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A bright outlook for rare earth elements after a challenging period

Published: 23:40 22 Feb 2024 EST

Written by: Meagan Evans

Rare earth elements (REE) are used in the high-strength magnets found in new technologies such as smartphones, wind turbines, electric vehicles, and defence systems. Despite their name, REEs are not rare, although finding secure sources of supply is becoming increasingly important to countries, particularly given China's dominance of the sector.

Yet in 2023, REE prices tumbled. The price (in China) of praseodymium oxide — one of the most widely used rare earth elements — fell 34% over the year, while terbium oxide and neodymium oxide each dropped to their lowest levels last month since late 2020, according to data from Shanghai Metals Market.

It is believed, however, that further downside for rare earths is limited as prices, particularly for neodymium-praseodymium oxide, which is used in permanent magnets, are now near the production cost level after falling 38% last year.

CRU Group analyst Willis Thomas said: "We expect extra supply to be more or less cleared by end-2024, as demand catches up with supply through continually increasing electric vehicle sales and wind turbine production.”

Also, helping the picture is a decision by China to increase its REE quotas at a slower rate this year.

China issued a third batch of rare earth output quotas in 2023 — the first time it has done so since 2006 — with the total quota for the year at a record high of 255,000 tons, up 21.4% from a year earlier. Yet this year, China's quotas are expected to increase at between 10% to 15%. .

Wood Mackenzie analyst Ross Embleton said: "We do expect another increase in production quota for both mining and separation ... but not to the extent we saw last year.”

China accounts for 70% of rare earths mining, and 90% of refined output, according to the United States Geological Survey, has controlled its supply of strategic resources through the quota system since 2006.

Looking further ahead, strong demand for rare earth elements is expected in the coming decades as governments worldwide take steps to meet energy transition targets, with REEs playing a key role in decarbonisation

This is a good sign for ASX-listed REE hopefuls and producers following a challenging period.

In the spotlight: ASX-listed rare earth elements

Ionic Rare Earths

Ionic Rare Earths Ltd (ASX:IXR, OTC:IXRRF) is moving closer to its goal of becoming an alternative supplier of magnet and heavy rare earths critical for energy transition, advanced manufacturing and defence.

In the December quarter, IonicRE made substantial advances in its project development and operational capabilities. As an emergent key player in the global rare earths market, IonicRE not only solidified its position but also set the stage for significant growth.

The company successfully completed Phase 5 drilling at its Makuutu Rare Earths Project (60% IonicRE) in Uganda, with significant clay-hosted rare earth intersections across multiple drill holes

Ionic also strategically increased its ownership of the Makuutu Project, with IonicRE agreeing terms to move to 94% interest.

Subsequent to the quarter’s end, the company was awarded a large-scale mining licence for the Makuutu Project, and the company has secured a new chair to help bolster and lead the Ionic board of directors as it moves into the next important growth stage.

Advancements were also made at Ionic Technologies’ operations in Belfast, UK, with the magnet recycling demonstration plant on track for 24/7 operation from early 2024. WSP Global was appointed to manage the feasibility study for the commercial magnet recycling facility.

A share placement and SPP raised $7.2 million during the quarter.