China’s reserves of rare earths amount to 44 million tons, about a third of the world’s.
According to a study by S&P Global, rare earths are the enabling engine "of a 10-15 trillion dollar industry: that of electric vehicles". And not only that: a large part of the energy transition also passes through the use of rare earths.
Rare earths, a group of 17 elements of the periodic table of elements, defined since the end of the eighteenth century, are essential materials for the energy transition, and in particular for two industries: wind power and electric vehicles.
Dysprosium, Neodymium, Praseodymium, Terbium: these are the names of the four rare earths included by the consultancy firm in the list of the 10 most important materials for the transition, all with a crucial role in their reference sectors. World reserves, according to the US Geolocal Survey (USGS), amounted to 120 million tons at the end of 2021, compared to a production of 280 thousand tons.
So it would take about 500 years to completely zero the reserves.
So why are rare earths such a pressing problem? McKinsey lists a few factors. First, "these elements are present in relatively low concentrations; therefore, the identification and production of resources involves high implementation times and investments".
Second, "some elements such as neodymium are present in very different proportions in the various deposits, and therefore the availability and cheapness of some metals is much more difficult to estimate". Then there are the last two factors, both of which refer to the central point of the story: the excessive power of China.
According to USGS data, reserves in China amount to 44 million tons, about a third of the world’s reserves, and in 2021 60% of total production, 168,000 tons, came from Beijing. According to McKinsey "they are new geological explorations are necessary to identify valid deposits in specific geographical areas" which would allow to limit the quasi-monopoly of China.
What would happen if, as hypothesized by some analysts, Beijing were to launch an attack on Taiwan, a historical ally of the United States? Entire industrial chains, such as that of electric vehicles, would be seriously compromised, and the already not low costs would skyrocket.
Especially since Beijing has all the technical capabilities on its side to process and work rare earths, the fourth and last risk factor listed by the consultancy firm’s report. This is why "the energy transition will also require a regional redistribution of skills, as well as the reorganization of supply chains", concludes the study. The first battlefield of this new geopolitical confrontation already exists, and it is at the same time the largest island and the least densely populated nation on the planet: Greenland.
Greenland’s reserves amount to 1.5 million tons making the island, formally dependent on Denmark, the world’s eighth holder of rare earths. Incredible but true, the United States is just above, at 1.8 million, giving the gold medal of Western countries to Australia, at 4 million. The rare earth mining potential in Greenland is estimated at 60 thousand tons a year, 40% more than those extracted in the US in 2021.
The USGS has speculated that in a few years the island could surpass Chinese production. Washington did not stand by and already in 2019, in full presidency Trump (the same president who even proposed to buy Greenland), signed a memorandum of understanding with the Greenlandic authorities to pool geological expertise and investments in order to discover and exploit new deposits of rare earths.
China was not taken by surprise, and again using Australia as a bridgehead, in 2016 it acquired a stake of more than 10% in Greenland Minerals, now Energy Transition Minerals, a company listed in Sydney that deals with exploration of rare earths in Greenlandic territory. The geopolitics of rare earths is also nothing new for the government of Xi Jinping: when the Taliban took power in Afghanistan in the summer of 2021, China was one of the few countries not to close the doors to the regime and to support the reconstruction. A not disinterested choice considering that Kabul’s rare earth reserves (not listed in the Usgs report) amount to 1.4 million.
There is also another reason why Western countries want to reduce their dependence on Beijing and increase production capacities: costs. S&P Global analysts have calculated that the number of electric vehicles sold worldwide will approach 15 million in 2025 and approach 27 million in 2030. The growing demand for raw materials, in the face of a supply that is difficult to satisfy , will put prices under increasing pressure. Also because, the study by the rating company highlights, "rare earth elements are difficult to replace, in terms of efficiency, in the construction of electric motors". Not to mention all the other sectors of decarbonisation: according to McKinsey, a transition that is too rapid could cause the problem of costs to explode, because the metallurgical sector is capital-intensive and production times appear rather long. Given the difficulty in replacing materials, another game will be played for the consultancy firm on another front: that of technological replacement.
Original article published on Money.it Italy 2023-02-07 08:13:32. Original title: Chi vincerà la corsa alle terre rare?
