Rare earth elements

Rare Earth Metals Global Market Outlook:

MARKET OVERVIEW

Global Supply: 300,000 MMT (2022)

Chinese Market Growth: (8-10) percent (2021–2024)

Demand sectors: Permanent Magnets, Metallurgy, Autocatalysts

• China would continue to dominate the market, in terms of production volume, as well as market potential for a long term

• The largest rare earths reserves, and major rare earth processing facilities are present in China, which is projected to support the market’s sustained development. However, with various projects under development in the US, Australia will be a key trend to watch in the near future

Porter's Analysis on Rare Earth Metals

Supplier Power

• The global rare earth elements market is highly consolidated and hence, the bargaining power of suppliers is medium to high. Six state-owned miners of China are holding a major share of the rare earths mining industry, thereby allowing China to keep a strong handle on production

Barriers to New Entrants

• The barriers to new entrants is considered high for rare earths market. The process of extracting and subsequent treatment is a complex process and involves high costs

• The extraction process involves huge environmental cost. Some of the processes use acids for separation and the combustion with high temperatures emit carbon dioxide

Intensity of Rivalry

• Intensity of rivalry is medium, due to consolidation in the industry amongst the major players. There is high investment cost for entry, regulations, and high exit barriers

• The struggle for market share and increased profitability is reflected in price competition

Threat of Substitutes

• Rare earth elements have very low substitute threat. Though substitutes are available, they are always considered less effective in many applications

Buyer Power

• Buyer power is medium to high, depending on the end-use industry, as the level of demand varies across the industries

• For instance, the current magnet industry downturn and the weak commodity market provide added advantage to the buyers, in terms of price negotiation

Cost Structure Analysis : Rare Earth Metals

• China continues to hold a monopolistic position in the mining and processing of rare earths elements until today. Various other countries, such as the US, Australia, Europe, and Japan, are becoming highly concerned about their increasing dependence on China for stable supply of REEs

• Mining attributes to 35 percent of the total cost and processing of rare earths ore contributes to 60 percent of the total cost of production

Rare earth elements - Cost Structure – China-2022*

• Mining of rare earth ores constitutes to 35 percent of the total cost involved in production

• In China, extraction of rare earths is done by two main methods. The first involved removing layers of soil and transporting them to a leaching pond, where acids and chemicals are used to separate the REE from the soil/rock

• Another process involves drilling holes into rocks and flushing out the rare earth ores by means of water and chemicals. This mix is then directly transported to the leaching ponds for further processing and separation of REE. The whole process of crushing, milling, separating rare earths as oxides from ores constitutes around 60 percent of total cost of production.

• Tougher regulations governing rare earth mining and in-situ leaching operations were introduced in 2016, as rare earth mining causes huge destruction to the environment. The government of China has directed companies to upgrade their mining technologies and engage in more costly and less environmentally harmful mining and extraction processes. These include consolidating rare earth processing operations and locating them in designated industrial parks with wastewater treatment plants. Mining sites also are required to take steps to reduce erosion and cut down on dust