Prices of such exotic components of the periodic table as dysprosium and terbium increased by multiples over 2010-2011 before collapsing just as quickly. Five subsequent years of low-scale range-trading have seen rare earths slip off the collective investment radar, their place taken by new “hot” metals such as lithium and cobalt.
But now they’re back. Or at least a couple of them are. The prices of neodymium and praseodymium oxide are going stratospheric again, up by over 80% since the start of the year.
As ever with rare earths, this is all about what is happening in China, the world’s dominant producer of these critical materials.
It is also, though, a story of a specific supply chain adapting to a fast-changing demand picture because these two particular rare earths are part of the same green technology revolution that is causing such excitement in the battery materials space.
Neodymium and praseodymium, or the more manageable NdPr for short, are already two of the most commonly used rare earth elements (REE), accounting for 36% of global REE consumption in 2015, according to analysts at RFC Ambrian.
They’re in the hard disc drive in your laptop and the headphones you wear on the way to work.
Their most important application, however, is in the magnets used for electric motors, which is where they enter the electric vehicle supply chain.
As with the lithium-ion battery, the permanent magnets that use NdPr in motors are industry standard, meaning they face a similar exponential growth in usage generated by the electrification of the global vehicle fleet.
RFC Ambrian forecasts that increases in NdPr production, 45,170 tonnes in 2015, “will need to total between 15,000 tonnes (‘low case’) and 35,000 tonnes (‘high case’) by 2020.”
It was China that caused the explosion and subsequent meltdown in prices earlier this decade. The country cut off exports of REE, citing the need to control illegal output in the production hub of Inner Mongolia.
The rest of the world cried foul as did the World Trade Organisation and China was forced into a swift about-face.
Official exports have steadily increased ever since, up 26% in 2015 and another 34% in 2016.
Unofficial exports initially boomed as well in response to those sky-high prices, causing a surge in supply that kept REE prices at rock-bottom levels until this year.
Illegal production, however, seems to have been falling with Beijing consolidating its REE sector into six large groups and waging a war of attrition against the unofficial sector.
The official heat has been raised further this year in the form of the same rolling environmental and regulatory checks that have hit other Chinese metals sectors such as aluminium.
Indeed, according to Adamas Intelligence, which specialises in critical mineral markets, an explicit focus of the most recent inspections has been on 180 companies involved in the rare earths sector.
It’s noticeable that just about every other REE price in China is showing signs of bottoming out from the depressed price environment of 2012-2016, albeit without the same violence of the NdPr rally.
If Beijing’s clamp down on its REE sector is generating higher prices, Beijing also has the means to cap those prices in the short term.
It is sitting on an unknown amount of stockpiled REE and is now under pressure to release some of it to dampen bubbling spot markets.
Andy Home is a columnist for Reuters. The views expressed are those of the author.