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Surging Demand for Rare Earths by 2035: Can the United States Compete with China's Lead in Supply?

Increased Demand for Rare Earth Elements (REEs) in Clean Energy and Technology Sector Amid Supply Chain and Geopolitical Challenges

escalating demand for rare earth elements projected to treble by 2035: is America capable of...
escalating demand for rare earth elements projected to treble by 2035: is America capable of matching China's production?

Surging Demand for Rare Earths by 2035: Can the United States Compete with China's Lead in Supply?

Apple recently announced a $500 million investment in MP Materials for U.S.-made recycled rare earth magnets, signalling a significant push towards diversifying the rare earth element (REE) supply chain outside China. This move is part of a broader trend, with both the U.S. and Canada intensifying efforts to reduce their reliance on China and secure a more resilient supply of these crucial elements.

In the U.S., the Department of Defense has committed over $439 million since 2020 to bolster the domestic REE supply chain. The aim is to reduce reliance on China by supporting mining, processing infrastructure, and recycling technologies. The government is also implementing critical minerals legislation that includes tax incentives, regulatory reforms, and strategic stockpiling to incentivize domestic production and magnet manufacturing.

However, local primary supply is forecasted to remain insufficient in the near term due to long lead times for mine development and high capital requirements. Large-scale recycling systems for rare earth elements are still developing, but they are promoted as a fast-track and sustainable method to supplement primary mining. Recycling rare earth elements from used electronics, industrial components, and EV motors can reduce import dependence and close supply gaps, representing a sustainable and cost-effective way to boost local supply, especially for high-value magnets.

In Canada, government-supported projects are developing rare earth deposits in Saskatchewan and the Northwest Territories, aiming to build competitive supply chains. Canada is positioning itself as a key alternative supplier alongside Australia, which is also expanding rare earth production. Both countries emphasize environmental and regulatory oversight to balance sustainable development with supply security, which can slow project timelines.

Despite these efforts, challenges remain. China continues to dominate the refining capacity, with over 80% in 2023. The technical difficulty and cost of processing rare earths domestically, environmental concerns related to mining and refining, and potential market volatility due to geopolitical tensions further complicate efforts. Regulatory bottlenecks and the need for substantial investment in downstream manufacturing (e.g., magnet production) are additional hurdles.

Experts agree that diversification of supply chains outside China will remain gradual, and comprehensive policy support and international cooperation are needed to ensure sustainable, resilient rare earth supply chains by 2030 and beyond. The magnet application segment is expected to lead this growth, with a forecasted Compound Annual Growth Rate (CAGR) of 8.02%. The global rare earth metals market is expected to grow from 196.63 kilotons in 2025 to 260.36 kilotons by 2030, at a 5.8% CAGR.

Moreover, many manufacturers are redesigning products to minimize REE use where possible. Despite the promising outlook, market volatility is expected to persist through 2025. Regulatory reforms and international collaboration will be key to overcoming bottlenecks in the rare earth supply chain.

In conclusion, while the push towards diversifying the rare earth element supply chain is underway, it is a gradual process that requires sustained policy support and international cooperation. The benefits of a resilient and sustainable supply chain are clear, and efforts to achieve this goal are crucial for maintaining technological advancement and economic stability.

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Investment in technology is essential for the growth of renewable energy, particularly in the development of large-scale recycling systems for rare earth elements, which can offer a sustainable and cost-effective means to boost local supply and reduce import dependence. The government can incentivize this investment through tax incentives and regulatory reforms, as part of critical minerals legislation.

As the world strives towards a resilient and sustainable rare earth supply chain by 2030, clean energy technologies, such as EV motors, will play a significant role in the forecasted Compound Annual Growth Rate (CAGR) of 8.02%. Thus, it's crucial to prioritize investment in technology that supports the recovery and recycling of rare earth elements from these applications to meet the growing demand for clean energy.

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