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Why Oil Prices Rallied This Week

Why Oil Prices Rallied This Week

While the market navigates through…

Metal Miner

Metal Miner

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Rare Earths Prices Stabilize After 6 Months of Drops

  • Rare earth prices have stabilized after six months of drops, but supply concerns and market sentiment continue to influence volatility.
  • China's dominance in rare earth production poses challenges to the global supply chain.
  • Recycling and alternative materials could provide solutions to mitigate supply constraints and reduce environmental impact.
Rare Earths

Via Metal Miner

The Rare Earths MMI (Monthly Metals Index) seemed to find some stabilization after six months of dropping followed by a brief rebound in May. Overall, the index moved sideways, rising by just 2.11%. Meanwhile, prices for rare earth elements continue to pull in both directions due to a number of factors.

Issues like ongoing supply concerns stemming from predictions of price increases and the continued expansion of green energy and EVs is contributing to this ongoing bullish and bearish pressure. However, there remains a stockpile of rare earths in China due to the country’s abundant rare earth manufacturing sector. There are also widespread efforts to increase rare earth production outside of China. As a result, many anticipate rare earth prices to remain somewhat sideways in the short term.

Supply Concerns in the Rare Earth Elements Market

Concerns regarding supply continue to plague the rare earths market, causing price swings and igniting discussions about the long-term availability of these essential components.

The rare earths market continues to experience supply issues for many reasons. First off, with more than 80% of the output, China controls the majority of the world’s supply of rare earth elements. This means that any interruption in China’s supply chain, regardless of the cause —geopolitical conflicts, environmental restrictions, or internal policy changes – can have widespread effects on the global market.

Second, the process of mining rare earth elements is intricate and demanding on the environment. Due to the significant environmental damage that occurs during the extraction of rare earth elements, many countries continue to institute tighter laws, therefore increasing manufacturing costs. So, as nations like the U.S. and Australia want to increase production, they’ve also encountered substantial obstacles due to environmental laws and the high cost of extraction and processing.

Impact on Rare Earths Prices

Such supply worries continue to impact rare earth prices. Neodymium and dysprosium are two examples of rare earth elements that have experienced significant rises. Meanwhile, market apprehension about future supply capacities and the growing demand from industries like renewable energy and EVs continue to fuel price volatility. Neodymium oxide, for example, witnessed a price increase of more than 30% over the last year, indicating rising market concern about the reliability of the supply.

In response to these supply issues, investors continue to buy more shares in firms that mine rare earths, raising stock prices even further. This speculative activity further complicates the pricing dynamics, as market emotion frequently magnifies price fluctuations above and beyond what supply-demand fundamentals indicate.

Counterclaims to Rare Earth Element Supply Concerns

Despite supply concerns, a number of counterarguments suggest that the situation might not be as dire as it appears. Some analysts contend that the market is overreacting to brief delays and that the supply chain will soon recover. The U.S., Australia, and Canada are the primary locations of recent investments in rare earth mining projects, which they claim will help diversify the supply chain and reduce reliance on Chinese manufacturing.

Furthermore, technological advancements in recycling may help allay certain concerns about the supply. As recycling rare earth elements from electronic waste becomes easier, the world will be more likely to create a reserve of these vital components. By closing the gap between supply and demand, this recycling program might potentially alleviate some of the market pressure.

Additionally, specific supply concerns may see relief from the discovery of replacement materials. The hunt for suitable substitutes remains underway, especially for the magnets used in wind turbines and electric cars, which are two of the biggest REE users.

By Jennifer Kary

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