A few days ago, 8.8 million tonnes of rare earths were discovered in south-east Norway. An essential chemical element in the low-carbon, ecological and digital transition, this discovery could reshuffle the cards in terms of Europe’s autonomy and mineral security at a time when China accounts for almost 69% of the world’s mining production and the European Union remains extremely dependent on external supplies. What influence could this discovery have on the global rare earths market? How can Europe benefit? Emmanuel Hache, Senior Research Fellow at IRIS and specialised in energy forecasting and the economics of natural resources (energy and metals), provides some answers.

The Norwegian mining company Rare Earths Norway (‘REN’) has announced that it has discovered the largest deposit of rare earths in continental Europe. What are rare earths and what does this discovery mean to you?

Rare earth elements refer to a group of 17 chemical elements (Scandium, Yttrium, Lanthanum, Cerium, Praseodymium, Neodymium, Promethium, Samarium, Europium, Gadolinium, Terbium, Dysprosium, Holmium, Erbium, Thulium, Ytterbium and Lutecium) and, contrary to what their name suggests, they are no rarer than other more common metals. At current production rates (350,000 tonnes) and in view of global reserves (110 million tonnes), the world has around 315 years’ consumption of rare earths ahead of it. Rare earths are therefore not critical from a geological point of view. The two main problems facing the rare earths market are their environmental impact and the concentration of players in the market, particularly China. The market for rare earth elements is relatively small compared with the 22 million tonnes of the copper market, and transparency of prices and transactions remains low. Despite these weaknesses, rare earth elements are rightly seen as vitamins for the global economy and for the two transitions underway: the low-carbon transition and the digital transition. They have gradually established themselves as essential components in various cutting-edge industries, particularly in the military sector and in low-carbon technologies. In particular, they are found in the permanent magnets used in the turbines of certain wind turbines and in the motors of electric vehicles. These permanent magnets already account for almost 55% of all rare earth uses. Contrary to certain beliefs, there are no rare earths in batteries. They have exceptional properties – impressive thermal stability, high electrical conductivity and powerful magnetism – and have enabled significant advances in technological performance while reducing the consumption of materials. REN’s discovery follows that of Swedish mining group LKAB in January 2023. The latter announced that it had identified a deposit containing more than one million tonnes of metals, including rare earths, in Swedish Lapland, representing around 1% of the world’s reserves.

Could this discovery change the face of the global rare earths market?

The US Geological Survey (USGS) currently estimates global production of rare earths at around 350,000 tonnes in 2023, compared with 300,000 tonnes in 2022, an increase of more than 15% – proof of the attractiveness of these vitamins with the transitions underway. The leading producer is China, with almost 69% of the world’s mine production, followed by the United States (12%), Burma (11%), Australia (5%) and Thailand (2%). But many other countries have identified production, including India, Russia and Vietnam. An analysis of the breakdown of global reserves provides new insights into the market. While China has 40% of the world’s reserves, Brazil and Vietnam each have around 20%, and many other countries have reserves underground: the United States, Australia, Canada, Greenland, Russia, South Africa and Tanzania. A simple calculation looking at the breakdown between OECD and non-OECD countries is striking! OECD countries hold no more than 7.5% of the world’s reserves (compared with 92.5% for non-OECD countries). Only Australia, Canada, the United States and Greenland have reserves. So a deposit on the scale of the one discovered in Norway (around 8.8 million tonnes of rare earths, or 1.5 million tonnes of rare earth-based permanent magnets used in electric vehicles and wind turbines) represents a major mining asset for Europe. Indeed, the rare earths market is one of the most concentrated of all the low-carbon transition metals markets. China’s control of the market extends not only to mining production, but above all to the refining and separation of rare earths, for which it accounts for around 88%. China has built up a strategic advantage in this sector since the mid-1980s. When I say that it has built up an advantage, I should say that Western countries have largely contributed to the realisation of this strategy. Indeed, before the 1990s the world’s leading producer of rare earths was the United States and, until the mid-1980s, France, along with Rhône-Poulenc, was one of the two world leaders in rare earth purification, with a market share of almost 50%. The quote attributed to Den Xiaoping ‘The Middle East has the oil, China has the rare earths’ puts China’s mineral strategy at the heart of its international strategy, but also highlights the lack of strategic thinking on the part of OECD countries, which prefer to relocate the environmental impact of their consumption rather than think long-term about the notion of security of supply.

So this is good news for Europe and for the region’s mineral sovereignty?

In September 2022, Ursula von der Leyen, President of the European Commission, said in her State of the Union address: ‘Lithium and rare earths will soon be even more important than oil and gas. Our needs for rare earths alone will increase fivefold between now and 2030 […] The only problem is that at present, a single country controls almost the entire market ». This statement highlights the need for a European strategy on critical materials for a continent that is over 98% dependent on external supplies. The adoption of the European regulation on critical raw materials in April 2024 is a step in this direction, as it sets targets for production (10% of European consumption must come from extraction on its soil), refining (40% of its consumption must come from European refining), recycling and maximum dependence on outside countries. However, despite these ambitious targets, making discoveries today is no guarantee of production in the short term. In fact, as with all mineral production, the mining period does not coincide with the low-carbon transition period and, in the case of rare earths, the environmental impact of production must be minimised to promote acceptance of the projects. REN is talking about 10 billion Norwegian kroner (nearly 870 million euros) to launch the first phase of mining production by 2030, which would eventually supply 10% of European consumption. Faced with these investment volumes, and against a backdrop of uncertainties about production due to mining opposition, the International Energy Agency (IEA) pointed out in its latest report in May 2024 that demand for rare-earth-based permanent magnets should double between now and 2050 in climate scenarios that comply with the Paris agreements. Developing production will therefore not be enough in the short term, and other fundamentals, such as recycling and sober use, must be developed and given priority.

Translated by Deepl.