Thursday, December 5, 2024
Thursday, December 5, 2024
HomeProcurement/Supply Chain ManagementRare Earth Material Supply Chain: Exploring the Key Components and Challenges

Rare Earth Material Supply Chain: Exploring the Key Components and Challenges

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

Introduction

Rare earth elements are now a crucial component of many industries, from electronics to renewable energy, in today’s highly technological society. However, the supply chain for these priceless resources is intricate and frequently encounters formidable obstacles. We will delve into the complexities of the supply chain for rare earth materials in this blog, looking at its essential elements and the challenges it faces.

What are Rare Earths? And why are they so important?

The 17 (Rare Earth Elements) REEs are chemical elements with atomic numbers 57 through 71 (the lanthanides), plus scandium and yttrium. These metals have certain fluorescent, magnetic or conductive properties that make them well-suited for use in high-tech components such as permanent magnets, catalysts, rechargeable batteries, and LED lights and displays. Their contribution to the global economy is enormous, with over US$7 trillion worth of high technology finished products requiring REEs. The final goods that rely on these components range from smartphones and other consumer electronics to advanced military weapons and communications systems, to renewable energy technology such as wind turbines and electric vehicles.

Although 60% might not seem like a lot, further down the supply chain, China’s dependence is increasingly more obvious. According to the Centre for European Policy Studies, or CEPS, China now controls 91% of refining activities, 87% of oxide separation, and 94% of magnet manufacture.  China is the industry leader in rare earths mining and processing. China generated 140,000 metric tonnes of REO equivalents in 2020, or 58.3 percent of the world’s supply, according to the USGS. The next-largest producers were Australia (17,000), Myanmar (30,000), and the United States (38,000 metric tonnes of REO).[8] Brazil and Vietnam both have more than 20 million tonnes of rare earth reserves, notwithstanding their present low production levels. The Rare Earth (RE) resources in India are reported to be the fifth largest in the world. Indian resource is significantly lean with respect to grade and it is tied with radioactivity making the extraction long, complex and expensive. Further, Indian resource contain Light Rare Earth Elements (LREE) while Heavy Rare Earth Elements (HREE) are not available in extractable quantities.

Supply Chain of Rare Earth Materials

The rare-earths supply chain is typically made up of three main parts: mining and concentrating the raw materials, refining them to produce oxides and producing the magnet.

Now let us look at the three parts one by one:

Mining and concentrating the raw materials

The first step in the rare earth material supply chain is mining and extraction. These materials are typically found in low concentrations and are often mixed with other minerals, making their extraction a complex process. The primary sources of rare earth materials are found in China, which accounts for a significant portion of global production.

Refining and Processing

Once the rare earth materials are extracted, they undergo refining and processing to separate them from other minerals and impurities. This stage involves complex chemical processes to obtain high-purity rare earth compounds, such as oxides or salts, which are then used in various industries.

Manufacturing and Production

After the refining process, the purified rare earth materials are utilized in manufacturing and production. They are incorporated into different components and products based on their unique properties. For instance, neodymium magnets, which contain neodymium and iron, are widely used in motors and generators.

Once these three steps are over the distribution and trade of these rare earth materials starts.

Global Distribution and Trade

The global distribution and trade of rare earth materials play a crucial role in meeting the demand from industries worldwide. China has traditionally been a dominant player in the rare earth market, accounting for a significant portion of production and export. However, other countries, including Australia, the United States, and Brazil, are also striving to increase their production capacities.

Now let us look at some other crucial factors impacting rare earth supply chain:

Environmental Concerns

The rare earth material supply chain raises significant environmental concerns due to the extraction and processing methods involved. The mining and refining processes can result in the release of toxic substances and radioactive elements, leading to environmental degradation and potential health risks for nearby communities. Efforts are being made to develop more sustainable practices and minimize the environmental impact of rare earth mining.

Geopolitical Factors

The supply chain for rare earth materials is significantly impacted by the geopolitical environment. As was already established, China has significant influence in both international trade and geopolitics due to its supremacy in the manufacturing of rare earths. Because so many essential resources are dependent on a single nation, other countries have been forced to look for alternate sources and build their own manufacturing capacities. The Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development, which promotes the improvement of sound mining governance, now has India as a member.

Recently, India and Australia decided to strengthen their partnership in clean energy transition and create resilient supply chains for critical minerals. Australia committed $5.8 million to the three-year India-Australia Critical Minerals Investment Partnership.

India is planning to proactively engage with global players to secure its place in international partnerships on critical minerals. Last year, the United States formed the Minerals Security Partnership (MSP), a global alliance to reduce dependence on China.

MSP is an ambitious new alliance comprising Australia, Canada, Finland, France, Germany, Japan, the Republic of Korea, Sweden, the United Kingdom, the US and the European Commission.

The alliance intends to ensure that critical minerals are produced, processed and recycled in a manner that supports the ability of countries to realize the full economic and sustainable development benefit of their geological endowments. India needs to actively engage with global players to secure its seat in MSP.

Recycling and Sustainability

Given the increasing demand for rare earth materials and the limited supply, recycling and sustainability have become crucial aspects of the supply chain. Recycling technologies are being developed to recover rare earth materials from discarded products, reducing the dependence on primary mining. Furthermore, sustainable mining practices and efficient use of resources are being explored to ensure long-term availability.

Market Demand and Price Volatility

The market demand for rare earth materials is influenced by technological advancements and emerging industries. The rapid growth of electric vehicles, renewable energy systems, and consumer electronics has led to increased demand. However, the limited supply and geopolitical factors contribute to price volatility, making the market susceptible to fluctuations.

Way forward and Conclusion

The supply chain for rare earth materials needs to diversify, be sustainable, and improve technologically. Alternative sources are being created, extraction methods are being improved, and recycling is being encouraged. Collaboration between nations and businesses is crucial to ensure a steady supply chain that satisfies the expanding demand while reducing environmental effects.

Also read: Geopolitics & International Relations in Supply Chain Management: Building Supply Chain Resilience Through Global Connections

- Advertisement -
Shantanu Trivedi
Shantanu Trivedi
Shantanu Trivedi is working as a faculty at the University of Petroleum and Energy Studies, Dehradun. He holds an MBA and a Ph.D. degree in Supply chain management. He has more than a decade of experience in teaching and research. He has published 2 books, 5 book chapters and more than 12 research papers and articles in international journals of repute. His research interest includes Supply chain management, agribusiness, online and distance education, Business sustainability and infrastructure management. He is the reviewer of many international publishing houses. He has presented his work and won awards at many research conferences and symposiums. He has worked on many research with state governments and the government of India. In his spare time, Shantanu loves to travel and explore nature.
- Advertisment -

Most Popular