Exploration of high-grade uranium and REE deposits in Canada to support clean technologies

How did rare earths perform in 2022?

In 2021, the supply and demand dynamics of rare earths were uncertain, as the world was just beginning to reopen after the COVID-19 pandemic. However, most analysts were optimistic about the sector’s progress.

Adamas Intelligence’s Ryan Castilloux told INN that three main factors affected the market in 2022.

“The war between Russia and Ukraine exacerbated inflation in Europe and North America and fostered a crisis of consumer confidence that slowed growth in demand for new electronics, appliances, cordless power tools, and other uses for rare earth magnets. “, said.

At the same time, strict lockdowns and pandemic control measures in China last year contributed to a major crisis of consumer confidence in the Asia Pacific region. This hampered the manufacture of electric vehicles, mobile phones and everything else.

“To add insult to injury, the mainstream auto industry continued to be dogged by shortages of microchips and other components, slowing global auto production once again, (as well as) demand for rare-earth magnets that are widely used in micromotors, sensors and speakers everywhere”, Castilloux. saying.

For Project Blue’s Nils Backeberg, 2022 did not bring major disruptions to the expected growth of rare earths.

“While certain applications will have had a lower performing year in line with weak economic sentiment, the rare earth magnet markets remained in line with growth in EVs and energy-saving technology,” he said.

A surprise in 2022 was the tightness of the market in H1 for neodymium, the main lightweight rare earth used in the creation of permanent magnets. This was accelerated by Chinese demand reversing ahead of the market in neodymium-iron-boron magnet capacity.

“Outside of China, geopolitical interest has seen some projects move to construction in a race to meet limited Chinese demand, as sustainable, risk-free, non-Chinese supply takes center stage for critical materials,” he said. Backeberg.

However, he added, “China’s rare earths industry gave the world a gentle reminder of its leadership position by significantly increasing its mining and refining shares for the year.” In 2021, the Asian nation produced the most rare earth elements (REEs) at 168,000 metric tons, with the second-largest producer being the United States at just 43,000 metric tons.

In terms of prices, heavy rare earths saw the biggest unexpected rise as supplies from Myanmar were tight for much of the year, according to Project Blue data.

Meanwhile, the ongoing crisis of consumer confidence, coupled with continued bottlenecks in the automotive industry, led to lower prices for magnetic rare earths (neodymium, dysprosium, terbium, and praseodymium) than Adamas had expected. Intelligence at the end of 2021.

“Looking ahead, we believe that the current market malaise will ease over the next six to 18 months, bringing prices back in line with our existing medium to long-term projections,” Castilloux said.

What is the rare earth supply and demand forecast for 2023?

As the new year begins, there are key supply and demand dynamics to watch out for that could affect rare earths.

With a few exceptions, Castilloux expects to see increased demand for almost all REEs next year, although demand for magnetic rare earths will see the largest increase due to increased sales of electric vehicles, wind power installations and more.

“In addition, if low gasoline prices persist in Europe and the end of the lockdowns in China inspires renewed consumer confidence in these regions in the near term, we could see a burst of latent demand in 2023 (as we saw in 2021). as the pent-up demand for materializes the previous year,” he explained to INN.

Project Blue’s Backeberg agreed, saying most rare earths will continue to see demand growth, including cerium and lanthanum, which are predominantly used in fuel refining and catalysts for emissions reduction.

“In 2023, we may see relatively boosted demand related to economic recovery after a weak 2022, true for all regions,” he added.

Commenting on REE supply, Backeberg said the biggest risk in the rare earth supply chain remains heavy rare earth mining in Myanmar. The country provides 60 percent of China’s medium to heavy rare earth raw materials.

“The border with China has a history of regular closure,” he said. “ESG concerns from the Western world are still focused on battery materials, but could see an increased focus on EV engine materials coming from Myanmar.”

Project Blue does not see any tight supplies or shortfalls in 2023, barring unforeseen supply interruptions.

Meanwhile, for Adamas Intelligence, lanthanum and cerium will continue to be in excess supply in 2023 globally.

“However, in the US we expect demand to continue to outpace supply as MP Materials (NYSE:MP) ramps up production of refined oxide and chemicals,” Castilloux said. “By contrast, magnetic rare earths will continue to face a tight supply-demand balance into 2023, with potential shortfalls if consumer confidence picks up in major markets, fueling a burst of simmering demand.”

How will the rare earth supply chain change in 2023?

One trend that has accelerated with the COVID-19 pandemic has been the awakening of governments around the world to the vulnerabilities of their supply chains and their high dependence on countries like China.

As the new year begins, the next opportunity for miners will be to seek independent supply chains outside of China to meet demand for magnets from Europe and the US, Backeberg said.

“These markets are still in their infancy and opportunities are limited, but geopolitical interest is likely to see some growth set in,” he said. “It still opens questions about the surplus supply of non-magnetic REE generated in these supply chains outside of China.”

For the Project Blue expert, the non-Chinese value chain will operate at a premium to China, and countries will look to ESG-linked metrics to support the price premiums needed to develop supply outside of China.

“The EU and US are likely to continue to see EV-related investments in 2023, influencing opportunities for a rare earth magnet supply chain, while China remains decades ahead and continues to invest in improving its own base”. he said.

Commenting on how countries can compete with China, Castilloux said its cost leadership is becoming easier to challenge as supply chain sustainability, transparency, governance and environmental attributes are prioritized.

“That said, in the case of magnetic rare earths and certain battery materials, global demand is growing much faster than China alone can meet anyway, so the regions don’t yet have strong competition. itself,” he said.

For Castilloux, it is encouraging to see governments taking steps to support, stimulate and invest in supply chain development.

“While there are risks in doing so, such as making the wrong investments or cooking a political hot potato, the risk of inactivity for Canada, the US, Europe and other nations endowed with resources and/or demand is much greater,” he said. saying. “The shift to electromobility and renewable energy really presents a unique opportunity for these regions.”

For the REE market in particular, geopolitical interest is also slowly waking up to the fact that mining rare earths without a refinery does not establish supply chain independence.

“There are already some processing projects underway with political backing, but more steps in the value chain are still required to get to EV engines,” Backeberg said.

For Castilloux, what is needed right now is more investment and government interest to address the lack of capacity in the US and Europe to convert rare earth oxides from magnets into the metals and alloys needed for production. of magnets.

“That is the main gap threatening the promising magnet supply chains in these regions right now,” he said.

What factors will drive the rare earth market in 2023?

Even with increased macro uncertainty, Castilloux remains bullish on the REE market in 2023.

“We see potential for current market issues to abate faster than some may anticipate, bringing magnetic rare earth prices back in line with our existing mid-year projections,” he said.

For the expert, the so-called magnetic rare earths have the greatest advantage in the face of 2023.

“Demand for these items is growing faster than all others. The supply/demand balance for these items is already very tight, and their respective prices are already historically high, as the market is about to recover,” Castilloux said.

“Other REEs used in magnets as additives, such as gadolinium and holmium, are also well positioned as prices and rare earth shortages of conventional magnets rise.”

Similarly, for Backeberg, dysprosium and terbium are the best positioned elements at the start of 2023.

“Market growth remains focused on magnetic materials, specifically rotating magnets using heavy REEs, which, with the risk of heavy rare earth supply, offers the greatest advantage,” he said. “The anticipated growth for rare earth magnets is expected to continue in step with limited replacement technologies for EV drivetrains.”

In the long term, Project Blue believes that technology developments will need to meet significant bullish demand expected based on the current technology landscape, with several already in development.

“The current quota level (in China) should allow for a healthy supply of neodymium in 2023; however, further increases in magnet production ahead of demand could lead to further upside volatility,” Backeberg said.

On the other hand, high rare earth prices remain linked to Myanmar’s volatile supply chain. Project Blue predicts that the balance between supply and demand for heavy REEs will start to drive overall rare earth market dynamics, limiting the rise in neodymium prices over the medium term.