By Zimele Mbanjwa
Rare earth minerals- Not that rare, but that important
Rare earth minerals, colloquially referred to as "rare earths", have become a major talking point this year. These rare earths have emerged as one of China's main bargaining chips in trade negotiations with the United States (US) as it seeks less constraining trade terms with the Trump administration. The term has seen a surge in lookups over the last eight months per Google trends as investors and economists, as well as the broader public, seek to come to grips with the importance thereof.
They are not rare
Rare earth elements (REE) are not necessarily rare in terms of abundance in the Earth's crust. However, they are rarely found in concentrated, economically viable deposits, and their extraction is complex. The term "rare earths" is thus an industry term that stems from the fact that these elements are difficult to mine and refine but are critical in modern technologies. There are 17 rare earth metallic elements, as defined by the International Union of Pure and Applied Chemistry (IUPAC), with 15 being lanthides, which are characterised by their similar physical properties and their high reactivity, and the other two being scandium and yttrium, which have similar chemistry to lanthides and are found in similar ore deposits.
In industry applications, the minerals present valuable properties such as being magnetic, luminescent, and having catalytic properties. While similar, each REE ultimately possesses unique physical and chemical properties that make for different applications in downstream industries. Markets for rare earth elements are typically categorised into nine segments: catalysts, polishing, glass, phosphors and pigments, metallurgy, batteries, magnets, ceramics, and others.
As demand for clean energy and advanced technologies grows, so does the need for REEs -especially those used in high-performance magnets. This trend underscores the strategic importance of securing REE supply chains for future technological development.
Production
REEs are primarily produced in the form of rare earth oxides (REO) plus yttrium (TREO + Y). The production process is complex and involves several key stages, each designed to extract, concentrate, and refine these valuable materials. The requisite chemical treatment of the concentrated ore tends to be environmentally intensive, generating toxic and sometimes radioactive waste, which must be carefully managed.
Weng et al. (2015) estimated that the global mineral resource for TREO + Y amounts to at least 619.5 million tonnes, with an average ore grade of 0.63%. This indicates a substantial and varied supply of rare earth resources across different deposit types, each with distinct mineral compositions.
As already established, REEs are not necessarily rare but across the spectrum of the REEs, abundance is significantly uneven. Additionally, the supply of REEs is constrained by production capacity and geopolitical factors, particularly China's dominance in the market, which has been a major area of concern regarding long-term supply security for major consumers like the US and European Union (EU). Since the 1990s, China has been the dominant producer of REE, especially through its Bayan Obo deposit. In fact, in 2024 China produced ~69% of the world's rare-earth ores, followed by the US (~11.5%) and Myanmar (~8%), while Australia, Nigeria and Thailand accounted for ~3.3% each.
Use case: Clean Energy Transition and AI
More recently, the growth in rare earth demand has been driven by their role in the clean energy transition as well as technological revolution. REEs play a crucial role in clean energy technologies such as wind turbines, electric vehicle (EV) motors, and electrolysers, where their unique properties enable high efficiency and performance
REEs, particularly neodymium (Nd), dysprosium (Dy), and terbium (Tb), are essential for manufacturing neodymium-iron-boron (NdFeB) permanent magnets, which are the core components in modern wind turbines and EVs. REEs also play a crucial role in artificial intelligence (AI) by enabling the hardware that powers AI systems.
Permanent magnets account for ~60% of magnet REE demand. Wind turbines using REE-based permanent magnet synchronous generators (PMSGs) show lower greenhouse gas emissions and better environmental performance compared to conventional designs. In EVs, these magnets enable compact, lightweight, and highly efficient motors that convert electricity into torque with minimal energy loss. Up to one-third of an EV motor magnet can consist of REEs, making them essential for performance and range. High-performance magnets used in GPUs, data centres, and cooling systems are essential to enhance efficiency and durability, which are vital for AI workloads that demand immense processing power.
Demand and supply outlook
Since 2015, global demand for magnet-related REEs (neodymium, praseodymium, dysprosium, and terbium), has grown two-fold, surpassing 90 000 tonnes in 2024. Over the same period, the share of this demand driven by clean energy technologies, particularly EVs and wind turbines, has grown significantly from 8% to over 20%.
According to the IEA, across various policy scenarios, clean energy demand for REEs is expected to nearly triple between 2024 and 2040 thanks to continued growth of EV sales, wind turbine deployments and usage in data centres and GPUs. EVs are set to increase their share from 9% to 24% in the same period. With global data centre capacity expected to double by 2030, demand for REEs used in semiconductors, batteries, and energy storage systems supporting the infrastructure behind AI and green technologies is projected to grow at 8% and 10% annually, potentially outpacing supply by 2027. Permanent magnets specifically are set to see their share of magnet REE growth increase to ~70% by 2040.
Regionally, China is the leading consumer of magnet REEs, accounting for ~57% of global demand in 2024. This highlights the size of the Chinese manufacturing demand for rare earths, not just for magnets, but also other major industries that use rare earths, such as catalysts, microchips, glass and ceramics. Consequently, China accounted for 60% of REE mined production in 2024, and 91% of refined output.
While China leads new capacity additions, the outlook sees the country lose some market share in mining as other regions as well as recycling takes some market share. However, refining will remain still concentrated at ~73% of global demand by 2040 when early-stage projects outside China, like those by Tronox, Energy Fuels in the US, and Lynas in Malaysia come onlin
Risks to the supply outlook
The IEA estimates that ~60% of global supply growth to 2040 will come from mines that are currently operating - thus highlighting that regional supply will remain concentrated. As such, while supply of magnet rare earths was sufficient to meet demand in 2024, various risks to supply projections have recently emerged across key regions
Myanmar, which has seen the fastest growth rate for mined REE (~60% per annum between 2015 and 2025), would see its role as a major supplier of heavy rare earths like dysprosium and terbium fall significantly due to conflict in the Kachin region, which halted mining and exports to China. Although some inventory flow recently resumed, continued instability could lead to supply shortages and price increases for medium and heavy rare earths.
China, the biggest supplier of rare earths across mining, refining and recycling, has made various regulatory changes in its REE space. Global economic uncertainty and slower energy tech deployment have weakened the rare earth market recently, and in response, China raised its 2024 mining quota by less than 6%, a sharp drop from the over 20% increases seen in previous years. If China maintains its current production quota and the conflict in Myanmar continues, the heavy rare earths market could face significant disruption.
Moreover, in April 2025, China introduced immediate export controls on seven medium and heavy rare earth elements, requiring permits and stricter customs declarations. This move could disrupt global supply chains if export delays or restrictions intensify. Further to this, the US imposed steep tariffs on Chinese rare earth products in 2025 to reduce import dependence, targeting nearly the entire supply chain for permanent magnets. While these tariffs may boost domestic and allied production, they risk disrupting global supply chains.
Market price performance has been volatile because of the underlying uncertainties to supply, with key compounds like Praseodymium-Neodymium Oxide and Terbium Oxide (essential for permanent magnets) seeing price increases more recently.
Company exposure
Much like the underlying commodity prices, volatility has been evident in listed company exposures. There are various global REE projects on the go currently, and four of the five biggest players (see below) are listed entities outside of China - thus allowing for market sentiment visibility
Australia launched a AUD15 billion National Reconstruction Fund in 2023, allocating A$1 billion to resource value addition, including A$200 million ($126 million) in equity for Arafura Rare Earths and A$840 million ($554 million) in loans and grants. Additionally, Iluka Resources received A$1.7 billion ($1.1 billion) from the Critical Minerals Facility to build Australia's first integrated rare earth refinery. Lynas Rare Earths opened a processing facility in Western Australia and is currently developing a US separation plant with $258 million in US funding and A$20 million ($14 million) from Australia. In the US, MP Materials is expanding its operations with support from the Department of Defence. The US also committed $600 million to Australian Strategic Materials and $250 million to Meteoric Resources in Brazil
Bringing it home
In the local context, South Africa is in the top ten currently known REE reserves at an estimated 860 thousand tonnes. While not that large relative to the major producers, South Africa is home to two major projects, namely the Steenkampskraal Rare Earth Mine and Phalaborwa Rare Earths Project.
The Steenkampskraal Rare Earth Mine is said to host one of the world's richest rare earth and thorium deposits, with a run-of-mine grade of ~14.4% TREO and contained grades reaching 40 to 50%. Located in the Western Cape, the mine contains significant quantities of neodymium (15 600 tonnes), praseodymium (4 459 tonnes), dysprosium (867 tonnes), and terbium (182 tonnes). Backed by the Industrial Development Corporation (IDC), the mine is fully licensed and has existing infrastructure, making it a low-capex, low-opex operation. Its six-phase development plan aims to establish full REE processing and support South Africa's strategy for local beneficiation and green tech supply.
The Phalaborwa Rare Earths Project in Limpopo, operated by Rainbow Rare Earths, is a waste-to-resource project extracting REEs from phosphogypsum, with a 16-year lifespan and expected output of 1 900 tonnes of magnet REOs annually (neodymium, praseodymium, dysprosium, and terbium). Using advanced separation methods, it targets high-value elements, and has received strategic backing, including a proposed $50 million investment from the US via TechMet. Phalaborwa's interim economic study values the project at $611 million NPV, with capital costs of $326.1 million, and positions it as one of the lowest-cost REE producers outside China.
These initiatives aim to diversify supply chains, though challenges remain in matching China's technological edge and cost competitiveness. While inroads can be made in production capacity out of China, the high costs and complexity of separation and refining remain a key disadvantage for entities out of China. For now, it seems China will maintain a significant competitive advantage - particularly in refining and processing technology.
