How Important Are Rare Earth Metals? VERY - Part 2

On April 4, 2025, NY Times reported that "China has suspended almost all exports of 7 kinds of rare earth metals. The halt has caused increasingly severe shortages that threaten to close many factories in the United States and Europe."

On October 25, 2022, TerraManta published a blog post titled "How Important Are Rare Earth Metals? VERY".

Almost 3 years ago, TerraManta correctly identified what is transpiring today by using what we call motivational analysis, an essential element of Machine learning models.

Why Rare Earth Metals are ... Rare

Rare earth metals aren't very rare. What is however rare is the number of countries willing to separate them from one another. Breaking the chemical bonds that bind them in nature can require more than 100 stages of processing and large quantities of powerful acids.

Enter willing volunteer: China.

In other words, the rest of the world outsourced the separation of rare earth metals to China and decided to label itself from time to time as environmentally conscious.

Inconvenient facts: while China mines almost 70% of the world’s rare earths, Myanmar, Australia and the United States mine most of the rest. But China does the chemical processing for 90 percent of the world’s rare earths because it refines all of its own ore and also practically all of Myanmar’s and nearly half of U.S. production.

The story gets even more eye-opening.

China’s dominates exports of seven rare earths: dysprosium, gadolinium, lutetium, samarium, scandium, terbium and yttrium. These rare earth metals are mined mainly in China and Myanmar. They also happened to be among the hardest to separate chemically.

If other countries decided to invest in separation of these 7 rare earth metals, the environmental cost would be ... eye opening.

What rare earth metals China mostly stopped exporting in April 2025? Yes - the same seven: dysprosium, gadolinium, lutetium, samarium, scandium, terbium and yttrium

Why These 7 Rare Earth Metals are So Important

The main consumer of these seven metals is the automotive industry, which uses a lot of heat-resistant rare earth magnets.

However, the same 7 rare earth metals are also used by manufacturers of semiconductors, medical imaging chemicals, robots, offshore wind turbines and a wide range of military weapon systems.

It's worthwhile to repeat: a wide range of military weapon systems.

The adjustable seat in a luxury vehicle may include as many as 12 rare earth magnets for the motors that adjust it. Electric cars have additional rare earth magnets for the motors that turn their wheels.

Last week, Ford temporarily closed its Ford Explorer sport utility vehicle factory in Chicago for a week for lack of magnets

China's Response to: Why Suspend Exports?

The Chinese government has said repeatedly that it suspended exports of the seven rare earths, and magnets made from them, because they are “dual-use items” with both military and civilian applications

Samarium, which China stopped exporting this spring, is needed for the guidance systems for intercontinental ballistic missiles. An F-35 fighter jet has about 25 pounds of rare earth magnets, mostly samarium-cobalt magnets.

It is evident that China does not want F-35 fighter jets anywhere near Taiwan. Especially F-35B with short takeoff and vertical landing features (STOVL).

What's Next?

More agreements will be negotiated with China, accommodating China in a manner which will not be entirely transparent, leading to more volatility in the future.

The world will quickly shift its focus to the newly announced electric car, conveniently ignoring how much acid was needed to separate rare earth metals to produce this car.

Worth noting: China plans in 100 year cycles, while the rest of the world plans in 4 or 8 year cycles at most.

Where Do We Go From Here?

“A balanced perspective is still recommended.”

The amount of energy in the universe is constant.

The only constant is change.

Transition to renewable energy sources is not without a corresponding cost.

Change will bring increased volatility in commodity markets, including rare earths.

Volatility in commodity markets - if harnessed correctly - is a strategic differentiator for wealth managers seeking uncorrelated returns. That's where TerraManta can help.

TerraManta has been pioneering and successfully applied machine learning to forecasting commodity futures since 2015.