Rare earths revisited

By William Clarke
Published: Monday, 14 June 2021

Not for the first time, governments are focusing attention on supplies of rare earths as a vital resource for many areas of industry and technology. William Clarke reviews key international rare-earth supply chains and plans as the materials take center stage in a rush for new energy minerals

The rare-earth industry is taking another of its periodic turns in the spotlight, with governments once again fretting about the concentration of production in China, given the key role of these metals in huge parts of industry and technology.

But whereas previous supply panics, such as those triggered by Chinese export restrictions in 2009-10, have been particularly focused on the role of rare earths in the defense industry, current concerns are much more related to the importance of rare earths in new energy technology. For example, rare earths are key ingredients for the high-strength and durable magnets used in the drivetrains of electric cars, and in the turbines of wind-power plants.

The price of these rare earths is booming. The price of NDPR oxide, which contains neodymium and dysprosium and is the key element in rare-earth magnets, was $68.20 per kg in the first three of months of 2021, according to rare earth producer Lynas. This was up from $35.00 per kg in the corresponding period of 2020.

Prices for dysprosium and terbium, which are added to rare-earth magnets to increase heat resistance, are also rising fast. Over the same period, the cost of dysprosium oxide has risen year-on-year to $407.70 per tonne, from $222.00 per tonne. And terbium oxide prices have risen to $1,336.00 per tonne, from $477.00 per tonne.

It is also becoming clear that the drive to meet the carbon restriction targets of the Paris Climate Agreement, which the United States officially rejoined in 2021, will spur massive further demand for minerals, including rare earths.

To reach the target of net-zero emissions by 2050, the energy sector will be consuming minerals at six times the current rate by 2040, the International Energy Agency (IEA) forecast in a special report on Wednesday May 5. "Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realizing those ambitions," Fatih Birol, the IEA’s executive director, said.

"The challenges are not insurmountable, but governments must give clear signals about how they plan to turn their climate pledges into action," he added. "By acting now and acting together, they can significantly reduce the risks of price volatility and supply disruptions."

Government support needed

The rare-earth industry has restated the need for government support in order to develop diverse global supply chains that will not leave the world dependent on China. Even though rare-earth mines are springing up around the globe, facilities for processing, separating and metal production remain heavily concentrated in the East Asian nation. This concentration leaves supply chains vulnerable to political tensions, with fears growing that China could decide to choke-off rare-earth exports.

Western rare-earth market participants called for governments to step up and further support non-Chinese supply chains at a webinar run by the Rare Earth Industry Association in March 2020. "We need governments to step up and not wait until there is a crisis… It’s time to act," Lloyd Kaiser, general manager at Australian rare earth junior explorer Arafura, said.

Global rare-earth supply must be incentivized, David Merriman, from analyst group Roskill, added.

Markets are still watching a shift in focus of the United States government after the inauguration this year of Joe Biden as the new US president.

Rod Eggert, professor at the Colorado School of Mines, said there would be "a continued focus on technological solutions [and] a continued focus on primarily relying on the market," but there would be "growing acceptance that industrial policy has to play a bigger role" under the new administration. "Despite the change in tone, there will be less change than one might expect," Eggert said.

US takes lead in support

The change in US administration at the start of 2021 is spurring fresh support for domestic rare-earth production, with an increased focus on uses for energy rather than defense.

President Biden’s executive order on the strengthening of American manufacturing, which he signed during his first week in office, signaled wider support for domestic production of a number of key minerals, including rare earths.

"American manufacturing… must be part of the engine of American prosperity now," Biden said. "We’ll buy American products and support American jobs."

On this issue, there is continuity with the previous administration’s interest in developing domestic supply chains for a range of critical minerals. The US government has stepped up support for domestic rare-earth projects over fears that access to the critical minerals is, at the moment, tightly controlled by Chinese producers.

With operations in Australia and Malaysia, rare-earth miner and processor Lynas has announced government-backed plans to develop light and heavy rare-earth processing capacity in the US. "While demand for rare-earth materials continues to grow, Covid-19 has exposed the risks within the global supply chains of the single sourcing of critical materials," Lynas chief executive Amanda Lacaze said in January 2021. The company plans to locate both light and heavy rare-earth separation facilities at the same site in the state of Texas.

Biden’s policies will also boost demand for rare earths, with large-scale government support for wind power and electric vehicles.

This transition to new energy will require increased domestic mineral production, US Energy Secretary Jennifer Granholm said on March 9. Granholm said that there would be "huge demand" for sustainable mineral supply chains in the US, both to serve the domestic electric vehicle (EV) industry and to provide jobs for coal miners who may be affected by falling demand for fossil fuels.

Granholm’s statement underlined growing US policy support for domestic critical mineral production, which has continued despite the change in administration.

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Global wind boom

On the demand side, there is now much more government support. A key driver for this demand will be a massive investment in wind power.

In the US, on March 29 this year, Biden announced a series of measures to support this sector. These included the announcement of a new wind energy area in the New York-New Jersey Bight, an area of shallow water off the coast of New Jersey.

The measures involve support from a number of government agencies and include a target of 30 GW of offshore wind power by 2030, with an ultimate target of 110 GW of wind power by 2050. Other parts of the proposal include $3 billion in loans for wind projects and $230 million in funding for port infrastructure to support the offshore wind industry.

The United Kingdom is another emerging center of rare-earth demand, where wind power is being built at a rapid pace. Wind turbines are a major driver of demand for magnet rare earths, including neodymium, dysprosium and terbium.

On November 18, 2020, UK Prime Minister Boris Johnson laid out a 10-point plan to invest in renewable resources. As part of this plan, the government will invest £12 billion ($17 billion), and it suggested that this spending could spur at least three times as much in private-sector investment by 2030.

Among the sectors to receive support is offshore wind. Johnson restated a plan to quadruple wind power generation by 2030.

Additionally, the UK will end the sale of new petrol and diesel cars and vans by 2030 – this will be 10 years earlier than initially planned. To support this, there will be £1.3 billion of investment in charge points and more than 

£1 billion of investment in subsidies for the purchase of new electric vehicles and for battery production.

These investments would support demand for lithium, cobalt and graphite, which are key battery raw materials.

This rise in UK rare-earth demand is sparking investment in a UK rare-earth separation and magnet supply chain. In May 2021, Australian miner Peak Resources announced plans to build the UK’s first rare earths refinery after taking out a £1.85 million lease on a production site at Redcar on the River Tees in North Yorkshire, England, taking advantage of a Freeport system being introduced in the area.

Peak Resources currently operates the Ngulla Rare Earth project in Tanzania, east Africa, which is expected to produce 32,700 tonnes of 45% purity rare-earth concentrate when fully up and running. The company said that it will ship the concentrate from Tanzania to Teesside.

Another rare-earth company, Pensana, has submitted a planning application for a $125 million separation facility in Saltend, near Hull, on the east coast of England. London-listed Pensana is also developing a rare-earth mine at Longonjo in Angola, which is intended to supply the Saltend plant.

In November 2020, UK-based Less Common Metals received approval from Innovate UK, a non-government agency, to conduct a feasibility study to identify the requirements to establish a fully integrated supply chain for the production of rare-earth permanent magnets in the UK.

Other new wind power projects are being announced across the world, with governments striving to achieve the commitments of the Paris Climate Agreement.

South Korean President Moon Jae-in unveiled plans on February 5 for a $48.5 billion project to construct the world’s largest wind power plant. The 8.2 GW plant will be located off the coast of Sinan, southwest South Korea, and is part of the country’s plans to hit a 16.5 GW target for wind energy by 2030, up from 1.7 GW now. Most of the funding will come from engineering and energy companies, with $814 million being provided by the government.

Also on February 5, Denmark announced plans to build an artificial island in the North Sea to serve as the hub of a network of 10 GW of offshore turbines. The plan will contribute to the EU’s target of 200 GW of offshore wind capacity by 2050.

In China, meanwhile, a new action plan on reaching carbon neutrality was announced in March. China’s wind-power development policy is gradually pivoting to offshore wind power, with 3,060 MW of new offshore wind capacity installed in 2020, which equates to more than half of global offshore installation last year, according to the Global Wind Energy Council.

Local authorities in China are also supporting the drive. The Guangdong provincial government, for example, plans to support construction of 4,000 MW of offshore wind capacity by the end of 2021, and 15,000 MW by the end of 2025.

Jiangsu province, which has the largest offshore wind capacity in China, plans to install another 12.12 GW of capacity by 2025. And the Shandong regional government has announced plans to add capacity for 10 GW.

No supply crunch in sight

With demand booming, concerns continue to be raised, as they have been for many years, about the dominant role that Chinese state-owned enterprises play in global supply. But so far these concerns have remained only theoretical, with little sign of any appetite for restrictions on exports or production.

The Chinese government announced record-high rare-earth output quotas for the first half of 2021. In a joint statement released on February 19, China’s Ministry of Industry & Information Technology and the Ministry of Natural Resources said that the rare-earth ore mining quota will be 84,000 tonnes for the six months to June, up by 27.2% year-on-year.

The quota of ore to be processed was also increased, to 81,000 tonnes for the first half of 2021, up by 27.6% year-on-year.

The announcement of the highest rare-earth production quotas on record should calm fears of Chinese restrictions on rare-earth supplies, which intensified in 2021 following reports in western media that these were a possibility.

In January, the Chinese Ministry of Industry announced a draft management rule for rare-earth exports, which would include export and production quotas and other government supervision, ostensibly to prevent any detrimental environmental effects of unrestricted rare-earth production.

Market sources in China’s rare-earth sector have reported that there have been continued shipments of material from Myanmar, with no disruptions resulting from the recent military coup in the country and the subsequent waves of mass protests.

On February 1, the military of Myanmar took power in a coup, which displaced the elected administration and has sparked continuing protests and political violence. This situation has raised fears for the supplies of rare-earth ore to China, specifically the ionic clay that is used to produce heavy rare earths such as dysprosium and terbium. About half of China’s feedstock of heavy rare earths comes from Myanmar.

China imported a total of 8,714 tonnes of mixed rare-earth carbonate in the full year of 2020. Imports from Myanmar accounted for 71.4% of this, at 6,225 tonnes.

But Chinese rare-earth industry participants told Fastmarkets that they have not yet seen any significant delays to deliveries. Myanmar’s rare-earth mines are mostly in the north of country, in areas that are not yet being affected by the political unrest.

The border with China is porous, and illegally mined Chinese ore is sometimes smuggled into Myanmar and then reimported for processing in China. Myanmar does not publish detailed export statistics for rare earths.

In April this year, Lynas noted that Chinese exports are likely to increase in the near term. Lynas said that Chinese market participants are anticipating this growth and several suppliers have announced production capacity increases. Among those is the doubling of production within three years by Northern Rare Earth, China’s leading rare earths supplier.