Rare earths often get lumped together for the sake of brevity, but the market dynamics for each element are actually quite varied.
There are 17 rare earth elements (REEs) in all — 15 lanthanides plus yttrium and scandium.
It's a fairly diverse group, with each element having different applications, pricing and available supply. However, REEs are often placed in the same basket because they do not occur separately from each other in nature. Additionally, before modern methods, rare earths were too difficult and expensive to separate.
As a recent report from Stormcrow Capital points out, “It is practically impossible to simply mine and refine one or two rare earths; either you mine and separate them all or you end up with something that sells for a very low price because the hard work remains to be done.”
While REEs may be a complicated market, it's worth taking a closer look at the uses of the different rare earths and some of the dynamics surrounding their supply and demand.
Rare earth metals uses: Are these elements really rare?
Many REE investors will be familiar with the adage that rare earths are not that rare — according to the US Geological Survey, most rare earths are more plentiful in the Earth's crust than gold, silver and platinum.
Rare earths can be found in carbonatite deposits, alkaline igneous systems, ion-absorption clay deposits and monazite-xenotime-bearing placer deposits.
On the flip side, even though REEs are relatively abundant in the Earth’s crust worldwide (as of 2020 there were more than 120 million tonnes of rare earth reserves), “minable concentrations are less common than for most other mineral commodities,” notes the US Geological Survey.
Stormcrow Capital breaks it down by metal. “Lanthanum and cerium are relatively abundant in rare earth deposits, neodymium and praseodymium much less so, and erbium, ytterbium and lutetium are rare,” it explains. “Yttrium is as common as lanthanum and cerium in some types of deposits, but scandium is also very rare.”
Rare earths are usually divided into "heavy" and "light" varieties based on their atomic weight. And while the concentration of different REEs varies within each given deposit, every deposit is usually dominated by either heavy or light rare earths, with some elements being much more abundant.
Rare earth metals uses: Glass manufacturing, industrial catalysts, lighting
As mentioned above, although the REEs are grouped together, their applications vary widely.
Cerium, the most abundant rare earth, is more plentiful in the Earth's crust than copper. The metal is used as a polishing agent for different types of glass, including LCD screens.
Lanthanum is used as a catalyst for refining petroleum and to improve the alkali resistance of glass, especially in camera lenses. This REE is also used to make carbon arc lights used by the motion picture industry.
Europium is used in chemical formulations for LEDs, CRT displays and florescent bulbs. Yttrium is also used in LEDs and florescent bulbs.
While erbium has several uses, its most common application is in the manufacturing of glass optical fiber as it can amplify network signals.
One of the REEs that is considerably rare in terms of mine supply is scandium, a critical metal that is as strong as titanium, as light as aluminum and as hard as ceramic. There are a number of new applications emerging for scandium, including in alloys for high-end sports equipment, plus automotive and airplane parts.
Rare earth metals uses: Magnets
Though the heavy and light categories are normally used to separate REEs, other divisions can also be used.
For instance, praseodymium, neodymium, samarium and dysprosium are often used to make several different rare earth magnets, which are stronger in terms of weight or volume than any other magnet type. These magnets are increasingly used in different aspects of modern life, especially in situations where space is limited.
Magnets made from neodymium, boron and iron (NdFeB) are the strongest available, and these magnets can be found in the motors of wind turbines as well as electric vehicles.
Samarium-cobalt magnets are favored in military applications. That's because these magnets can operate at extremely high temperatures and are not affected by electromagnetic pulses. For example, an electromagnetic pulse resulting from a nuclear weapon discharged a distance away wouldn't have an effect on a motor driven by samarium-cobalt magnets — certainly a worthy consideration for those in the defense industry.
However, the cobalt in these magnets makes them very expensive to use, so for most other industries, NdFeB blends are the magnet of choice.
Praseodymium and dysprosium are also commonly used in industrial magnets in order to improve coercivity and resistance to corrosion. Furthermore, dysprosium has another function in neodymium-praseodymium-iron-boron magnets — the magnets can only operate at fairly low temperatures on their own, but the addition of either dysprosium or another rare earth, terbium, allows them to keep working at much higher temperatures.
Stormway Capital projects that the most promising market for rare earth magnets will be electric vehicle motors. As a caveat, the firm’s analysts note that permanent NdFeB magnets “are not strictly necessary to the construction of any electric vehicle.” In fact, Tesla’s (NASDAQ:TSLA) Model S main motor does not contain any type of magnet.
Rare earth metals uses: Investing in rare earths
Applications for rare earth magnets are rapidly growing as new technologies evolve. However, lack of secure supply has driven some industries to seek out alternative technologies that don't require REE magnets.
Still, rare earth magnets are not going away anytime soon. REEs are an important part of the technology that drives modern life. They can be found in smartphones, computers and televisions, and are an important component in green energy technologies such as wind turbines and electric vehicle motors.
Understanding the different types of rare earths is the first step toward making an investment in this space. Investors with an interest in rare earths are also advised to keep an eye on the various supply and demand dynamics affecting the different rare earths.
Of course, investors should be aware that China accounts for the lion's share of rare earth production, with an output of 140,000 tonnes in 2020. However, there are some rare earth-producing operations outside of China, including MP Materials’ (NSYE:MP) Mountain Pass mine in California and Lynas Rare Earths' (ASX:LYC,OTC Pink:LYSCF) Mount Weld mine in Australia and refining facility in Malaysia.
This is an updated version of an article originally published by the Investing News Network in 2014.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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