3.4% of global reserves.

The term 'rare earths' is technically a misnomer-most rare earth elements are in fact relatively common in the earth's crust-but they are only rarely found in concentrated deposits as is typical of other metals like iron, copper, or gold. This makes finding viable economic sites for mining difficult. The rare earth family includes key metals like neodymium, samarium, cerium, and praseodymium.

Rare for everyone except China

Since 2010, China has been losing considerable ground on the mining of rare earth oxides, falling from 92% of global production in 2010 to just under 58% in 2020. China's rare earth deposits are found in the south-eastern parts of the nation, around the southern Jiangxi and northern Guangdong provinces.

China remains the only major player in the refining process, however, producing 85% of all refined metal in 2020, and refining is undertaken by only six companies, all state-run. This keeps the market under tight Chinese control for now, though production in other nations has grown significantly since 2017.

Rare earth elements, REEs, and rare earth oxides, REOs, are often co-deposited with other metals, and Australia has significant overlap of reserves with other operating mines, such as Olympic Dam. Australia produces the vast majority of its REOs from the Mount Weld mine in central Western Australia, where they are mined and shipped to Malaysia for refining at the Lynas Advanced Materials Plant, in operation since 2013. Australia has remained a consistent producer and is expected to grow over 9%pa out to 2030 as rising prices encourage the development of several untapped deposits.

Since 2018, Myanmar and the US have put significant effort into becoming more serious contributors to the rare earths market, growing from functionally not producing to 45kt of REO equivalent for the US and 30kt of REO equivalent for Myanmar.

Elementary Essentials

Rare earths are used in a wide variety of markets, but primarily in highly developed technologies such as electric vehicles, renewable power, consumer electronics, batteries, nuclear control rods, data storage, and x-ray machines. Some rare earths are also used as alloys for stainless steel or other advanced alloys.

As a result of primary end uses, the largest importers of rare earths, other than cerium, are the US (20%), China (18%), Philippines (12%), Vietnam (10%), Japan (9.7%) and Germany (9.6%). The consumption of rare earths has grown roughly 3.9% annually since 2015, and accelerated despite the Covid-19 pandemic, to 5% in 2020.

Once domestic production is accounted for, China maintains a commanding share of total rare earth consumption, at roughly 70% of the global total. Approximately 30% of China's production is magnets, and another roughly 25% is in catalysts or polishing powders. Japan and Asia (Vietnam and South Korea most notably) lean towards a more even distribution and focus on value-add products, while the rest of the world makes almost no permanent magnets.

Looking ahead, a large sector of the growth market for rare earths is in magnetic products as renewables and electric vehicles rely heavily on permanent magnets for electrification of infrastructure. Historically, the rare earths market is volatile with fluctuations in over or under-supply, export restrictions and quotas, but increasingly rare earth products used for magnetisation are being declared 'critical minerals' and nations are making moves toward securing long-term support for the market to reduce volatility.

Significant upside risk remains for magnetic elements, like neodymium and praseodymium, as the energy transition gains momentum and can expect long-term market deficits, with demand growing up to 35% out to 2030. Prices will continue to grow steadily for these elements as a supply crunch begins to restrict supply, and markets may be forced to use more expensive rare earth alternatives such as Terbium, which had an over US$900/kg price premium at the end of 2020.