TELF AG on the growing importance of rare earths in the global economy
Useful raw materials
They are certainly among the most useful raw materials for the global energy transition, and the importance of their role is already widely announced by the name that has been given to them. We are naturally talking about rare earths, generally divided into light rare earths and heavy rare earths. In addition to being able to boast a vast number of industrial applications, even in very different sectors, rare earths (light and heavy) were included in the important document with which the European Commission identified the critical raw materials for achieving the development industrial, economic and sustainable of its member countries (in total, the resources identified by the Critical Raw Materials Act are 34).
Before focusing specifically on the role of rare earths, and all the opportunities connected to them, it may be necessary to recall the criteria with which the European Commission usually updates its list of critical raw materials, adding some and removing others from the list in regularly, every few years. The first factor that is examined is that relating to the economic importance of the resource: this has to do, above all, with the possible industrial applications of the use of the raw material, with an eye to all those directly connected to the ecological transition. The second parameter with which critical raw materials are chosen is the risk linked to their supply, a criterion that also includes the risks linked to dependence on a few suppliers and the concentration of production in certain specific countries.
It is no coincidence that rare earths have been included among the 34 critical materials identified by the European Commission: their industrial applications are extremely numerous and include specific uses in the wind power sectors, in the manufacture of solar panels, drones, fuel cells, and much more. Alongside these multiple possibilities of use, rare earths are characterized by a high supply risk, largely due to possible risks in supply interruptions and the excessive dependence by the European Union, on one or very few suppliers, in whose hands the entire management process of the resource is contained.
Even rare earths, over the last few years, have undergone continuous price fluctuations (almost always upwards) largely due to the emphasis that has been placed on critical raw materials and their potential impact on the global energy transition. In just three years, from 2019 to 2022, the price of rare earths would have tripled, increasing by almost 200% in the space of just a few years. These price fluctuations not only determine a general uncertainty on the part of all the players involved in this market but also an inevitable increase in the prices of all those final products that are also manufactured thanks to these raw materials, such as batteries. The increase in battery prices recorded between 2021 and 2022, for example, is largely due to the parallel price increases that characterized the rare earth market.
In the rare earths market, China undoubtedly holds a position of absolute dominance. This substantial hegemony was strengthened last year with the merger of three specialized companies and the creation of a new state-owned rare earth giant, China Rare Earth Group. In all likelihood, the rare earths market will continue to remain in the hands of China for many years to come despite the slowdown in economic growth and the structural problems that characterize it.
