FORECASTS & TRENDS E-LETTER
by Spencer Wright
March 5, 2024

IN THIS ISSUE:

1. What are Rare Earth Elements?

2. Where do Rare Earth Elements Come From?

3. Why are Rare Earth Elements Important to You?

4. What is the Future of Rare Earth Elements?

What are Rare Earth Elements?

Have you heard of Rare Earth Elements? It wouldn’t surprise me if you hadn’t. But they are a vital part of the modern industrial supply chain and are critical components in many modern necessities.

The name Rare Earth Elements (REEs) (also Rare Earth Metals) is not at all accurate. The so-called REEs are not actually rare. They are, in fact, reasonably common. There are 17 REEs. They are, Lanthanum (La), Cerium (Ce), Praseodymium (Pr), Neodymium (Nd), Promethium (Pm), Samarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Holmium (Ho), Erbium (Er), Thulium (Tm), Ytterbium (Yb), Lutetium (Lu), Yttrium (Y), and Scandium (Sc). There will be a quiz at the end.

The elements themselves are usually semi-lustrous and many appear nearly identical. Consider the chart below. Many of the elements look just about the same, none of which look remarkable.

What makes REEs ‘rare’ is the time consuming, costly, and dangerous process of extracting them from the surrounding ore. REEs are used in two different states: a metallic state, and an oxidized state.

The processing of REEs is an involved and hazardous undertaking. REEs are often laced with thorium and uranium, both radioactive. Every ton of extracted REEs yields two tons of toxic waste material. This is using current extraction methods, but newer, more efficient, and safer extraction techniques are being researched in the US.

Still, REE mining and extraction have the potential to be environmentally hazardous.

Where do Rare Earth Elements Come From?

Several countries produce REEs to some degree. The top three producers are China, the US, and Australia. China has been the leading producer by a wide margin for decades. Recently the US received some good news on the REE front. A major find outside Sheridan, Wyoming may tip the balance of REE production heavily toward the US. This find may be as much as 2.34 billion metric tons of REEs, more than China’s current known reserves.  This infographic illustrates China’s current dominance over the REE market.

As you might imagine, China controlling the majority of global REE production is not good. We found this out during the pandemic when supply chains faltered and the production of many REE goods was extensively curtailed or halted altogether.

The Sheridan find seems to be particularly rich in Neodymium (Nd) and Praseodymium (Pr) oxides, the two most sought after REEs. The Chinese REE dominance has provided them a strong hand to play internationally when negotiating treaties, executing policy and exerting influence on nearly every level. The importance of the Sheridan find cannot be overstated.

Why are Rare Earth Elements Important to You?

REEs are vital to the modern world. They are in nearly all the important devices you use daily. Including your computer, your cell phone, your television, your car. And more! As technologies, such as electric cars and alternative energies become more and more common, the need for REEs will grow. You can understand why it is so dangerous and destabilizing that China, an oppressive totalitarian dictatorship, continue to dominate in the REE space.

This infographic illustrates the broad range of goods that require REEs in their various forms.

This infographic is so informative. It breaks down how the specific REEs are utilized. As you can see, REEs are vital for far more than just cool consumer tech. They are also used for fertilizer, nuclear power, advanced medical devices, the defense industry, petroleum refining, water treatment and so much more. It is no exaggeration to say that unfettered access to REEs is a serious national security concern. Again, the impact of the Wyoming find is tremendous and welcome news for the US and the Western Alliance.

Of course, having access to a large stockpile of REEs and harvesting them for use are very different things. As pointed out above, the extraction of REEs is an expensive and dangerous endeavor. As the US and other Western countries will only extract REEs safely, it will take quite a while for the US to increase production to market leading levels.

Under the best of circumstances, the US will not become the leader in REE production for several years at a minimum.

China will continue in its REE leadership role for the foreseeable future and will fight the diminishment of its leading role in every way it can. But the Sheridan find will eventually tilt the scales away from a Sino-centric REE environment. Still, China will remain a major player in REEs for decades to come.

What is the Future for Rare Earth Elements?

The future for REEs is very bright. Current global production, led by China, is more than 300,000 metric tons, a production level that has increased more than 200% over the last 30 years. The international military industrial complex along with the burgeoning technologies of alternative energy, electric vehicles, the proliferation of consumer technologies through the underserved third world, and the dawn of AI, will only increase demand for REEs.

It is also likely that as prices of REEs rise, the search for new exploitable deposits will intensify and new finds will be discovered.

Also, a major effort to increase REE recycling should be undertaken. According to the world leading Chemical Processes and Materials Research Group, “The overall REE recycling situation today is very weak (only 2% of REEs are recovered by recycling processes compared with 90% for iron and steel). The biggest recycling potentials rely on the sectors of lamp phosphors (17%), permanent magnets (7%), and NiMH batteries (10%) mainly at the end-of-life stage of the products.”

As the demand for REEs grows, a robust and institutionalized recycling effort could reduce the potentially negative environmental impact as well as help meet the REE needs for future generations.

Thanks for reading,

 

Forecasts & Trends E-Letter is published by Halbert Wealth Management, Inc., a Registered Investment Adviser under the Investment Advisers Act of 1940. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of the named author and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific advice. Readers are urged to check with their financial counselors before making any decisions. This does not constitute an offer of sale of any securities. Halbert Wealth Management, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have their own money in markets or programs mentioned herein. Past results are not necessarily indicative of future results. All investments have a risk of loss. Be sure to read all offering materials and disclosures before making a decision to invest. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.