Resurging Commodity Markets: The Rare Earths (Part 2)
Change is afoot in many a market this year, but what exactly is going on? While the vanadium market may be reaping the benefits of a boost to global construction, the recent climbing prices in the rare earths (REE, “rare earths”) are reacting just as much to increasing demand as they are to tightening supplies out of China. Transport, consumer electronics and energy are all major driving forces in the REE space, and the expansion of these markets has created peak demand at a time of rapidly increasing regulation of the Chinese mining industry, leading many analysts to warn of an impending shortage. One thing is for sure, explorers in the rare earths who managed to survive the last few years will begin to see financial viability in their projects once again; it’s time to get those dusty old conveyor belts started!
This month, the prices of both super-magnet metals, neodymium and praseodymium, have surged amid continued inspections of illicit mining operations throughout China. The heavy environmental cost of the nation’s intensive industry has become too great to bear, with one minor mining city requiring over US$5 billion to clean up, prompting the Chinese government to enact tight controls on extraction practices and waste management. The plan to reduce pollutants and encourage recycling has forced up the cost of compliance for many operators to such an extent that supply is legitimately threatened. President Xi expects to have all rare earth miners consolidated into six state-owned operations by 2020, an ambitious move which we believe will ultimately secure China’s dominance in rare earths.
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This comes at the same time as demand for magnetic motors continues its ascent ahead of the predicted switch to electric vehicles over the next decade. In reality, all vehicles already use rare earths, but the move towards green technologies will extend requirements far beyond current levels as neodymium, dysprosium and praseodymium are featured heavily in electric motors. This is borne out by the recent struggle for Mountain Pass; the old Molycorp mine that was last month sold to a Chinese-led team that evidently expect it to become rather profitable again in the near future.
An area that I’d personally keep a close eye on is heavy-lifting drones. These have long been the stuff of dreams in the tech world as current battery technology can barely keep a hobbyist quadcopter in the air for an hour, let alone have a 60kg behemoth moving large loads around all day. Industrial magnets are absolutely crucial in providing the power necessary to bring manual labor drones into the workplace, and along with them, the batteries to match.
Lithium, cobalt, cerium, lanthanum and praseodymium all feature in modern high-energy-density power cells to varying degrees, meaning that a significant number of emerging technologies still depend entirely on the supply of rare earths, something that many claimed wouldn’t be true even two years ago, citing imminent substitution. In fact, the magnetic materials market is now projected to be worth US$96bn by 2020 mainly on the back of explosive growth in manufacturing in Asia-Pacific creating massive demand for components.
We have come to rely very heavily indeed on rare earths, particularly the magnetic materials, and until a replacement is found they will continue to be a crucial ingredient to modern life itself. The last five years may have killed off a myriad of hopefuls, but the next five will birth just as many.
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