Driving the green transition
The shift to a clean energy system is set to drive a huge increase in the requirements for REEs and other critical minerals, meaning that the energy sector is emerging as a major force in mineral markets.
The four REEs that are particularly important to the green energy transition are Nd Pr, Dy and Tb, due to their role in the rare earth permanent magnets (“REPMs”) critical for use in EVs and wind turbines.
REPMs are by far the most economically important use of rare earths, accounting for ca. 26% by volume in 2022, but ca. 74% by value; however, they are forecast to account for +99% by value by 2040, according to Argus Media.
Uses of RREs by volume and value
Demand for the permanent magnet REEs (NdPr, Dy and Tb) is likely to be accelerated by increasingly ambitious government targets and evolving global emissions legislation.
Wind power will be a key contributor to meeting the Paris Agreement climate goals, with the IEA stating that almost 70% of electricity generation will need to come from solar photovoltaics and wind by 2050 in order to reach the targets.
The electrification of the transport sector is also central to a clean-energy future and, whilst EV sales are increasing worldwide, a significant shift from fossil fuel cars will be required in order to meet Paris Agreement goals. Governments around the world are increasingly turning to legislation to accelerate the transition to EVs.
Currently, ca. one third of global REPM demand is driven by EV drivetrains and wind turbines applications. The remaining ca. two thirds is driven by consumer electronics, traditional automotive, HVAC, disk drives, speakers, robotics and a variety of consumer/industrial/defence applications. However, growth in the clean energy sector is expected to see its share of the REPM market rise to ca. 56% by 2028, according to Canaccord Genuity and Adamas Intelligence.
REPM demand by end-user 2016 – 2028
Adamas Intelligence (actuals), Canaccord Genuity (estimates)
Within the clean energy space, there are two major drivers of demand for REPMs, being EVs and wind turbines.
The EV market is forecast to grow ca. 13% per annum from 2023 to 2033, with global sales of EVs expected to rise to ca. 49 million units in 2033.
Global EV sales by type 2019 – 2033
The increasing use of REPM direct drive generators (efficiency benefits over traditional gearbox-based designs) used in wind turbines is expected to be another key demand driver, as wind generation is one of the fastest growing forms of energy. Nearly 400GW of capacity is expected to be installed from 2021 to 2031, which will require growth of ca. 20% per annum.
Global offshore wind capacity additions 2022 – 2031 (GW)