Rare Earth metals: The new metal mania

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  Quantumrun Foresight
• August 7, 2024

Insight summary

Rare earth metals are becoming as crucial as oil due to their importance in modern technologies and the complex geopolitics of their supply. The demand for these metals is expected to skyrocket, pushing countries to diversify their sources and invest in recycling methods. With China's dominance in production, nations are developing strategies to ensure sustainable and independent access to these critical resources.

Rare earth metals context

Rare earth metals have increasingly been dubbed the "new oil" due to their critical role in modern technologies and the geopolitical challenges surrounding their supply. Essential for the transition to a low-carbon economy, these metals are crucial for manufacturing electric vehicles (EVs), wind turbines, and various electronic devices. The demand for rare earth elements like neodymium, praseodymium, and dysprosium is expected to surge dramatically as the world shifts away from fossil fuels. According to the International Energy Agency, the demand for these minerals could increase up to sevenfold by 2040.

China dominates the rare earth metals market as of 2024, controlling 60 percent of global production and 85 percent of the processing. This monopolistic hold has led to significant geopolitical tensions, as seen when China cut off rare earth exports to Japan in 2010 during a diplomatic dispute. In response, other countries, including the US, have ramped up efforts to diversify their sources. Initiatives such as the Biden Administration's Inflation Reduction Act, which includes tax incentives for mining companies, and the National Defense Authorization Act of 2023 emphasize increasing domestic production and sourcing critical minerals from non-Chinese suppliers.

Companies worldwide are exploring innovative methods to extract and recycle rare earth elements. For instance, US-based startup Noveon Magnetics focuses on reclaiming materials from discarded commercial magnets to produce new ones for EVs and wind turbines. Similarly, startup Rivalia Chemical is developing technology to extract rare earth elements from coal ash, addressing environmental and supply chain challenges. These efforts, supported by significant government funding, aim to create a sustainable and diversified supply of rare earth metals.

Disruptive impact

As demand for EVs and renewable energy sources rises, these sectors may have more job opportunities, especially in mining, recycling, and manufacturing. However, there may also be challenges, such as higher prices for electronic devices and vehicles due to supply constraints. Additionally, environmental concerns related to mining and processing rare earth elements could lead to more stringent regulations and changes in consumer behavior toward more sustainable products.

Companies may need to adapt their strategies and operations to address the scarcity and rising costs of rare earth metals. For instance, businesses in the technology and automotive industries might invest in research to find alternative materials or more efficient recycling methods. Firms may also seek to secure long-term supply agreements or develop closer partnerships with mining firms to ensure a steady supply of these critical materials. Furthermore, businesses could face increased scrutiny regarding their environmental practices and the sourcing of materials, pushing them to adopt more sustainable and ethical operations.

Meanwhile, national strategies may include investing in domestic mining and processing capabilities to reduce dependence on foreign sources, particularly from China. Governments could also offer incentives for recycling and developing alternative materials to mitigate supply risks. Diplomatic efforts might focus on securing alliances and trade agreements with countries rich in rare earth elements while addressing environmental and human rights concerns related to mining practices.

Implications of rare earth metals

Wider implications of rare earth metals may include: 

• A greater push towards developing and implementing circular economy principles, leading to more sustainable consumption and production patterns.


• Governments establishing stricter regulations on mining practices to minimize environmental impact, leading to cleaner and safer extraction processes.


• Companies investing more in alternative materials research to reduce dependence on rare earth metals, leading to increased innovation in material science.


• Increased geopolitical tensions over rare earth metal supply chains, leading to more strategic alliances and trade agreements between nations.


• Urban areas experiencing growth as technology companies expand operations to meet rising demand, leading to changes in demographic patterns and urban planning.


• Technological advancements in recycling and resource recovery, leading to more efficient and cost-effective methods for reusing rare earth elements.


• Governments providing incentives for domestic rare earth metal production, leading to reduced reliance on foreign sources and greater economic independence.

Questions to consider

• How might advancements in recycling rare earth metals impact the prices and availability of everyday electronics you use?


• How can local governments balance environmental protection with the need to expand mining operations for rare earth metals?