Highlights
- US and global initiatives aim to diversify rare earth element supply chains away from China through domestic production, friendshoring, and e-waste recycling.
- Recycling rare earth elements from e-waste could lower NdFeB magnet supply chain risks and provide environmental benefits.
- Analysts evaluate the potential impacts of increased secondary production on trade flows, supply chain security, and the environment.
Anna Perry (opens in a new tab) and Kelsi Van Veen (opens in a new tab) both employed at the United States (US) International Trade Commission report on recent policy initiatives in the United States and beyond emphasizing less reliance on China for rare earth elements and related downstream products, such as neodymium iron boron (NdFeB) magnets. Key among this mission, the recycling of rare earth elements and NdFeB magnets from electronic waste (e-waste). A nascent approach to both lessens import dependence on China and the environmental impacts of mining and refining these products. The Perry and Van Veen paper point to several methods for recycling NdFeB magnets from e-waste while evaluating possible impacts on both supply chains and the environment should one or more of these recycling techniques take off.
Of course, driving this change in policy is not only the rise in demand for REEs given the move to a decarbonized economy but also the need to diversify away from China domination. Specific magnet demand includes neodymium iron boron (NdFeB)1 magnets. NdFeB magnets, the strongest permanent magnets, are used in both conventional consumer electronics and increasingly in green technologies such as electric vehicles and wind turbines.
The analysts raise the key challenge today:
“Supply chains for these products are highly concentrated in China, which supplied 69 percent of REE mine production in 2023 and 92 percent of NdFeB magnet production in 2022.”
The need to diversify away from China is clear, as Ms. Perry and Van Veen point out that “high supply chain concentration exposes the United States to economic shocks or other crises such as wars, natural disasters, or health crises, increasing risk associated with the inability to quickly adapt sourcing.”
Furthermore, the COVID-19 pandemic broadly demonstrated the consequences of supply chain concentration. Spooking the world in 2010 was the China-Japan maritime dispute famously led to China temporarily halting REE exports to Japan.
This temporary short term export ban disruption spurred considerable panic, demonstrating the need for Japan to diversify its REE imports.
Plus, our global order has changed, with growing challenges to the post-World War II order. For example, rising trade tensions between the United States and China in recent years raises alarm that China could restrict exports of REEs or downstream products (e.g., NdFeB magnets). And such a move by China could have a serious adverse effect on the US unless REE markets can become less dependent on China.
And the US. analysts remind all that in June 2024 China announced additional rare earth regulations to protect domestic industry by establishing a rare earth product tracking system in the country.
The U.S. Department of Energy assessment of NdFeB magnet supply chains used a country-level Herfindahl-Hirschman index (opens in a new tab) (HHI), a measure for concentration of global production, to determine domestic supply chain risk.
In China, HHI is 8,514—considered a high risk. Meaning they have a high geographic concentration of NdFeB magnet manufacturing.
The analysts delineate the U.S. plan moving forward: “Diversification and dispersion of global production of NdFeB magnets is needed to lower the HHI to moderate risk (typically below 2,500).”
Importantly simply increasing U.S. production of NdFeB while lowering the HHI, this would do little to convert HHI to low risk, write the authors. Why? The overwhelming amount of NdFeB magnet is produced in China.
Citing Goodman’s 2023 working paper, “Method of Estimating Global Supply Chain Risk (opens in a new tab),” the present authors note a country’s level and concentration of import dependence as additional risk factors in supply chain risk analysis method to the U.S. NdFeB magnet supply chain yields a high risk value for imports from China of 7,944.
What this means is that for the U.S. to truly change the REE supply chain landscape the nation must boost domestic production of REEs while at the same time reduce importance dependence on China and associated supply chain risk.
And that’s what numerous nations, including the United States, are doing now with all sorts of initiatives to lessen supply chain reliance on China. What are these initiatives?
- Expand domestic mine production, separation, and refining capacity
- Collaboration with trading partners to support diversified supply chains (i.e., friendshoring).
- Development of technologies to recover REEs and recycle REE-containing products, particularly NdFeB magnets—from electronic waste (e-waste).
Enter this important paper titled “Recovering Rare Earth Elements from E-Waste: Potential Impacts on NdFeB Magnet Supply Chains and the Environment” published by the U.S. International Trade Commission.
So, what’s the heart of this paper?
The authors delve into secondary REE and NdFeB magnet production through e-waste recycling as a pathway to lower NdFeB magnet supply chain risk. A risk analysis contextualizes potential impacts of increased domestic and foreign secondary production and import diversification to supply chain security.
What about the environmental benefits from increased secondary production from e-waste? This is real as the authors highlight “Increasingly, environmental externalities and regulations are viewed as a form of supply chain risk.”
The paper first presents an overview of current REE supply chains, emphasizing NdFeB magnets as a critical intermediate product. The authors then delineate emerging REE recovery technologies for NdFeB magnets, and the economic viability of secondary production given current U.S. production of e-waste and recycling capacity.
Thereafter the authors cover a background on the environmental costs of primary REE production and e-waste disposal practices follows.
What are the impacts of increased secondary NdFeB magnet production on trade flows, supply chain security, and the environment? Analysis of potential impacts indicates that secondary production of REEs and NdFeB magnets can yield various environmental benefits while markedly reducing domestic supply chain risks. Further research is needed to accurately quantify these impacts.
See the paper (opens in a new tab)
Daniel
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