Geopolitics to drive rare earth supply diversification
The rare earths supply chain is poised for greater geographical diversification as new mines and processing plants outside of China are brought into production throughout the second half of the decade, as part of on-going derisking efforts by Western governments.
“The world is reliant on a single source for the majority of rare earths supply,” said Daan de Jonge, product director multi-commodity at Benchmark. “Investments are being driven not only by economics but also important geopolitical considerations. The future of the supply chain is wrapped up in the complexity of criticality and national supply chain strategies.”
Supply growth is expected outside China in spite ofa weak pricing environment, supported by bullish demand prospects and the strategic importance of developing an ex-China rare earth supply chain.
The US, in particular, is seeking to develop a rare earths supply chain independent of China – providing financing for ex-China projects through the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BLI).
According to theBenchmark Rare Earths Forecast, the supply of mined rare earth oxides from non-Chinese sources is expected to grow 5.8x through to 2030, with the US and Australia accounting for the largest share of this growth.
Higher prices required to support ex-China projects
China’s grip over rare earths supply makes the industry a strategic geopolitical battleground, potentially allowing it to shut off exports with significant ramifications for western economies.
The country’s rare earth mining sector is predominantly owned and operated by state-owned enterprises, which are able operate at or below cost, as strategic objectives taking precedence over profit maximisation.
This approach has resulted inunsustainably low pricesfor large portions of the ex-China industry, making it more challenging for projects to secure financing from the private sector.
With higher prices required to incentivise project development, the US and EU have considered intervention into critical mineral markets. These measures includemechanisms such as minimum price floorsand national stockpiling to support price levels.
Western governments are also developing a joint-strategy through theUS-led Minerals Security Partnership (MSP), which aims to drive investments into ex-Chinacritical mineral projects to help bridge the private sector funding gap.
Benchmark offers a range of market intelligence services for the rare earths market, including:Rare Earths Price Assessmentproviding transparency into rare earth prices along with market analysis every month.Rare Earths Forecast Reportexamines supply, demand, prices and costs for rare earth elements out to 2040.Rare Earths ESG Reportenables market participants to assess and benchmark the ESG performance and approach of rare earths producers globally.For more information on our Rare Earths market intelligence, please provide your detailshere.
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