Three Key Trends That Could Impact Rare Earths in 2024

A slew of developments and challenges significantly impacted the rare earth mining landscape in 2023. Rare earth elements or minerals are a group of different metallic elements that have a number of applications, including in consumer electronics, high-technology devices, renewable technologies such as electric cars, and the development of magnets for industrial and national security purposes.

The sector experienced a surge of mergers and acquisitions, lower lithium prices, strategic action in the critical minerals sector by China, record gold prices and a challenging period for both nickel and cobalt.

Below we look at factors that may affect rare earth minerals this year.

Electric vehicle demand coupled with economic factors

This will likely affect the rare earth segment as the demand for electric cars is expected to increase as more individuals adopt battery-electric vehicles. Companies such as Tesla confirm this by the record sales numbers they posted in 2023.

However, recent data shows that the demand for electric vehicles slowed late last year as economic conditions around the world stagnated. The inflationary environment in the United States and other major nations may have played a role in this, as an increasing cost of debt prevented many drivers from acquiring electric cars.

Additionally, with the prices of electric cars dropping across the board thanks to industry-wide price cuts initiated by major companies, many interested drivers are holding out and waiting for prices to drop even further.

A strategic metal downturn

While the sector has already seen a drop in strategic metal prices from late last year into 2024, the mining industry is cyclical, and this downturn may reverse in the next few months.

The performance of rare earth metals typically depends on a myriad of factors including geopolitical events, technological advancements and economic conditions. Analyzing these factors in relation to the rare earth industry is key to understanding the segment and navigating its dynamics.

China’s influence on the rare earth element

The influence of this East Asian nation on the rare earths space is too large to ignore. The nation essentially monopolized global production of rare earth minerals and now controls roughly 80% to 90% of the world’s rare earth elements refining capabilities.

With tensions between China and America at record highs, many western nations are looking to diversify their rare earth element supply chains and reduce their reliance on China. As it stands, however, Chinese companies refine and manufacture most of the rare earth mineral-related end products on the globe, giving the country unprecedented leverage in an industry that’s critical to America’s economy and national security.

We can expect efforts by America to build up its own rare earth element refining capabilities and shore up local supplies, especially now that China has begun passing export restrictions on elements such as graphite. Entities such as Southern Copper Corporation (NYSE: SCCO) are already availing some strategically important metals, so it won’t be long before other actors take advantage of the growing market of rare earths to set up North American supply chains using raw materials sourced locally.

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