With rising global demand for electric vehicles, wind turbines, batteries and other clean energy technologies, rare earth metals may seem an appealing investment opportunity. Unfortunately, their high levels of concentration and complex supply chains increase the risk of physical disruption or trade restrictions that could limit growth potential.
Western concerns regarding China's dominance in REM production have only intensified since Beijing first instituted export quotas in 2009. Mining and extraction often cause severe environmental degradation.
Every new electric car that rolls off an assembly line in Fremont or Qinghai, China contains rare earth elements - these metals are essential in creating lightweight batteries and motors that power electric cars, hybrid and battery-electric alike. Each hybrid and battery-electric vehicle uses several pounds of rare earth compounds such as neodymium and praseodymium that produce electricity to power motors, windows and turn the wheels - without them, an electric car would simply cease moving forward!
These metals' distinctive electronic, magnetic, luminescent, catalytic and optical properties have made them the technological industry's "goldmine." Common applications for rare earths include flat screens, energy-saving lamps, LEDs, lasers, radar, computer hard drives, jet engine fins, refrigerator applications, glass polishing and some types of electric motors; as well as oil refining and the petrochemical industries as catalysts. Rare earths (lanthanide series atomic numbers 57 through 71) are more difficult and expensive to process; thus becoming precious commodities.
Lithium, cobalt and nickel prices have seen tremendous increases over the past several years as demand for electric car batteries and climate change concern have caused prices of these key ingredients for battery production to skyrocket. But this rise in battery costs has been outweighed by an exponential surge in rare earth elements like titanium.
China exerts immense control over the price of metals. Under Deng Xiaoping's leadership, Chinese manufacturing and global trade capabilities were greatly expanded during the late 1970s; under his authority they believed their economy could restore national prosperity while simultaneously reinforcing political control over China.
China has successfully implemented this strategy; today they are the world's top producer and exporter of rare earth elements and electric vehicles. A recent report by MIT Technology Review estimated that large wind turbines require 800 pounds of neodymium and 130 pounds of dysprosium in its permanent magnet motor for operation.
Molycorp, one of the major rare earth producers in the US, recently purchased Mountain Pass mine last year and plans to reopen it next year with a production plant for nickel-metal hydride batteries. Their plan includes domestic refining and separation capabilities currently shipped overseas as well as magnet-making capacities that will help make domestic production viable.
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Wind turbine manufacturing relies heavily on rare earth minerals like neodymium, praseodymium, dysprosium and terbium for creating magnetic components and electric current that turn turbine blades. Green energy sources like these help protect our climate while simultaneously decreasing greenhouse gas emissions enough to avoid climate collapse.
Rare earths can be found naturally, yet extraction or refinement can be challenging. Most rare earth supplies are mined in China; mining there has been an enormous source of pollution. Mining activity also contributes to pollution through leaching ponds used to extract rare earths from soil.
U.S. production of rare earth minerals had previously been the leading global source, but environmental regulations and China's poor track record on environmental stewardship limited production significantly. But that may soon change; companies like Lynas, MP Materials, and American Rare Earths are making moves to revive domestic production as well as magnet manufacturing capabilities in America.
These firms are also working towards developing more eco-friendly methods of extracting rare earths from ore, an important move because one of the major concerns associated with transitioning to renewable energy economy is that we will run out of essential metals before 2040 - even if transitioning entirely to wind power would only quadruple mineral needs.
Rare earths demand will depend heavily on technological and policy choices. A concerted effort to meet Paris Agreement goals of stabilizing global temperatures below 2 degrees Celsius could significantly increase rare earth demand; specifically batteries and wind turbines. Achieving carbon neutrality would result in massive production increases for batteries as well as turbines; this would ultimately cause demand to skyrocket, leading to much higher demand for rare earths (along with lithium and graphite) which can then be more easily extracted, thus producing them sustainably.
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World leaders need to accelerate decarbonization by quickly transitioning away from fossil fuel use and towards zero-carbon renewable energy, including wind turbines, solar panels, electric cars and batteries which all use rare earth metals in their manufacturing. Unfortunately, extracting these key minerals is an unsustainable practice which pollutes communities while damaging ecosystems.
Rare earth elements (REEs), like cobalt and lithium, are widely utilized in batteries that power electric vehicles. Each battery contains multiple pounds of REE compounds which will only increase in demand as more people purchase these vehicles.
Heavy rare earths such as dysprosium and terbium are also essential elements in battery production, yet more difficult to find. Furthermore, they're needed to produce permanent magnets containing neodymium or praseodymium magnets used in wind turbines and electric car motors where their demand will likely soar exponentially.
REEs are used in applications besides battery cells. REEs can reduce air pollution through catalytic converters and polishing high-quality glass, give screens on electronic devices an attractive glow and enable engineers to precisely tailor electromagnetic radiation. Terbium emits light at 545 nanometers which makes it perfect for green phosphor displays used on laptops and smartphones while Dysprosium and europium produce other wavelengths making them suitable for red/blue phosphor displays used on televisions and computers respectively.
Due to global efforts to decarbonize, demand for certain minerals will skyrocket as demand surges far faster than previously. Unfortunately, their supply remains constrained due to limited mines and China. If there were to be a shortage, prices might skyrocket as manufacturers adapt products or create alternatives in response.
Success of adaptations depends on whether manufacturers are willing to pay more for ethically produced REEs. Achieve sustainable and socially equitable production requires consumers and manufacturers alike demanding such materials, along with mechanisms both within and beyond governments that enforce them.
Frank Herbert's science fiction novel Dune depicts spice melange as an invaluable natural substance that gives its users the power to traverse vast expanses of space and construct an intergalactic civilization. Rare earth metals provide solutions for various needs - for instance neodymium magnets power the tiny motor in cellphone earbuds to vibrate its speaker for clear sound; lanthanum reduces distortion in glass camera lenses; cerium helps refine oil; gadolinium captures neutrons in nuclear reactors while yttrium/erbium contribute to high speed fiber-optic data networks which transport internet data as well as long distance phone calls globally.
Rare earths have grown increasingly important in defense applications due to their versatility. They're used as magnets in radar sets that guide missiles and bombs, as well as lasers like the yttrium-aluminum-garnet (YAG) laser that guides lasers on aircrafts and cruise missiles.
Rare earths have long been at the core of international tensions due to their strategic significance. China holds an overwhelming lead in rare earth mining and refining markets as well as components that utilize REEs. China's state-owned companies are more integrated than their private competitors on both sides of the Atlantic.
China significantly restricted rare earth exports in 2010 in order to secure domestic production, leading to panic buying and prices skyrocketing. Japan, United States and European Union filed complaints with the World Trade Organization against this policy that eventually resulted in China relaxing their quotas and decreasing prices.
Unfortunately, this change of fortune has not altered the fact that most mining and processing plants take years to break even, making it impossible for any company other than China to profitably produce rare earths. Therefore, even large end consumers such as VW and BMW prefer not launching their own mining and processing projects.
That does not change the fact that there are rare earth deposits in Europe that could be mined, yet remain unused due to cost and development timeframe issues. An artificial supply shortage caused by China's export ban could harm not only end consumers but also producers of modern defence systems which depend on these essential materials for production.