The rare earth elements (REE) industry is expected to almost triple in size within the next 10 years, according to a new research report from an established firm. This rapid increase could make the supply shortage even worse than it has already become due to recent trade decisions made by China.
New York-headquartered McKinsey & Company discussed these key findings and other relevant specifics in an article titled “Powering the Energy Transition’s Motor: Circular Rare Earth Elements” on Thursday.
According to the firm, the industry’s expansion will be primarily driven by soaring demand for elements needed in rare earth magnets like neodymium and praseodymium. McKinsey has pointed out that their monetary value outweighs their quantity immensely.
“Today, magnetic REEs make up around 30 per cent of overall REE volume, but they capture more than 80 per cent of the value,” the firm highlighted.
Increasing production of electric vehicles and wind turbine infrastructure are the primary catalysts driving this upward trend, McKinsey says.
The business and consulting expert has used 2022 as its base year. Demand has been steadily rising from 59,000 tons during that 365-day period and is projected to hit 176,000 by 2035.
Credit: McKinsey & Company
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Demand prediction comes at an uncertain time
In addition to these key findings, the report also emphasizes that efforts to diversify away from China’s current monopoly will be met with significant difficulties in the coming years. The Asian superpower currently produces about 65 per cent of all REEs and 90 per cent of the world’s rare earth magnets.
This research has come out as rare earths have been attracting the attention of world governments more than ever before.
Since April, global supply chains have been facing major disruptions, largely due to the trade conflict between the Chinese and United States. China implemented strict export controls that month, requiring domestic suppliers to obtain special licenses to send shipments abroad.
The Trump Administration’s activities have also been taking a significant toll outside of American borders.
This lack of rare earths that serve as essential components in military technology and weaponry has sent shockwaves through the defence and aerospace industries of several nations. The Americans have been hit hard, but so has Japan, the European Union, South Korea, Australia and others.
Furthermore, the global automotive industry is one of the other sectors that has been impacted worst by China’s recent export controls implemented in response to U.S. tariffs. Last month, a representative from a German magnet producer told Reuters that he had been answering one call after the other from vehicle makers in “full panic” about the shortage of rare metals.
However, recent Chinese government data has shown that exports rose immensely in response to recent successful negotiations between delegations from Washington and Beijing. Exports shot up by 660 per cent last month in comparison to May.
Significant concerns remain nonetheless, as discussed by McKinsey & Company in last week’s report, and the recent improvement has only given industry stakeholders so much room to breathe for the time being.
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