Why is the demand for rare earth metals growing
Of course, first of all, this is connected with the discussion around the still unsigned agreement between the USA and Ukraine for 500 billion USD. Initially, it was assumed that it would be entirely related to the development of rare earth metals in Ukraine. But then it also included objects of Ukrainian infrastructure. And yet rare earth elements are connected with this agreement. It is also characteristic that Russian President Vladimir Putin also announced his readiness to conclude a deal with the USA for these metals. In general, the topic of rare earth metals has become quite popular.
But in any case, it was the increased interest of US President Donald Trump in rare earth metals that gave such publicity to this undoubtedly strategically important, but until recently not very noticeable part of global metallurgy and the global economy as a whole. The strategic importance in this case is determined by the importance that rare earth metals have for modern industry - from mobile communications, military electronics to metallurgy and green energy.
For example, the touchpad on mobile phone screens would be impossible without small additions of the metal indium. Cerium is used to polish glass. Tantalum grains regulate the power in the phone. While without lithium, batteries could not work. Dysprosium and neodymium are used in phones and other gadgets, yttrium in military radars, and germanium and gallium in the production of semiconductors.
Naturally, all this creates a demand for rare metals, which include lithium and tungsten and many other materials. In addition, a separate group of rare earth metals is distinguished, which includes 17 elements, including scandium, dysprosium, indium, gallium and others. Therefore, the question always arises of what exactly is meant when talking about rare or rare earth metals. For example, from a group of 17 rare earth metals, in the same Ukraine, theoretically, only scandium can be mined, but the profitability of its production is highly questionable. But in Ukraine there are deposits of graphite, lithium and other rare metals.
Technological and environmental complexity of mining
In principle, everyone in the world needs such metals, but their production in terms of the principles of operation differs from ordinary markets, for example, from metallurgy. Thus, the production of some of them is concentrated in only a few places on the planet, and the sales market is very specific and quite limited.
Some metals are mined in quantities of only a few tons, others are toxic or their extraction involves toxic or radioactive materials, and almost all of them require a lot of effort to produce.
Very often, rare earth elements are a by-product of the production of base metals, for example, cobalt can be obtained during the extraction of copper. Gallium and indium are obtained during the processing of aluminum and zinc. In this case, it is necessary to make great efforts to isolate rare earth elements from the total mass of the same copper ore. That is why companies that mine ores of various metals often try to avoid working with rare earth elements in their composition.
The extraction of ores containing rare earth metals and their conversion into commercial products requires repeated washing with various mixtures, including acids. Therefore, this is always a very dirty environmental production. In fact, this is one of the reasons why rare earth metals are not mined in countries with effective environmental legislation. Under such conditions, their production would be too expensive. In addition, a very long time can pass from the moment of investment to the moment of production, sometimes decades. While on the market, the prices of rare earth elements can be both very significant and fall to a critically low level, below any profitability. Precisely because they are usually concentrated in one or two places, and there is no alternative on the market.
China's leadership
In such a situation, it is very difficult to plan regular investments. Any offer below market price can make production unprofitable. Something similar happened with rare earths. China offered prices 30-40% below market price, and this led to the closure of production in many countries. For example, today 98% of gallium and 67% of germanium are produced in China. The area around the city of Lengxiuyang in Hunan province accounts for 60% of the world's antimony market.
In theory, rare earth metals can be produced in many places on the planet. But this requires “a significant amount of money“ for investments, technologies and, last but not least, convenient environmental legislation. In general, the extraction of rare earth metals is a rather “dirty” production. Because we are talking about separating the smallest fractions of material from the rock massif and bringing it into commercial form.
In fact, China took a leading position in the rare earth materials market precisely because of the direct interest of the state in this. The fact is that after the start of large-scale Chinese reforms in the 1980s, the PRC began to import significantly more raw materials and energy resources. The Chinese authorities decided to partially compensate for the increased costs by exporting rare earth materials. As a result of their efforts, many of their productions outside the country turned out to be unprofitable. The situation mainly affected the United States, which was previously the main producer of rare earth metals.
As a result, up to 93% of the rare earth market ended up under Chinese control. First, because of the price, because their prices in China are 50% cheaper than outside it. With the total volume of this market of 12 billion USD per year, this provides China with a certain amount of export revenue. But more importantly, access to cheaper rare earth elements was used as an incentive for foreign technology companies to move their production to China. This is largely the reason why the majority of Apple's mobile phones are manufactured here. On the Chinese market, foreigners can get guaranteed quantities of rare earth elements at prices below world prices.
Although in 2010 a conflict arose between China and Japan over the arrest of several Chinese fishermen near disputed islands in the South China Sea. By coincidence, in the second half of the same year, Beijing reduced export quotas for rare earth elements by 40%.
Over the past 15 years, demand for rare earth metals has only increased, as high-tech production has grown and investments in green energy have increased. Today, China controls up to 70% of the world market for rare earth metals, compared to 93% 15 years ago. But among the entire list of rare earth elements, the most valuable ones are produced in this country, which are important for the high-tech and military spheres.
Trump's most coveted asset
So Trump's desire to gain access to deposits of rare earths and rare metals is understandable, especially in the context of his dissatisfaction with the results of the globalization process for the United States. Naturally, dependence on China on such a sensitive issue cannot but worry him. So in early March, he increased tariffs on imports from China to 20%. Beijing responded by imposing tariffs on imports of agricultural products from the United States. But it seems that the trade wars are just beginning for Trump, and rare earth elements may one day be affected.
The problem here is that even if the United States decides to allow unlimited investment and lift environmental regulations, it will probably take decades before real production of rare earth metals begins. A similar situation applies to their production in all other countries, including Ukraine and Russia.
Rare earth metals can theoretically be found in many places on the planet, but they are so scarce that their production may be completely unprofitable.
The news was published on the basis of an information exchange agreement between Fakti.bg and Kazinform