Rare Earth Exchanges

Penn State Paper Explores Rare Earth Sector Allocations & Supply Chain Realities

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Highlights

  • Rare earth elements are crucial for emerging technologies like electric vehicles.
  • Magnets and catalysts dominate the consumption of rare earth elements.
  • The U.S. currently relies entirely on imports of rare earth elements.
  • Potential domestic sources in the U.S. include coal and coal byproducts.
  • China’s dominance in rare earth element production poses a significant challenge to global supply chain resilience.

A recent paper titled “Rare Earth Elements: Sector Allocations and Supply Chain Considerations (opens in a new tab)” was authored by Mpila Makiesse Nkiawete (opens in a new tab) and Randy Lee Vander Wal (opens in a new tab) from the EMS Energy Institute (opens in a new tab) and the Department of Energy and Mineral Engineering at Penn State University. It was published in the Journal of Rare Earths (Volume 43, Issue 1, January 2025). The study explores the sectoral allocation and supply chain dynamics of rare earth elements (REEs), with an emphasis on their critical role in renewable energy technologies and the economic value they generate.

The Penn State-based authors hypothesize that sectoral allocations of REEs, especially for magnets and catalysts, highlight their criticality in growing industries such as electric vehicles (EVs) and renewable energy while illustrating the disconnect between usage volumes and economic value. The research uses historical trend analysis (2008-2022) and sectoral breakdowns of rare earth oxide (REO) usage globally and in the U.S., leveraging data from the United States Geological Survey (USGS) and other market reports. The authors examine elemental compositions, economic impacts, and the viability of alternative REE sources such as coal and coal byproducts.

Findings

First, when applying the output to sectoral allocations, the authors note that magnets (29% of total REO use in 2020) and catalysts (20%) dominate REO consumption, though magnets account for a disproportionately higher economic value. The U.S. market heavily emphasizes catalysts, with limited domestic activity in magnet or battery sectors.  When addressing growth trends, demand for NdFeB magnets and associated elements like neodymium (Nd) and dysprosium (Dy) rises, driven by EVs and wind turbines. Projected shortfalls in Dy are anticipated due to limited global production.

REEs contribute significantly to economic activity, with the U.S. market linked to over $274 billion in downstream sectors. However, as Rare Earth Exchanges frequently reports, the U.S. relies entirely on imports, leaving its supply chain critically vulnerable.

But what about coal as a potential resource? The study identifies coal and coal byproducts as promising domestic REE sources, with potential reserves exceeding 10 million tons. If extraction and processing challenges are addressed, these reserves could mitigate the U.S.’s reliance on imports. However, the reporting of Rare Earth Exchanges suggests that such a recycling opportunity at scale would be years away.

Not surprisingly, this paper points to China’s dominance in REE production and processing, which remains a critical challenge. While the U.S. has resumed some production at Mountain Pass, it lacks processing infrastructure, leading to a continued reliance on imported REOs and finished products.

What’s Limited about the study?

The study relies on historical trends and projections, which may not account for technological advancements or shifts in market dynamics, such as the development of non-REE-based magnets. For example, when delving into assumptions of future demand, projections for EVs and wind turbines assume uninterrupted growth and policy enforcement, which may not materialize. In fact, Rare Earth Exchanges has suggested with the incoming Trump presidency and anticipated exit of the Paris Agreement and electric vehicle mandates, the market for rare earth element-related outputs may be impacted.

Additionally, while the potential for recycling REEs is acknowledged, its feasibility and scalability are not fully explored.

The paper assumes the viability of coal-based REE extraction but does not address the regulatory and environmental hurdles that could impede its development.

Implications

The findings underscore the strategic importance of diversifying REE supply chains to ensure the stability of industries critical to energy transitions. Policymakers and industry leaders must prioritize domestic REE production and processing to mitigate risks associated with geopolitical dependencies. The paper also highlights the need for investment in recycling technologies and alternative materials to address supply imbalances and reduce environmental impact. The exploration of coal as an REE source presents a significant opportunity but requires overcoming technical and regulatory barriers to be a practical solution.

This paper represents an important contribution to understanding the evolving dynamics of REE markets and their implications for economic and technological resilience, particularly in the face of growing global electrification demands.

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