Analysts at UBS are factoring huge growth in demand for the key rare earth elements neodymium and praseodymium into models that run out to 2030.
The analysis is based on likely increases in the usage of the rare earths in electric vehicles and wind turbines. UBS pointed out that an electric vehicle typically has between one and two kilogrammes of neodymium and praseodymium (NdPr) in it, while wind turbines have around 200 kilogrammes.
The situation is complicated because China is currently the dominant supplier and has on occasion made threatening noises about cutting off the flow of NdPr to Western economies.
These threats have been somewhat blunted to date by the intercession of the World Trade Organisation, and also by a more general fear on the part of the Chinese of tit-for-tat reprisals.
Strategists on both sides know full well that although China dominates supply currently, rare earth elements on the whole aren’t that rare, and that if new sources are needed in the West they could be found.
In such a scenario the crucial aspect would be the pinch point, or the time lag between the identification of new supplies and actually getting new production to the market, especially since processing rare earths is notoriously difficult.
This is why UBS has been taking a particular interest in Lynas Rare Earths (ASX:LYC). Lynas is already a long way down the tracks in terms of project development, and is all set to build a new processing plant in Texas.
Other companies with projects that are already out of the starting blocks ought to benefit too. Medallion Resources (CVE:MDL) has been making moves in the arena of rare earths processing technologies, while American Resources (NASDAQ:AREC) is looking to create a vertically integrated operation.
This fits with a return to an emphasis on local sources of supply stimulated by President Trump’s robust approach to the perceived Chinese trade threat, and President Biden has continued to make the appropriate noises in support of rare earths.
But in Africa too, progress is being made in bringing on big new projects. There, Lotus Resources (ASX:LOT) continues to advance its Milenje Hills prospect in Malawi, while Mkango (LON:MKA), a well-known UK-based rare earths company, is also making progress in the same country.
Rainbow Rare Earths (LON:RBW), meanwhile, is continuing to move forward with its projects in Burundi, which, as far as the known data is concerned, may be the highest grading rare earths operations in the world.
Companies like these will be the first out of the starting blocks when investors’ minds start to turn in earnest to the rare earths companies once again. And it might not be too long now before that happens.
The uncertainties created by the coronavirus have already caused a doubling of NdPr prices over the past nine months or so, although the array of global stimulus packages have also boosted demand.
UBS is forecasting average NdPr prices of US$60 per kilogramme this year, although spot is higher, while the prices should move to around US$100 per kilogramme in 2024.