INDUSTRY BULLETIN: Electric Vehicles will also increase demand for rare earths. Will China restrict supply?

April 9, 2018

In 2010, China cut off sales of rare earths to Japan over a territorial dispute in the East China Sea. Could China use its near-monopoly control over rare earths supply to restrict exports to the US, as part of escalating trade tensions? Some market observers believe that could be the case, leaving the market scrambling once again to find new rare earth supply sources outside China.

While most investors are now well aware of the rapidly growing demand for lithium ion battery materials being created by the transition to electric vehicles (EVs), less well known is the fact that this will also create new demand for rare earths, particularly neodymium and praseodymium.

Avalon Advanced Materials Inc. was represented at the recent 8th Annual Rare Earth Conference in Kunmin, China, where we learned that the rare earth industry is poised for a significant increase in demand, due mostly to the increased manufacture and implementation of EV electric motors that contain rare earth magnets. Amanda Lacaze, Managing Director and CEO of Lynas Corporation, forecasted neodymium and praseodymium demand for magnets would grow from just above 20,000 tonnes per year (tpy) in 2015 to over 40,000 tpy in 2030, putting upward pressure on prices. Also, during the conference, Dr. Nils Backeberg, Analyst for Roskill Information Services Ltd., forecasted that total rare earth demand would increase from 138,000 tpy in 2017 to 170,000 tpy in 2020 (+23%), with most of this increase being created by demand for magnets.

An EV can contain as much as 10 kg of permanent magnet material (most often neodymium-iron-boron). In China, this will mean consumption of 5,000 tonnes of permanent magnets in 2020 and 15,000 tonnes by 2025 for EVs alone, according to ShuSen Jin, Chairman of Baotou Jinshan Magnetic Material Co., Ltd.

Permanent Magnet content of Electric Vehicles

Hybrid Electric Vehicle
Plug-in Hybrid Electric Vehicle (PHEV) Electric Vehicle

1-2 kg

2-3 kg

5-10 kg

Source: Baotou Jinshan Magnetic Materials Co., Ltd.

Note: A typical neodymium-iron-boron magnet can contain up to 35% rare earths (neodymium, praseodymium, dysprosium).

As reportedly recently by Reuters, Tesla's decision to shift to a motor using neodymium-praseodymium magnets in its Model 3 Long Range car adds to the pressure on already-strained supplies of these rare earth elements.

The main conclusion drawn from the recent Rare Earth Conference was that neodymium and praseodymium demand related to EV motors is increasing and will continue to increase over the next few years at a rate exceeding available supply. Growing internal demand could provide China with further justification for imposing export restrictions. New rare earth supply sources outside China - offering potential for production of concentrates rich in neodymium and praseodymium - will be needed to meet the growing global demand.

Avalon's 100% owned Nechalacho Rare Earth Elements Project (Thor Lake, NWT, Canada) hosts several discrete near-surface zones of neodymium-praseodymium-rich mineralization hosted in a mineral called bastnaesite. These readily-accessible resources could present near-term development opportunities to produce neodymium-praseodymium-rich concentrates for export. Preliminary work has already been initiated to study this possibility.

For questions or feedback, please email Avalon at [email protected]

About Avalon Advanced Materials Inc. (TSX: AVL & OTCQX: AVLNF)
Avalon Advanced Materials Inc. is a Canadian mineral development company focused on technology metals and minerals. The Company has three advanced stage projects, all 100%-owned, providing investors with exposure to lithium, tin and indium, as well as rare earth elements, tantalum, niobium, and zirconium. Avalon is currently focusing on its Separation Rapids Lithium Project, Kenora, ON and its East Kemptville Tin-Indium Project, Yarmouth, NS. Social responsibility and environmental stewardship are corporate cornerstones.