The Economics of rare earth metals and the Russian-Ukrainian conflict..

Rare earth metals are not that rare; they are simply difficult to extract from their ores. There are about 17 of them, Their premium comes from their magnetism, florescence and catalytic properties. They have become an indispensable part of technology and modernisation…

They are used in electronics, green energy, medical technology, defence industry, among other areas, Think of missiles, lasers and nuclear reactors. Their key strength is that when used with other metals, they allow miniaturisation. Think of earphones and how big speakers used to be.

To give you the context, your smartphone contains rare earths such as yttrium, lanthanum, cerium, praseodymium, neodymium, gadolinium, europium, terbium and dysprosium. Ever heard of them? Add some gold, Originally rare earths were a byproduct in the production of uranium, causing significant environmental issues.

Remember nuclear bombs? Rare earths need cheap and abundant labour, which could explain how China became a leading producer. By 2000 China produced 95 per cent of rare earth metals, This percentage has decreased to 60 but given their importance, most countries feel vulnerable and would love to diversify the sources.

China still processes 90 per cent of rare earths. If the Asian powerhouse decides to leverage that, the prices would go up. Remember the oil crisis in the 1970s? What would a rare earth crisis look like?, The fact that rare earth metals are used in industries, the medical field and in defence means countries will take steps to ensure adequate supply. Rare earth could replace oil in importance.

Think of neodymium and dysprosium – two rare earths used in electric car batteries. If we shift to all-electric cars in the near future, where shall all the rare earths come from? Think of the price of cars if only a few countries got rare earths. Think of it, 94 million cars were produced in 2023. US geological survey classified rare earths into two – light and hard. Light rare include lanthanum, cerium, praseodymium, neodymium, samarium, europium and gadolinium.

Heavy rare are terbium, dysprosium   holmium, erbium, thulium, ytterbium, lutetium and yttrium, The importance of rare earths means two professions could rise in stature – geology and chemistry.  Never mind the association of the latter with magic and witchcraft. By the way, if you are still thinking of silver and gold, you are old-fashioned.

Now comes Ukraine. All along, the invasion of Ukraine was portrayed as a reaction to her attempt to join the North Atlantic Treaty Organisation (Nato). Another factor was in the background but has now come into play – rare earth metals.  The UN says Ukraine has five per cent of the world’s reserves of rare earth metals and 21 of 30 minerals classified as critical by the European Union. I guess Russia has this information. It seems the Ukrainian war has an economic front and solution too.