The booming electric vehicle sector has
already resulted in massive increases in demand for lithium and
cobalt for use in batteries.
And the trend is also driving demand for
neodymium, a rare earth used to make magnets for use in
electric vehicle (EV) motors. Consultancy Roskill, which
estimated global neodymium demand at 31,700 tonnes in 2017,
forecasts it to rise to 34,200 tonnes in 2018 and 38,800 tonnes
But demand for rare earth magnets is not
just dependent on total EV numbers. The fact that neodymium
magnets can be removed from vehicle powertrains, at the expense
of battery capacity, means that prices will be highly
correlated to battery materials - lower cobalt and lithium
prices could discourage neodymium demand while higher neodymium
prices could unlock further demand for battery materials.
Permanent magnets in EVs can be replaced
by electric magnets powered by a car's battery system. In fact,
EV pioneer Tesla favored electric magnets in previous car
models, driven in part by concerns over the security and
sustainability of rare earth supplies.
But Tesla was eventually forced to adopt
rare earth magnets for the Model 3 as the only affordable way
to deliver high power-to-weight ratios.
The problem is that substitution of
permanent magnets with electric magnets increases the load on
The capacity of a battery would need to be
increased by a "conservative 5%" to compensate for removing
rare earth magnets, Adamas Intelligence estimates.
This has a knock-on effect on the cost of
battery materials. Prices for lithium and cobalt are soaring
because of demand from the EV sector.
This means it is considerably cheaper for
car manufacturers to use permanent magnets for now despite
rising material costs.
And there is currently no affordable
variety of permanent magnet that does not contain rare earths.
Magnets made from samarium, another rare earth, alloyed with
cobalt offer similar performance to neodymium magnets but have
higher material costs and increased exposure to cobalt markets
that are themselves tied to battery demand.
So neodymium demand is closely tied to
battery mineral demand. Rising sales of EVs will drive up
demand for both of those materials.
And the increased battery load required
for substituting electric magnets means that neodymium is
essentially a way for vehicle manufacturers to thrift lithium
If the prices for neodymium rise too far,
it could unlock new battery mineral demand - manufacturers
would need to increase battery capacity to accommodate electric
magnets. And falling battery material prices - or cheaper
battery technology - could reduce the potential ceiling on