Critical Metals

periodic table showing rare earths with cell phone showing chinese flag
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What’s the rare earths outlook for 2022? Here analysts share their thoughts on what’s ahead for the rare earths market.

Click here to read the previous rare earths outlook.

Following an uncertain 2020 on the back of the COVID-19 pandemic, the rare earths market continued to see interest from investors and governments around the world in 2021.

Rare earths, used in the high-strength magnets found in much of the latest technology, from smartphones to wind turbines to electric vehicles (EVs), will be a primary 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 China.

As 2022 begins, what is the rare earths outlook for the year ahead? The Investing News Network (INN) reached out to analysts in the space to find out what they think is coming. Here's what they said.


Rare earths trends 2021: The year in review

With the pandemic still around, the dynamics for rare earths supply and demand were uncertain last year, but most analysts remained optimistic about the sector.

The demand side of the rare earths space performed largely as expected, with consumption of so-called magnet rare earths — neodymium, praseodymium, dysprosium and terbium — leading the market’s growth by volume and value, as per Adamas Intelligence.

Speaking with INN about 2021, Managing Director Ryan Castilloux said that on the supply side there were a couple of surprises that led the market to become exceptionally tight through the second half of the year, lifting prices of certain rare earth oxides, metals and alloys to 10 year highs.

“At the start of the year, a coup kicked off in Myanmar that heightened concerns about the sustainability of cross-border flows into China,” Castilloux explained to INN. Myanmar produces a major portion of the heavy rare earth feedstocks processed in China’s south.

“In the middle of the year, with the pandemic ripping on the Myanmar side, the China-Myanmar border was closed and trade halted for six months, underpinning a rise in concentrate, oxide, metal and alloy prices,” he added.

In 2021, most rare earth element (REE) prices were up, with the exception of lanthanum and cerium, whose performance was as expected, according to Luisa Moreno, managing director of Tahuti Global and director of Defense Metals (TSXV:DEFN,OTCQB:DFMTF).

“We are likely to continue to see an oversupply of these two common elements, as total production of REEs increases to fulfill demand for the more critical REEs,” she said. “The prices of the so-called magnet elements were under upward pressure throughout the year due to the continued increase in demand.”

Prices for many heavy rare earths also rose, particularly yttrium at about 120 percent year-on-year, and holmium at around 136 percent year-on-year, supported in part by the Myanmar-China border closure, Moreno said.

When asked about the major news in the sector this past year, Castilloux said 2021 brought more major developments than the seven years preceding it combined.

Aside from the Myanmar coup and border closure mentioned above, China's power crunch and the price increases it caused were also key catalysts for the sector.

“The MP Materials (NYSE:MP) US magnet plant announcement and related offtake agreement with General Motors (NYSE:GM) was also huge news, as was the announcement of VAC's intention to do the same,” Castilloux said.

For her part, Moreno said a key news item has been the consolidation of rare earths companies in China.

The Chinese government announced that it is consolidating China Minmetals Rare Earth (SZSE:000831), Chinalco Rare Earth & Metals and China Southern Rare Earth Group under one company called China Rare Earth Group.

“The government will own 31.2 percent in the new REE group company, and the shareholders of the three companies will own the remaining interest,” Moreno explained. “How this event may ultimately affect supply, exports and prices is to be seen.”

Rare earths outlook 2022: Supply and demand

As the new year begins, there are key supply and demand dynamics to pay attention to that could impact rare earths. One demand catalyst in 2022 will be how the chip shortage develops.

“If the global chip shortage eases next year, allowing the auto industry to return to normal, we would expect demand for all major rare earths, including lanthanum and cerium, to grow healthily,” Castilloux said. “But if chip shortages continue to hamper vehicle production, we expect demand for cerium and lanthanum to suffer in parallel.” Lanthanum and cerium are used for emissions-reduction catalysts and oil-refining catalysts.

In terms of demand, Moreno is expecting to see healthy demand for most rare earths, but not for lanthanum and cerium, for which demand is likely to stay unchanged in the near future.

“Demand from the largest-consuming countries and regions, like China, Japan, Europe, the US and South Korea, is likely to increase if demand for emerging energy technologies continues to go up,” she added.

And if demand keeps growing at this pace, supply will need to pick up to meet the need for REEs globally — with China remaining the key output player.

“Although there are several projects outside China, and some are in relatively advanced stages, such as Lynas Rare Earths (ASX:LYC,OTC Pink:LYSCF) and Iluka Resources (ASX:ILU,OTC Pink:ILKAF) in Australia, the most likely source of new supply this year is still likely China,” Moreno said.

In terms of supply, China will almost certainly increase production again in 2022, according to Adamas Intelligence.

“The extent of these production increases is likely to be influenced by the nation’s comfort regarding the near-term sustainability of feedstock supplies from Myanmar, as well as the US — given MP Materials’ plans to begin domestic processing this year,” Castilloux commented to INN.

Looking over at whether further supply outside of China could materialize in the near future, Moreno said she is expecting more projects to advance closer to production, including Defense Metals, which has recently completed a preliminary economic assessment; she is currently a director at the company.

“I hope that additional production out of Australia and the US in the near term, and out of Africa and South America in the long term, will also be realized to decrease the rest of the world's reliance on China,” she said.

For Castilloux, the next two to three years will be transitional for the supply chain ex-China in a number of ways.

In the US, MP Materials is ramping up processing, and soon after will move downstream into metal, alloy and magnet making as well; Germany’s VAC plans to build a magnet plant in the country, and Urban Mining Company, USA Rare Earth and others are currently scaling production of their own or planning to.

Outside of the US, a number of developments will also take place in the coming years. Neo Performance Materials (TSX:NEO,OTC Pink:NOPMF) is looking to build and scale a magnet plant in Europe, while Australian Strategic Materials (ASX:ASM,OTC Pink:ASMMF), owner of the Dubbo project in Australia, is planning to produce neodymium magnetic alloys (NdFeB) at its Korean metals plant by mid-year.

“That said, we’ll see the beginnings of some major changes in 2022 outside of China, and by 2025 should see a more diverse supplier landscape, albeit one still dominated by China at every step of the value chain,” Castilloux said in conversation with INN.

All in all, the market may start to see deficits for neodymium and praseodymium (NdPr) for the manufacturing of high-performance magnets for EVs and wind turbines. “(But) we are likely to see an oversupply of lanthanum and cerium and further downward price pressures for these two elements,” Moreno said.

Rare earths outlook 2022: Miners and supply chains

As interesting as the rare earth market continues to be for many in 2022, miners will face challenges in the year ahead. “The main challenge will be to deliver,” Moreno said to INN, adding that for a couple years it was difficult for junior rare earths companies to raise funds.

“With rare earths prices increasing, and investors realizing the dramatic increase in demand for rare earths for renewable technology applications, access to funding has been less challenging for companies with good projects,” she said. “If funding is less of a problem, the next challenge is to deliver — to be able to bring projects to production as soon as possible by developing an economic and competitive metallurgical process.”

For Castilloux, a challenge for the sector as a whole in 2022 will be coping with potential supply-side disruptions, be they related to the pandemic, the political situation in Myanmar, international trade or other forces.

“With the supply/demand balance for magnet rare earths on a knife’s edge going into 2022, there is simply no buffer of supply to draw upon if and when such disruptions materialize,” he said.

Rare earths outlook 2022: What’s ahead

After a year that saw most REEs increase in price, Moreno expects prices to remain high in 2022.

“Prices for some of the most critical rare earths, like NdPr and terbium, have doubled in the last 12 months, but may stabilize at the current higher levels this year, hopefully,” she said. “It is important to see stable REE prices to give confidence to those end users that are planning to adopt/use technologies that rely on REEs.”

For his part, Castilloux pointed out that prices were strong in 2021, but may have stacked on some froth in the second half of the year due to the Myanmar border closure and seasonal power shortages in China.

“The Myanmar border has since reopened and accumulated inventories are flowing into China. As the cold season relents and power demand eases, there’s potential for prices to give up some of their late-year gains in the first half of 2022,” he commented to INN.

However, he added that there are a lot of balls in the air going into 2022 on the supply side that could again disrupt the market and send prices rallying.

“(That) really speaks to the prevailing tightness between supply and demand for magnet rare earths. There is simply no buffer of supply to draw upon when disruptions materialize,” he said.

For the expert, unquestionably the magnet rare earths ― namely, neodymium, praseodymium, dysprosium and terbium ― have the biggest upside potential entering 2022.

“Importantly, this also includes didymium (a combined form of neodymium and praseodymium), which is the main input material for the NdFeB magnet industry,” he said.

In terms of factors that investors should be watching in 2022, Moreno said statistics on EV sales and general economic indicators that could affect the global green agenda are worth keeping an eye on.

“Government policies related to zero-carbon emissions and the adoption of green technologies like EVs will continue to have a dramatic effect on demand for rare earths and other critical materials, and investors should pay close attention to that,” she said.

For his part, Castilloux said investors should expect to see more major end users, including automakers and cleantech companies that are seeking to lock up emerging non-Chinese rare earth supplies, “be it through offtake agreements or direct investments in the upstream.”

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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