Rare Earth Exchanges

The Future of Rare Earth Elements: Addressing Challenges Through Mineral Hubs

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Highlights

  • Global demand for rare earth elements is projected to increase 2-5 times by 2035, reaching a market value of $750 billion.
  • Mineral hubs offer a centralized processing strategy to mitigate geopolitical risks and stabilize critical mineral supply chains.
  • Success of mineral hubs depends on robust infrastructure, government support, and collaborative international partnerships.

Victoria Kulik and her colleagues at Boston Consulting Group (BCG) have identified critical challenges in the rare earth elements (REEs) industry (opens in a new tab) and propose a novel solution: the creation of “mineral hubs.” These regional processing centers aim to address pressing issues in supply chain stability while presenting significant economic opportunities. The report illuminates the urgent need to tackle the growing supply-demand imbalance fueled by the global energy transition and complicated by geopolitical tensions and structural inefficiencies in mining and processing.

The Challenge

Demand for rare earth elements and other critical minerals is skyrocketing as renewable energy systems and electric vehicles (EVs) become central to the global energy transition. According to BCG, demand for these minerals could increase by 2–5 times by 2035, reaching a market value of $750 billion. However, supply has not kept pace. Aging mineral deposits, declining ore quality, and chronic underinvestment in exploration have led to severe constraints. The permitting process for new mining projects, now averaging 16 years, further hampers the ability to bring new resources online.

Geopolitical risks add another layer of complexity. China’s dominance in rare earth processing—accounting for over 60% of global capacity—has left many countries, particularly in the West, heavily dependent on imports. Resource nationalism, trade restrictions, and fragmented supply chains threaten to disrupt 30% of global mineral trade in the next decade, potentially crippling industries reliant on these materials.

The Solution Concept

BCG’s solution lies in establishing mineral hubs—centralized processing centers that can transform the mineral landscape. These hubs offer economies of scale, enabling efficient, large-scale processing that reduces costs and stabilizes supply chains. By fostering partnerships between nations, companies, and industries, hubs can mitigate the impact of geopolitical shocks and provide a reliable supply of critical minerals. BCG highlights Indonesia’s success as a nickel-processing hub, where favorable policies have attracted $21 billion in foreign investment and positioned the country as a pivotal player in the EV battery supply chain.

Some Considerations

However, the mineral hub model is not without challenges. Hubs’ success depends on robust infrastructure, including transportation networks, energy resources, and logistics systems. Government backing is crucial, as streamlined regulations, subsidies, and public-private partnerships are required to attract investment and sustain operations. Additionally, BCG’s emphasis on economic benefits raises concerns about potential environmental and social impacts, such as community displacement and ecological degradation. These factors necessitate a careful balance between economic development and sustainability.

BCG underscores the urgency of stakeholders’ action. Resource-rich countries should evaluate their competitive advantages and seek international partnerships to establish or integrate with existing hubs. Global mining companies must collaborate with multiple hubs to maintain access to critical minerals and manage geopolitical risks. For junior mining companies, hubs provide an opportunity to scale operations and secure financing. Manufacturers and end users, particularly in the US and EU, can benefit from collaborating with hubs to ensure long-term access to essential minerals without the need for domestic processing facilities.

Takeaway

In conclusion, BCG’s vision for mineral hubs represents a bold strategy to address the critical mineral supply gap essential for the energy transition and advanced industries. While these hubs promise supply chain resilience and economic growth, their success relies on collaboration among governments, corporations, and industries. As competition intensifies and supply chain pressures mount, swift and coordinated action will be necessary to seize this opportunity and ensure a sustainable future for the rare earth elements industry.

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