Highlights
- Demand for magnet rare earth elements is expected to triple by 2035, with a potential 60 kt supply gap.
- Current recycling technologies face massive challenges in scaling, including high recovery costs and poor collection rates.
- China dominates rare earth production and processing, controlling over 90% of current output.
Top tier consultancy McKinsey’s recent article, “Powering the energy transition’s motor: Circular rare earth elements (opens in a new tab)”, makes a clear and timely case: demand for magnet rare earth elements (Nd, Pr, Dy, Tb) is set to triple by 2035, and postconsumer scrap could offer a vital—if underutilized—secondary supply. That’s accurate. So is the broader framing: China still controls the lion’s share of rare earth production and processing, and recent export restrictions have spurred an urgent push to diversify.
Their forecast—176 kt of demand for magnet REEs by 2035 versus a 60 kt supply gap—is consistent with industry projections, including those published by Adamas Intelligence and Metal Events. The insight that magnetic REEs comprise 30% of volume but 80% of value is also factually sound.
Factually Firm, but Light on Friction
McKinsey smartly outlines the challenges of scaling REE magnet recycling: small magnet sizes, high recovery costs, and poor collection rates. These are real. Where the piece falters is in its tone—it leans too far into optimistic abstraction.
Technologies like hydrogen decrepitation, robotic disassembly, and hydrometallurgical recovery are highlighted but only as “emerging.” That’s true, but McKinsey skirts around the massive capital, policy, and infrastructure hurdles needed to scale these methods. In the U.S. and EU, no industrial-scale REE magnet recycler yet exists. Japan and China dominate, with the latter controlling 90%+ of the output.
Also missing: geopolitical reality. While the article acknowledges China’s dominance, it avoids direct mention of U.S. or EU policy responses—like the DoD-MP Materials pricing floor, the MP-Apple deal, Inflation Reduction Act incentives, or European Critical Raw Materials Act. That’s a curious omission for a piece so focused on industrial resilience.
What’s Speculative?
McKinsey projects a shift in scrap pools from consumer electronics to EVs and turbines by 2050. That’s logical, but the implied assumption is that industrial players will solve the cost and technical challenges of large-magnet recovery in time. That’s possible—but not guaranteed. Until OEMs redesign for disassembly and recyclers receive real incentives, we remain years away from achieving material post-consumer recovery at scale.
The article also suggests that even modest regulatory changes could materially shift supply chain behavior. That’s wishful thinking without naming specific levers (eco-design mandates, magnet labeling, take-back laws).
Bias Watch: Clean Tech Echo Chamber?
There’s no overt misinformation here. But McKinsey’s framing flirts with circularity triumphalism—painting a smooth path from idea to implementation while downplaying just how messy and investment-heavy this transition will be. It’s a glossy view from the boardroom, not the scrapyard. After all, consultants rarely have to weld the pipe, raise the capital, or de-risk the engineering—execution is someone else’s headache.
Bottom Line for Investors
McKinsey’s analysis is factually sound and offers useful frameworks. But its cautious optimism needs balancing. Investors should ask: Who’s scaling this? Who’s paying for it? And what happens if China clamps down harder before circularity delivers?
That’s the motor Rare Earth Exchanges will keep turning.
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