Most rare earths mines are struggling to break even under low prices while early-stage projects face delays and funding shortfalls, according toBenchmark’s new cost and margin curve models.

“Benchmark’s cost model suggests that current price levels are not only hurting producers outside of China, but Chinese producers as well,” said Benchmark’s senior rare earth analyst Neha Mukherjee.

Chinese rare earths producers are among the most cost-efficient in the world, signalling how challenging the market has been over the last two years.

The impact of low prices is most concerning for suppliers outside China, where 16 assets representing around half of all forecast ex-China supply in 2030 would struggle to maintain production in praseodymium neodymium (PrNd) in that year if PrNd oxide dipped below $60 per kilogram.

Just eight ex-China rare earths assets would be capable of breaking even on direct on-site costs for making PrNd in 2030, according to Benchmark’s cost analysis.

Investors may have little incentive to back projects so dependent on higher prices, potentially slowing the West’s push to reduce dependence on Chinese supply chains.

Ex-China projects are under the added disadvantage of having to demonstrate high rates of return while large state-owned competitors in China do not face the same pressure.

Prices for PrNd oxide, used in rare earth permanent magnets (REPMs), have been on the decline overall for two years. Despite a slight August rebound, demand would need to strengthen further for a significant and longer-term uplift.

The cost analysis also reveals direct costs for ionic clay assets, which contain higher concentrations of heavy rare earths, tend to be higher. This puts heavy rare earths projects at highest risks of delays unless current market conditions improve.

Price suppression likely in competitive light rare earths

The most economical rare earth assets globally can produce a kilogram of rare earth oxide for $11 or below, according to the cost analysis. Almost all of these are hard rock deposits, which contain relatively higher concentrations of light compared to heavy rare earths.

The bulk of hard rock assets are already operating, including China’s Baiyun Ebo and the group of assets known as Sichuan Hard Rock. These are among the most productive in terms of supply. Mountain Pass in the US and Mount Weld in Australia, which have a smaller output, have comparable costs.

The fact that most PrNd-centric assets are already so high quality means prospective hard rock projects must achieve extreme cost reductions in order to compete in a crowded field.

This will deter all but the most cost-effective entrants from going online, particularly in a low price environment such as today.

Ex-China heavy rare earths most at risk

Ionic clay projects are most at risk from low price environments, according to the cost analysis.

This is because most ex-China ionic clay assets have higher extraction costs than hard rock mines, requiring much higher prices to come online. Ionic clay assets worldwide are also mostly still under development.

The heavy rare earths oxides have seen somewhat higher price volatility in recent years, another factor that could potentially deter investments.

Without more ionic clay assets going into operation over coming years, there is a high risk of a global supply gap in the heavy rare earths. The ex-China deficit is likely to be even more acute.

The unfavourable economics of ex-China ionic clay mines, due partly to the low production costs of illegal output from Myanmar, could prolong Western dependence on Chinese mined and processed dysprosium, terbium, and other heavy rare earths.

The West’s reliance on China is greater for the heavy rare earths than the light rare earths since almost all ionic clay mines are under Chinese ownership.

What Benchmark’s cost model model accounts for

Benchmark analysed on-site costs to mine and process enough rare earths ore concentrate for a single kilogram of rare earth oxide at 27 mining rare earths assets and 20 processing assets around the world.

On-site costs included labour, chemical inputs, processing, and energy for extracting the ores and converting them into concentrate. The analysis centred on the year 2030 as most rare earths assets are not operating today.

Where assets lacked the on-site capacity to convert ores into concentrate, the model added transport costs to move material to facilities elsewhere.

It also accounts for where assets make extra revenue from non-rare earth byproducts.

Benchmark’s rare earths cost model is one of the continuous enhancements made to ourRare Earths Forecast, which analyses supply, demand and price of rare earth materials by producer out to 2040.

Learn more about Benchmark’sRare Earths Forecastand accompanying cost model by completing the form below: