Highlights

• Rare earth prices are unsustainably low, deterring investment despite their critical role in electric vehicle and renewable energy technologies.
• Current market pricing primarily reflects localized Chinese transactions, obscuring growing global demand and potential supply shortages.
• Companies focusing on clean, sustainable rare earth production are positioned to lead the energy transition as market dynamics evolve.

The rare earths market faces a paradoxical challenge: despite their critical role in powering electric vehicles (EVs) and renewable energy technologies, current prices are unsustainably low, deterring investment and exploration. Ramon Barua, (opens in a new tab) CEO of Aclara Resources (opens in a new tab), highlights that these prices, primarily reflecting localized Chinese transactions, obscure the growing global demand and impending supply shortages. Financing new rare earth projects is hindered by unattractive market prices that fail to justify investments, while EV manufacturers prioritize cost savings over securing sustainable and diverse rare earth sources. However, Barua argues that the cost of rare earths is negligible compared to the overall cost of an EV, and their efficiency-enhancing properties can reduce battery costs and improve vehicle performance. As sustainability and performance become paramount to consumers, rare earth prices are poised to rise sharply, rewarding companies that adopt sustainable production and strategic foresight. Barua asserts that first movers with a focus on clean rare earths will lead the energy transition.

So, what are some key assumptions and/or biases in Barua’s analysis in Global Mining Review (opens in a new tab)?

Assumptions and Biases:

One assumption involves market behavior. The claim that rare earth prices will rise assumes a shift in consumer and manufacturer priorities toward sustainability and performance.

What about economic feasibility?  The argument minimizes potential resistance from EV manufacturers to pay premiums, despite their current cost-reduction focus.  We cannot underestimate obstacles to change.

Strategic Positioning must be considered as well**.**  The emphasis on "first movers" reflects a bias toward companies, like Aclara Resources, that are positioning themselves as leaders in sustainable rare earth production. Of course, Barua stands to benefit from such a scenario.

Is a universal alignment of industry and consumers interest towards environmental goals? We do not think so, especially with the incoming Trump presidency.