Heavy rare earths a blind spot in the electric vehicle supply chain
Rare earths will play an essential role in the global decarbonization and electrification transition. Rare earths are critical elements to high end permanent magnets used in electric vehicles and wind turbines. As demand for electric vehicles and wind power is growing exponentially so will the demand for permanent magnets. According to Adamas Intelligence, permanent magnets represent 95% of the total value of global rare earth oxide consumption in 2021. Electric vehicle drive trains and wind turbine generators made up an estimated 30% of permanent magnets demand in 2022 and most of the demand growth over the next decade will come from these two sectors.
“Lithium and rare earths will soon be more important than oil and gas.”
At the State of the European Union on 14 September 2022, the President of the European Commission, Ursula von der Leyen announced - The European Critical Raw Materials Act (‘ECRMA’), “Lithium and rare earths will soon be more important than oil and gas. Our demand for rare earths alone will increase fivefold by 2030. We must avoid becoming dependent again, as we did with oil and gas. We will identify strategic projects all along the supply chain, from extraction to refining, from processing to recycling. And we will build up strategic reserves where supply is at risk. This is why, today, I am announcing a European Critical Raw Materials Act.”.
While it is encouraging to see Europe acknowledging the problematic dependence on foreign nations for critical minerals, China is still dominating the entire supply chain, from mining 63%, oxides 93%, metals and alloys 91%, NdFeB alloys and powders 93% to NdFeB magnets 92%. Chinese dominance is the reason Europe and North America are seeking to diversify supply chains but achieving complete independence will take decades if ever. Long term investment is needed today to build a sustainable western supply chain of critical minerals, but the permitting process is slow and getting a new mine into production can take anything from 10-15 years. Governments and policymakers need to adapt to a new era of energy where critical minerals are essential, fast tracking the permitting process is one way to speed up the energy transition.
"Dysprosium and Terbium are required in conditions where temperature, motion and other damaging forces are high, such as electric vehicle drive trains and wind turbine generators"
Not all rare earths are created equal, and there are a set of seventeen different metallic elements. They can be classified as either light or heavy. Heavy rare earths are of special strategic concern, including Dysprosium (“Dy”) and Terbium (“Tb”). Dysprosium and Terbium are required in conditions where temperature, motion and other damaging forces are high, such as electric vehicle drive trains and wind turbine generators. Dysprosium and Terbium have already entered a period of structural deficit, and the deficit is accelerating. Most attention has however been drawn to hardrock projects with high Neodymium (“Nd”) and Praseodymium (“Pr”) exposure, but with limited Dy and Tb levels. Investors and stakeholders need to focus on projects with a balanced basket of both magnet and heavy rare earths oxides. Scrutinizing the basket weight of each rare earths project is a good exercise to identify projects that are enriched on both NdPr and DyTb and that can answer to the challenges the western world is facing. The next step is to identify potential red flags. This includes analyzing levels of radionuclides, capex/opex, minesite recovery, minesite payability, infrastructure, permitting risk, environmental and other ESG (Environmental, Social, and Governance) factors. Ionic adsorption clay (“IAC”) deposits tick all the right boxes and avoid many of the fatal flaws associated with hardrock projects.
Building a western supply chain of sustainable high value-added rare earths materials is pivotal to the national security of western nations and to accelerate the advent of electric transportation and renewable energy. As demand continues to outstrip supply, the supply deficit will widen. With the electric vehicle revolution in full swing, heavy rare earths remain a blind spot in the automotive supply chain and a limiting factor.