-The rare earth elements (REEs) comprise a group of 17 elements. Whilst not geologically rare, their extraction and processing are complex, expensive, and environmentally hazardous.
-The REEs have many uses that make them especially valuable to the energy and defence industries, notably in the manufacture of energy storage, permanent magnets, catalysts, and lasers.
-China has achieved dominance of REE production and processing through a combination of early moves into the industry, state investment along the supply chain, export controls, low labour costs, and decades of weak environmental regulation that enabled illegal mines and processing plants.
-Demand for REEs is expected to continue to rise dramatically through 2030 and beyond, driven by their use in permanent magnets for electric vehicle (EV) motors (including hybrid vehicles) and wind turbines.
-Alternative technologies could substitute or reduce REE consumption in both EV and wind turbine drives. These include improved materials utilization and lower waste, hybrid drives with smaller permanent magnets, and improving the cost and performance of motors and magnet technologies without REE.
-Given the potential of these options, the future demand for REE is subject to high uncertainty, and will likely depend partly on policy support for reducing REE demand, as well as on market conditions such as prices and supply disruptions.
-These uncertainties on the demand side exacerbate supply-side challenges: investments in mining require long lead times as well as hard-to-find skilled workforce, among other issues.
-Driven by the desire to reduce supply chain risks and enhance national security, efforts are underway in Europe and the USA to reduce China’s 90 per cent dominance of REE processing, which include diversifying REE demand by increasing recycling, enhancing the performance of lowREE permanent magnets, and expanding processing capabilities in other countries.
-While 2023 could mark a turning point in light of these efforts, China is virtually certain to remain the global leader in processing REEs through 2030, given the scale of its existing processing industry and position in global battery and electronics supply chains.
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