Rare earths are key elements, and demand for this group of critical metals is expected to be strong in the coming decades as governments around the world take steps to meet energy transition targets.
Used in the high-strength magnets found in much of the latest technology, from smartphones to wind turbines to electric vehicles (EVs), rare earths will be an important focus for the resource sector well into the next decade as more countries in the west work to create supply chains that are less dependent on top producer China.
As 2023 begins, what is the rare earths forecast for the year ahead? The Investing News Network (INN) reached out to analysts in the space to find out. Read on to learn what they had to say.
How did rare earths perform in 2022?
In 2021, rare earths supply and demand dynamics were uncertain as the world was just beginning to reopen after the COVID-19 pandemic. However, most analysts were optimistic about the sector moving forward.
Ryan Castilloux of Adamas Intelligence told INN that three main factors impacted the market in 2022.
“The Russia-Ukraine war exacerbated inflation in Europe and North America and fostered a consumer confidence crisis that slowed demand growth for new electronics, consumer appliances, cordless power tools and other uses of rare earth magnets,” he said.
At the same time, strict lockdowns and pandemic control measures in China last year contributed to a major consumer confidence crisis in the Asia Pacific region. This hindered the manufacturing of EVs, mobile phones and everything in between.
“Adding insult to injury, the conventional automotive industry continued to be dogged by microchip and other component shortages, slowing global automobile production yet again, (as well as) demand for rare earth magnets used widely in micromotors, sensors and speakers throughout,” Castilloux said.
For Nils Backeberg of Project Blue, 2022 did not create any major disruptions in the expected growth for rare earths.
“While certain applications will have had a lower-performing year in line with the weak economic sentiment, rare earth magnet markets remained aligned with EV and energy-saving technology growth,” he said.
One surprise in 2022 was the market tightness in H1 for neodymium, the main light rare earth used in the creation of permanent magnets. This was accelerated by above-market Chinese demand investment in neodymium-iron-boron magnet capacity.
“Outside of China, geopolitical interest has seen some projects move into construction in a race to meet limited ex-China demand as sustainable, de-risked, non-Chinese supply takes center stage for critical materials,” Backeberg said.
However, he added, “China’s rare earths industry gave the world a gentle reminder of its leading position by significantly ramping up its mining and refining quotas for the year.” In 2021, the Asian nation produced the most rare earth elements (REEs) at 168,000 metric tons. The second largest producer was the US with only 43,000 metric tons.
In terms of prices, heavy rare earths saw the highest unexpected upside, as supply from Myanmar was restricted for much of the year, according to Project Blue data.
Read more: Rare Earths Market Forecast: Top Trends That Will Affect Rare Earths in 2023