Rare Earths: An Overview of Global Trade and Markets

#1 · September 25, 2023, 2:35 pm

Quote from chief_editor on September 25, 2023, 2:35 pm

Rare earth elements (REEs) are a group of 17 metallic elements that are vital for many modern technologies, including consumer electronics, green energy products, advanced defense systems, and more. While relatively abundant in the earth's crust, economically viable rare earth deposits are less common. Currently, the global rare earth industry is dominated by China, which produces over 70% of the world's supply. However, over the past decade, concerns over China's dominant market position have led other major countries to explore expanding rare earth production and reducing reliance on Chinese exports.

Global Rare Earth Reserves and Production

According to the United States Geological Survey (USGS), as of 2020 the world's reserves of rare earth oxides totaled 120 million tonnes. The five countries with the largest reserves were China (44 million tonnes), Brazil (22 million tonnes), Vietnam (22 million tonnes), Russia (12 million tonnes), and India (6.9 million tonnes).

In terms of production, China has long accounted for the vast majority of mined rare earths. In 2020, China produced 140,000 tonnes, while the next leading producers were the United States (38,000 tonnes), Myanmar (30,000 tonnes), Australia (17,000 tonnes) and Madagascar (8,000 tonnes). No other country produced more than 5,000 tonnes. China's outsized production is aided by preferential policies, lax environmental regulations, extensive processing capabilities, and lower labor costs compared to other major producers.

China's Dominance in Rare Earth Processing

While China dominates rare earth mining, its dominance is even more pronounced in downstream rare earth processing and metal/alloy/magnet production. In 2020, China accounted for approximately 90% of the world’s rare earth processing capacity. Even rare earths mined overseas are often sent to China for processing and refining into metals, alloys, and magnets.

China’s rare earth industry is centered around three major state-supported production hubs: Baotou in Inner Mongolia, Ganzhou in Jiangxi, and Chengdu in Sichuan. These hubs offer integrated mining, processing, research and transportation logistics capabilities that other countries lack. China also holds intellectual property advantages in rare earth metallurgy and magnet manufacturing.

Rare Earth Trade Between China and Rest of World

Given China's market dominance, it is unsurprising that China is the leading exporter of rare earth products. In 2020, China exported over 50,000 tonnes of rare earth compounds and metals valued at $1.3 billion. The main importers were Japan (27%), the United States (11%), and Germany (7%).

At the same time, China relies heavily on imports of raw rare earth ores from other sources to feed its processing industry. In 2020, China imported 48,000 tonnes of rare earth ores and concentrates valued at $137 million. The main suppliers were Myanmar (38%), the US (28%), and Australia (11%).

Efforts to Reduce Reliance on Chinese Rare Earths

Concerns over reliance on Chinese rare earths have grown in recent years, especially from the US, EU, and Japan. Particular worry has focused on the risk that China could restrict rare earth exports for geopolitical ends. In response, governments are taking steps to diversify global rare earth supply chains, including:

Funding new rare earth mining projects in friendly countries like Australia and Canada

Stockpiling rare earth minerals as a buffer against supply disruption

Investing in and subsidizing domestic rare earth processing capacities

Reducing rare earth usage and increasing recycling capacities to curb demand

Filing WTO disputes against China for alleged unfair trade practices

For its part, China has denied it would restrict rare earth exports for political reasons. However, periodic Chinese export quotas/tariffs and deteriorating US-China relations continue to make rare earths a source of trade and security tensions.

Outlook for the Global Rare Earth Industry

Going forward, global rare earth supply chains look set to diversify away from overreliance on China, albeit gradually. With supportive policies, the US, Australia, and Myanmar could potentially supply up to half of global mined rare earths by 2030. However, China will likely maintain dominance in processing for the foreseeable future.

Developing viable rare earth processing chains outside China that can produce separated rare earth oxides, alloys, magnets, and other products at competitive prices remains a major challenge. Doing so will require attracting substantial private sector investment and technology transfer.

Environmental concerns around mining and chemicals used in processing are another consideration, especially with scrutiny from civil society likely to increase. In China itself, the government is taking steps to consolidate producers, improve environmental regulation, and eliminate illegal mining.

While total global demand for rare earths looks set to keep increasing as green energy and high-tech applications expand, improved recycling and more efficient use could help curb demand growth. If supply risks are managed well, rare earths should not constrain global technology and energy transitions. But they will remain a critical domain where mineral supply security and geopolitics intersect.

Rare earth elements (REEs) are a group of 17 metallic elements that are vital for many modern technologies, including consumer electronics, green energy products, advanced defense systems, and more. While relatively abundant in the earth's crust, economically viable rare earth deposits are less common. Currently, the global rare earth industry is dominated by China, which produces over 70% of the world's supply. However, over the past decade, concerns over China's dominant market position have led other major countries to explore expanding rare earth production and reducing reliance on Chinese exports.

Global Rare Earth Reserves and Production

According to the United States Geological Survey (USGS), as of 2020 the world's reserves of rare earth oxides totaled 120 million tonnes. The five countries with the largest reserves were China (44 million tonnes), Brazil (22 million tonnes), Vietnam (22 million tonnes), Russia (12 million tonnes), and India (6.9 million tonnes).

In terms of production, China has long accounted for the vast majority of mined rare earths. In 2020, China produced 140,000 tonnes, while the next leading producers were the United States (38,000 tonnes), Myanmar (30,000 tonnes), Australia (17,000 tonnes) and Madagascar (8,000 tonnes). No other country produced more than 5,000 tonnes. China's outsized production is aided by preferential policies, lax environmental regulations, extensive processing capabilities, and lower labor costs compared to other major producers.

China's Dominance in Rare Earth Processing

While China dominates rare earth mining, its dominance is even more pronounced in downstream rare earth processing and metal/alloy/magnet production. In 2020, China accounted for approximately 90% of the world’s rare earth processing capacity. Even rare earths mined overseas are often sent to China for processing and refining into metals, alloys, and magnets.

China’s rare earth industry is centered around three major state-supported production hubs: Baotou in Inner Mongolia, Ganzhou in Jiangxi, and Chengdu in Sichuan. These hubs offer integrated mining, processing, research and transportation logistics capabilities that other countries lack. China also holds intellectual property advantages in rare earth metallurgy and magnet manufacturing.

Rare Earth Trade Between China and Rest of World

Given China's market dominance, it is unsurprising that China is the leading exporter of rare earth products. In 2020, China exported over 50,000 tonnes of rare earth compounds and metals valued at $1.3 billion. The main importers were Japan (27%), the United States (11%), and Germany (7%).

At the same time, China relies heavily on imports of raw rare earth ores from other sources to feed its processing industry. In 2020, China imported 48,000 tonnes of rare earth ores and concentrates valued at $137 million. The main suppliers were Myanmar (38%), the US (28%), and Australia (11%).

Efforts to Reduce Reliance on Chinese Rare Earths

Concerns over reliance on Chinese rare earths have grown in recent years, especially from the US, EU, and Japan. Particular worry has focused on the risk that China could restrict rare earth exports for geopolitical ends. In response, governments are taking steps to diversify global rare earth supply chains, including:

Funding new rare earth mining projects in friendly countries like Australia and Canada
Stockpiling rare earth minerals as a buffer against supply disruption
Investing in and subsidizing domestic rare earth processing capacities
Reducing rare earth usage and increasing recycling capacities to curb demand
Filing WTO disputes against China for alleged unfair trade practices

For its part, China has denied it would restrict rare earth exports for political reasons. However, periodic Chinese export quotas/tariffs and deteriorating US-China relations continue to make rare earths a source of trade and security tensions.

Outlook for the Global Rare Earth Industry

Going forward, global rare earth supply chains look set to diversify away from overreliance on China, albeit gradually. With supportive policies, the US, Australia, and Myanmar could potentially supply up to half of global mined rare earths by 2030. However, China will likely maintain dominance in processing for the foreseeable future.

Developing viable rare earth processing chains outside China that can produce separated rare earth oxides, alloys, magnets, and other products at competitive prices remains a major challenge. Doing so will require attracting substantial private sector investment and technology transfer.

Environmental concerns around mining and chemicals used in processing are another consideration, especially with scrutiny from civil society likely to increase. In China itself, the government is taking steps to consolidate producers, improve environmental regulation, and eliminate illegal mining.

While total global demand for rare earths looks set to keep increasing as green energy and high-tech applications expand, improved recycling and more efficient use could help curb demand growth. If supply risks are managed well, rare earths should not constrain global technology and energy transitions. But they will remain a critical domain where mineral supply security and geopolitics intersect.