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| Fig. 1: Geographical concentration of suppply chain stages for sintered NdFeB magnets. [2] (Courtesy of the DOE) |
Fears about a major shortage in critical metals and minerals such copper, lithium, cobalt, and nickel have been in the news over the last few years. These are predicated on the sharp surge in demand that is expected over the next 2-3 decades as decarbonization and electrification efforts ramp up. There is a lesser-known group of metals though that is critically important to this effort and also faces a major potential supply shortage: rare earth elements (REE). The two REE that this report focuses on are Neodymium (Nd) and Dysprosium (Dy). Both of these are important constituent elements of permanent magnets, which are devices that are widely used in commercial and industrial technologies such as consumer electronics, wind turbines, and EVs. The specific type of permanent magnets most commonly used in clean energy are NdFeB (Neodymium-iron- boron), and with the planned expansion of EVs, demand for these two elements in particular is set out to outpace supply. [1]
REE are not rare in terms of abundance on Earth but mining them profitably is challenging because multiple elements are found in ores together and are co-products, but only a small sub-group of elements have large scale industrial use-cases. There are also four stages for preparing these elements for end-use: mining, separation, refining, and manufacturing. These dynamics make the supply chain complex because of the investment and technologies required to develop requisite capabilities.
The supply chain is currently dominated by China, particularly at the final product production stage as it produces ~93% of the world's NdFeB magnets, while having ~60% of the REE suply. The closest competitor in terms of manufacturing is Japan, while in terms of reserves it is the US followed by Myanmar and Australia. [2] (See Fig. 1.)
There are also high environmental costs for expanding mining as wastewater can lead to soil acidification and water contamination, as well as damaging local ecosystems through changing land use. This activity also leads to atmospheric and radioactive pollution. [3]
One of the major sources of increasing demand for NdFeB magnets are expanding market share of EVs. Currently, this use-case makes up only 6% of total demand, but projections for 2030 estimate this to be as high as 30%. It is estimated that ~2kg of NdFeB magnets are used in each EV and Nd makes up 30% of the total weight, while Dy makes up ~2%. Assuming these per EV figures remain constant, achieving the target IEAs Net Zero annual EV sales estimate of 56 million by 2030 would result in an annual growth rate of 27% Nd and Dy demand (see Table 1).
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| Table 1: Estimated EV demand for Neodymium. [7,8] |
While the possibility of replacing motors that use NdFeB magnets have been researched, this has not been meaningfully successful as potential replacements (e.g. the rare-earth metal free asynchronous motors used in Tesla's Model S have lower efficiency and power density.) Therefore, demand for NdFeB magnets has increased as supply of EVs have gone up. However, there are efforts to reduce the amount of NdFeB used per EV, which can help alleviate the demand pressure going forward. [4]
Global reserves for REE are estimated at 120 billion kg, with annual production of 240 million kg in 2020, and an annual supply growth rate of 6.5% over the past 50 years. [5] If we assume that Nd and Dy make up 20% and 0.7% of these reserves respectively which is their market share within the REE portfolio then the annual estimated supply of these elements in 2030 is 85 million kg for Nd and 3 million kg for Dy. [6] This means that up to 40% of the annual supply for Nd and 75% for Dy will be consumed only for making EVs, leading to constrained resources available for other rapidly growing use-cases such as wind turbines. Another rapidly growing use-case that makes up a large portion of the remaining 60% is wind turbines. There are alternatives to mining in order to increase supply, such as recovery from used products, but these methods are operationally harder and costlier due to the extra steps involved in gathering waste products from landfills, sorting, etc.
This is reflected in the recent price trend of Neodymium, and by extension NdFeB magnets. From mid-2020 to early 2022, the price of Neodymium increased from ~$50/kg to ~$230/kg, an almost 4x increase. Despite coming down since then and stabilizing around $125/kg, they are still at levels 100% higher than a couple of years ago. This is after prices remained relatively flat from 2013-2020. The recent price surge can be attributed to supply chain disruptions and growing EV demand, but the spot price is perhaps not an effective way to assess whether future demand-supply gaps are being price in. A better gauge of future concerns, which is what this report intends to illustrate, could be better understood through futures contracts and mining company reports. What is certain, however, is that the price of these metals is sensitive to market dynamics, as price surged higher in 2011-2012 as well when China announced tighter export controls.
REE are critical components of technologies that are at the heart of the decarbonization effort. However, access to these elements is subject to limited supply growth, supply chain disruptions, and geopolitical tensions. Countries such as the US are investing heavily in reshoring this supply chain, but this requires significant capex and is not a short-term fix. Ultimately, recycling and reusing materials will have to be scaled up while demand control measures, for example promoting electric buses over EVs, will be required to ensure that these scarce resources are effectively utilized.
© Taimur Ahmad. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] M. Humphries, "Rare Earth Elements: The Global Supply Chain," Congressional Research Service, R41347, December 2013.
[2] "Rare Earth Magnets and Motors: A European Call to Action," European Raw Materials Alliance, 2021.
[3] Bai et al., "Evaluation of Resource and Environmental Carrying Capacity in Rare Earth Mining Areas in China," Sci. Rep. 12, 6105 (2022).
[4] C. C. Pavelet al., "Role of Substitution in Mitigating the Supply Pressure of Rare Earths in Electric Road Transport Applications," Sust. Mater. Technol. 12, 62 (2017).
[5] "Mineral Commodity Summaries," U.S. Geological Survey, January 2021.
[6] E. Alonso et al., "Evaluating Rare Earth Element Availability: A Case with Revolutionary Demand from Clean Technologies," Environ. Sci. Technol. 46, 3406 (2012).
[7] "Rare Earth Permanent Magnets: Supply Chain Deep Dive Assessment," U.S. Department of Energy, February 2022.
[8] "Net Zero by 2050," International Energy Agency, October 2021.