The global energy transition is increasingly tightening the supply/demand balance of rare earth elements (REEs) vital to the development of multiple clean technology applications, including wind turbines and electric vehicles (EVs). EV and wind applications currently account for a comparatively minor share of global REE demand, however as both industries grow REE demand for clean technologies could increase four-fold by 2035. While REE volumes in EVs are considerably below the quantities of other critical raw materials needed for battery cathodes and anodes, the high reliance on permanent magnet motors of EV manufacturers, paired with the exponential surge in EV sales, is expected to significantly increase REE demand from the EV industry. REEs are however more critical for wind turbines, particularly as offshore applications grow and an increasing number of onshore turbines switch to direct drive generators. With EV and wind power thus driving the bulk of growth in overall REE demand, high-value REE consumption including neodymium and dysprosium used for NdFeB magnets is thus expected to increase exponentially, though these products usually account for less than 15% of total global REE mine output in mixed REE deposits.

Besides the physical constraints of ramping up high-value REE output in the short-to-medium term, global REE supply is highly dependent on China, which in 2022 accounted for about 70% of global mine production and over 82% of refined product supply. In terms of mined supply, China’s market share grew considerably in 2022 compared to 2021 due to the country’s 25% increase in its annual domestic production quota, with ROW production actually declining in 2022. This decline is largely attributable to falling output from mining operations in Burundi, Brazil, and Madagascar, offsetting gains from other markets including Thailand and the US.

Against the backdrop of high geographical concentration of supply, investment in rare earth production outside of China is growing considerably, though project feasibility is uncertain due to China’s control on global REE prices, which can significantly hamper the cost-competitiveness and profitability of REE upstream and refining projects elsewhere. However, China is expected to retain its dominance in global REE mine supply beyond 2030, supplying almost half of total global volumes by 2035. The REE industry outside of China is still at its infancy compared with EV and wind developments, but geopolitical interest will likely spur some growth in supply chain localization in the medium term. To compete against the hegemony of Chinese supply and China’s control on REE prices, key demand markets like the US and the EU are already introducing major policies to increase their self-sufficiency, including subsidies and domestic manufacturing requirements. While this should create a strong incentive for domestic investment, announced projects outside of China are still at a very early stage of development and, even if fully implemented, are unlikely to satisfy booming regional EV and wind power demand – though they have the potential to displace a significant portion of current Chinese supply.

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