Rare-earth-based materials and compounds have become increasingly important to all aspects of the technologies that underpin modern-day life. Rare-earth elements (REEs) are being used in increasing quantities in the consumer goods, labor-saving appliances and other devices that are associated with GDP growth and increased standards of living. Examples include computer hard-disk drives, automobiles, cell phones, cordless power tools, hi-tech ceramics, televisions and computer monitors, medical imaging, heating and air conditioning, washing machines and the like. New technologies inevitably use REEs too.

Whether driven by projections of ever-increasing demand for energy, concerns about climate change or energy independence, the largest driver for future growth in the rare-earth sector (as in many others) comes from the development of clean technology and other so-called sustainable technology initiatives. Systems such as wind turbines and electric vehicles will require the use and production of efficient electrical machines. REE-based permanent magnets, used in such devices, provide superior performance and efficiencies.

There is also a very significant potential arbitrage opportunity relating to two of the world’s leading energy sources, crude oil and natural gas, which further drives potential demand for these electrical machines (and by extension, REEs).

The vast majority of today’s automobiles use gasoline and other crude-oil-based products. On an energy-equivalence basis, 1 barrel (bbl) of crude oil is capable of producing approximately six times the energy contained in 1 thousand cubic feet (mcf) of natural gas. However, the cost of 1 bbl of crude oil is far greater than six times the cost of a mcf of natural gas (in July 2011 the price ratio was greater than 20:1). Some estimates indicate that switching to a natural-gas power generation system, and using that system to fuel an electrified transportation fleet, would save an estimated $200B per year for the United States, alone.

The use of technologies based on REE-containing components, is the key to making this arbitrage happen. In addition to the cost savings, transitioning to such a power generation system would have obviously strategic benefits to countries with their vast domestic natural-gas resources.

Recent demand projections for rare earths, sourced originally from IMCOA, are described in the table below.

Forecast for Global Rare-Earth Demand in 2016 (t REO ± 20%)

Source: IMCOA