“Rare earth elements” (“REEs”) refers to a group of seventeen unique chemical elements: the lanthanides which are comprised of fifteen elements, plus scandium and yttrium which are grouped alongside the lanthanides on account of their similar physical and chemical properties.
REEs are often separated into two sub-groups based on atomic weight. The first of these sub-groups, the light REEs, is comprised of lanthanum, cerium, praseodymium, neodymium and samarium (atomic number 57 to 62). The second sub-group, the heavy REEs, is comprised of the lanthanides with an atomic number ranging from 63 to 71: europium, gadolinium, terbium, holmium, erbium, thulium, ytterbium, lutetium as well as scandium and yttrium (atomic numbers 21 and 39). The unique chemical and physical properties of REEs have positioned them as a critical material across a number of rapidly evolving markets and industrial applications.
Rare Earths Demand
Global demand for end-products that rely on REEs has increased in recent years. A leading driver for overall REE demand is the expanding use of rare earth permanent magnets. While permanent rare earth magnets do not incorporate lanthanum and cerium, their growing use is fuelling growing demand for neodymium, praseodymium, samarium, gadolinium, terbium and dysprosium.
In July, 2010, the Chinese government dramatically reduced the rare earth export quota. The subsequent spike in REE prices contributed to a significant increase in illegal production and smuggling which continues to this day. On the demand side, the price spikes prompted many end-users of rare earth oxides and metals to begin stockpiling material. Others launched measures to move away from dependence on REEs particularly those in the lighting phosphors and battery industries. As a result overall demand growth has softened has softened in the years following the price spike.
Demand for REEs is forecast to strengthen between 2015 and 2025, but this anticipated growth in global demand is dependent on the introduction of new REE producers in North America, Australia and South Africa to fill the demand gap left by an anticipated reduction in exports from China. China’s government remains firmly focused on its domestic supply/demand balance and various government statements have often conveyed a desire to achieve a situation where domestic producers and consumers of REEs are both able to profit and expand. Conversely, the supply and pricing situation outside China does not motivate government policy. For example, in October 2016, a development plan for 2016-20 released by China’s MIIT revealed that the Chinese government aims to limit rare earth output to below 140,000t by 2020 and increase the country’s production of value-added products. The new plan offers little thought for other global consumers in terms of physical supply.
As a result, China’s near monopoly over REE supply presents a risk that many end-use manufacturers outside China are attempting to mitigate where possible and are actively supporting the development of non-Chinese sources of supply. However, while there are a number of new rare earth projects attempting to enter production, the success of many projects remains firmly aligned with the presence of favourable market prices that can offset the large operating and capital costs often associated with mining and refining rare earths. If the Chinese government continues to pursue policies that seek to curb production and add value to its REE resources, non-Chinese industries that depend on REEs will seek out and adopt viable alternatives.