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WHAT ARE RARE EARTH ELEMENTS (REES)?

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. Comprising 17 unique chemical elements, REEs are often separated into two sub-groups based on atomic weight: light REEs (lanthanum, cerium, praseodymium, neodymium and samarium); and heavy REEs (europium, gadolinium, terbium, holmium, erbium, thulium, ytterbium, lutetium as well as scandium and yttrium).

NEODYMIUM AND PRASEODYMIUM (NDPR) CONSTITUTE 90%+ OF REE VALUE

NdPr are critical elements in the manufacturing of permanent magnets used for motors, turbines and in mobile phones. Permanent magnet production accounted for 91% of the total value of TREO consumption in 2019.

Permanent magnets and catalysts are the largest rare earth demand drivers

GLOBAL TRENDS ACCELERATE NDPR DEMAND POWERED BY THE GREEN REVOLUTION

Key global megatrends are driving strong and diversified demand for NdPr:

  • Automation: accelerating technological progress
  • Low carbon transition: environmental protection and climate change
  • Sustainable resource security: increasing scarcity of and global competition for resources
  • Supply chain security: against backdrop of heightened national protectionism

NdPr demand is likely to be accelerated by evolving global emissions legislation:

  • Wind power will be a key contributor to meeting Paris Climate Goals
  • UK to ban new petrol and diesel car sales by 2030 and increase offshore wind capacity to a level sufficient to power every home by this date
  • Germany targets offshore wind power expansion targets of 20GW by 2030 and 40GW by 2040
  • France aims to produce 1m EVs annually by 2025

There are currently no acceptable substitutes for NdPr in permanent magnets for electric vehicles (EVs) and wind turbines.

Whilst battery chemistry is still evolving, the motor technology required across all EVs drives NdPr demand regardless of battery chemistry:

  • Growth in EV production forecast to lead to increase in demand for NdPr of 25-90% by 2030.
  • Each new EV requires between 1-2kg of NdPr.
  • Average annual NdPr demand from EVs forecast to increase by ~4,200 – 9,600tpa from 2020-2025.1
  • Value of global magnet REO consumption to increase from US$2.98bn to US$15.65bn by 2030.2

Permanent magnet electricity generators for wind turbines:

  • Wind turbines consume ~600-830kg of REO per Megawatt.3
  • Estimated wind-capacity growth of 5.7% year-on-year to 2050.4
  • Growing to +1.9TW of total wind capacity by 2050.5

Sources: 1. SP Angel 2. Adamus Intelligence 3. Curtin University 4. Bloomberg NEF New Energy Outlook 2020 5. NDRC-ERI “Aggressive Scenario”.

SIGNIFICANT PROJECTED NDPR SUPPLY CONSTRAINTS

An ethical and sustainable supply chain for strategic materials is required:

  • China currently dominates global RE production (~80%).
  • The EU’s Action Plan on Critical Raw Materials aims to strengthen domestic sourcing of raw materials in the EU and diversifying supply from both primary and secondary sources.
  • US has announced contracts with REE producers to strengthen its domestic supply chain.

Supply deficit is likely due to challenges to bringing new REE mines into production include:

  • Many projects are low grade.
  • Estimated high levels of capital for complex processing, ranging from US$200-500m for major listed rare earths projects.
  • Current rare earth prices unlikely to support significant development.