Rare earth elements are essential to powering global innovation, but their supply chains remain a critical vulnerability. The latest episode of Fastmarkets’ Fast Forward podcast explores this vital topic with insights from Rowena Smith, CEO of Australian Strategic Materials, and Ahmad Ghahreman, CEO of Cyclic Materials. Read an overview below, or hit play to listen to the conversation in full.
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Why rare earths matter
Rare earths are indispensable to modern technologies, from electric vehicles (EVs) and wind turbines to military systems. While not geologically rare, their extraction and refinement are complex and costly.
- Versatile uses: Rare earth magnets provide unparalleled energy efficiency, as discussed by Ghahreman. He said “The AirPods we use today would be gigantic without rare earth magnets”
- Strategic importance: These elements fuel the green energy transition and secure defense systems, underscoring their geopolitical and economic significance
China’s dominance in the supply chain
China has cultivated a near-monopoly over rare earth production and processing, highlighting the West’s dependence and vulnerability.
- Production and processing monopoly:
- China mines 60% of rare earths and processes over 90%
- “China acts like a vacuum for these materials,” said Ghahreman, emphasizing its dominance
- A decades-long strategy:
- Smith said, “Deng Xiaoping famously said that in the 1990s, ‘the Middle East has oil; China has rare earths’.”
- China’s foresight helped secure its leading position today
- Risk of weaponization:
- Export restrictions from China could disrupt global industries
- “If China cut off supply today, we would feel the pain later today,” said Smith
Challenges in building alternative supply chains
Shifting reliance away from Chinese rare earths is no easy task, with timing and capital presenting major hurdles.
- Extended time frames: Developing a rare earth mine often takes 18 years. “Even if we halve that time, it’s still too long,” said Adams, highlighting the West’s disadvantage
- Investment barriers: Private investments are deterred by uncertain pricing and significant costs. “You won’t see progress unless pricing uncertainty is addressed,” said Smith
- Infrastructure gaps: Western economies lack the midstream capabilities to process and refine rare earths. “The midstream was missing, but efforts to untangle it are underway,” said Ghahreman
Potential solutions for diversification
The podcast discussed pathways to reduce dependency on Chinese supply chains, underlining practical strategies for sustainable growth.
First, there is vertical integration. Companies like ASM aim to control the entire supply chain. “Our strategy is to go from mine to alloy, supporting emerging magnet producers outside China,” said Smith.
Another solution is around collaboration across borders. Partnering globally offers a way to pool resources and address gaps.
“Allied countries must leverage each other’s strengths and move fast,” said Smith.
Finally, there is policy support. Tools like government-backed price floors or strategic stockpiles could incentivize investment.
The role of recycling and substitution
Recycling and innovation in alternatives to rare earths play a vital role, but both face technical and market challenges.
Currently, only 1% of rare earth supply comes from recycling. Ghahreman said, “We have the largest overground rare earth deposit in e-waste and end-of-life products, but tapping it takes times.”
There are also limitations with substitutions. Alternatives rarely match rare earth magnets’ efficiency. Discussing EV motors, Ghahreman said, “If you’re investing in a costly battery, it only makes sense to pair it with the most efficient motor, powered by rare earth magnets.”
What’s next for rare earths?
The drive to secure rare earth supply chains is intensifying as the West strives for independence from China. Key pathways forward include:
- Scaling up advanced projects and recycled efforts
- Fostering policy frameworks to reduce investment risks
- Developing partnerships to fill gaps in supply chain infrastructure
“We can’t afford to work off blank pages,” said Smith. “It’s about building on existing capability and acting now.”
Stay updated
For more insights and expertise, listen to the full episode of Fast Forward and explore Fastmarkets’ rare earth prices and industry coverage.
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