In 2023, the mining industry experienced many challenges and developments that significantly affected the landscape. These included the downturn in lithium prices, intense merger and acquisition activities, a challenging period for cobalt and nickel, strategic moves by China in critical mineral markets, and the setting of new records for gold prices. Now, heading into 2024, what trends can we anticipate in the rare earth industry, and how are global supply chain dynamics evolving outside of China?
Although there has been a downward trend in strategic metals prices from last year, it’s important to remember the cyclical nature of the mining industry. Many factors, including economic conditions, technological advancements and geopolitical events, can influence the status of rare metals. This recognition is crucial for making informed investment decisions and navigating the industry’s dynamics effectively.
Not only that but how these strategic metals are traded can also have an effect.
Suppose firms active in physical commodities trading stockpiles these metals in large amounts, driving metals costs up; or several end users exit the market after fully stockpiled for the year. These are factors that can result in significant swings in metal prices. So, while the current trend may suggest a temporary decline in strategic metals, understanding the underlying factors and the cyclical nature underscores that periods of contraction often pave the way for subsequent phases of growth.
Diving further into the factors that have been affecting rare earth elements, I must mention the effects that the current economic environment is having. The effect of interest rates rising from a near-zero rate to 5 percent has directly contributed to the slowdown in demand for electric vehicles. People are more cautious about buying EVs, partly due to the costs but also because manufacturers have decreased their prices significantly over the last quarter. As a result, consumers are holding out, wondering if or when they might see yet another decrease.
However, it’s not just EVs that need to be considered. There are also many uses for these critical metals. Rare earths, for instance, are used in military technologies, agriculture and medical equipment, showcasing their significance in multiple sectors.
Although there has been a downward trend in strategic metals prices, influenced by a significant slowdown in EV demand, we must also recognize the intricate web of challenges posed by the global supply chain dynamics, especially the substantial influence exerted by China.
While efforts to diversify production outside of China have been making headway, there are still many supply chain complexities to work out, meaning the refining and manufacturing of end products still predominantly revolve around China. This reliance on China for both rare earth metal production and related technologies remains a pivotal aspect influencing market trends (sometimes for the better, and sometimes not). For example, export restrictions imposed by China led to a support in graphite prices last year, showing their influence even as we move away from their dependence.
Looking ahead, the goal of many rare earths mining companies is to continue developing robust offshore supply chains that can support not only the mining of these strategic metals but also the refining, processing and manufacturing processes. Although we are still 5-10 years out from the total realization of this goal, it’s a step in the right direction for building a healthy supply chain so that the rest of the world can benefit from access to sustainable, conflict-free metals.
