| | 5 minute read

UBS Rare Earth Forecasts Only Tell Half the Story

Current NdPr supply and demand underestimated by 50%

Recently, investment bank UBS released a new report on the outlook for EV battery and motor materials following its teardown of the VW ID.3. Check out this overview from MINING.com for an informative summary of the report’s main conclusions.

Of particular interest to us at Adamas Intelligence were the bank’s latest projections for supply, demand and prices of magnet rare earths (namely didymium, “NdPr”). In our humble opinion, the UBS analysis misses the mark.

UBS conclusion: Didymium will see a “step change” in demand growth over the next decade, from approximately 30,000 tonnes per annum now to around a 100,000 tonnes per annum in 2030 with EVs making up 80% of the total.

Our take: Current global didymium oxide demand is approximately 65,000 tonnes per annum, double that estimated by UBS, and will increase to more than 140,000 tonnes per annum by 2030, of which passenger EVs, commercial EVs and other e-mobility types will collectively make up just 25-30% of total demand, considering vehicle traction motors, micromotors, sensors and loudspeakers.

For context, bear in mind that (as of 2019), total global production of NdFeB alloys and powders (the bulk precursor materials from which sintered and bonded NdFeB magnets are made) amounted to roughly 190,000 tonnes. These powders and alloys are comprised of approximately 31 weight percent rare earth metal (or 36 weight percent rare earth oxide equivalent) inferring a baseline demand of 60,000 to 70,000 tonnes of didymium oxide per annum (with lesser dysprosium and terbium) for magnet precursor production.

UBS conclusion: Current global didymium supply of around 38,000 tonnes will rise to nearly 60,000 tonnes by 2030.

Our take: As with demand, current global didymium oxide supply (primary + secondary) is also approximately 65,000 tonnes per annum, of which the majority comes from primary production in China, Australia, the U.S., and Myanmar coupled with often-overlooked but abundant secondary supplies from magnet swarf and scrap in China and Japan.

By 2030, Adamas Intelligence forecasts that total global didymium oxide supply will rise to 125,000 tonnes per annum (more than double the projection of UBS) and the market will face a deficit of 16,000 tonnes per annum (versus nearly 45,000 tonnes projected by UBS).

UBS conclusion: NdPr price forecasted to peak at $100 per kilogram in 2024 to reflect the “looming deficit and rising supply anxiety,” before returning to $70 per kilogram by 2027.

Our take: The price of didymium (“NdPr”) metal has already surged past UBS’ arbitrary “peak” of $100 per kilogram, although we suspect that throughout their analysis, when referring to supply, demand and prices of “NdPr” the team is actually referring to NdPr oxide, which any market follower will point out is a starkly different product.

All things considered, we are thrilled to see more investment banks and research firms dipping toes into the opaque abyss that is the global rare earth market but would caution investors and industry followers to carry out their own due diligence using multiple sources given the rising tide of misinformation washing over the market.

More Information: Rare Earth Magnet Market Outlook to 2030

In this report, we provide a detailed overview of the global NdFeB alloy, powder, magnet and magnet rare earth markets, including a historical breakdown of production, consumption, prices and inventory levels from 2015 through 2019. Next, we unravel the anticipated near-term impact of the COVID-19 pandemic on world markets and forecast global supply, demand and prices from 2020 through 2030.

After growing at a CAGR of 6.4% from 2015 through 2019, Adamas Intelligence forecasts that global consumption of NdFeB alloys and powders will drop by 9.3% in 2020 on account of the ongoing negative effects of COVID-19 on demand for everything from electric vehicle traction motors to automotive micromotors, wind power generators, consumer appliances, cordless powertools and dozens of other end-uses and applications.

However, with the ongoing re-opening of key demand markets in Asia, Europe and North America through the end of 2020 and into 2021, we expect demand for most end-uses and applications of NdFeB magnets to rebound strongly in 2021 and 2022 and thereafter rise steadily through the end of the decade and beyond.

Overall, we forecast that global demand for NdFeB alloys and powders will increase at a CAGR of 9.7% from 2020 through 2030 translating to comparable demand growth for the magnet rare earths (i.e. neodymium, praseodymium, dysprosium and terbium) these alloys and powders contain. Over the same period, we forecast that global production of magnet rare earth oxides will collectively increase at a slower CAGR of 7.1% from 2020 through 2030 as the supply side of the market struggles to keep up with rapidly growing demand.

Among the findings of our analysis:

Market for Magnet Rare Earth Oxides to Increase Five-Fold by 2030: With total magnet rare earth oxide demand forecasted to increase at a CAGR of 9.7% and prices projected to increase at CAGRs of 5.6% to 9.9% over the same period, Adamas Intelligence forecasts that the value of global magnet rare earth oxide consumption will rise five-fold by 2030, from US $2.98 billion this year to US $15.65 billion at the end of the decade.

Annual NdFeB Shortages of 48,000 Tonnes Expected by 2030: Constrained by an expected under-supply of neodymium, praseodymium and dysprosium oxide from 2022 onward, Adamas Intelligence forecasts that global shortages of NdFeB alloy and powder will amount to 48,000 tonnes annually by 2030 – roughly the amount needed for some 25 to 30 million electric vehicle traction motors.

Annual NdPr Oxide Shortages of 16,000 Tonnes Expected by 2030: Constrained by a lack of new primary and secondary supply sources from 2022 onward, Adamas Intelligence forecasts that global shortages of neodymium, praseodymium and didymium oxide (or oxide equivalent) will collectively rise to 16,000 tonnes in 2030, an amount equal to roughly three-times Lynas Corporation’s annual output, or three-times MP Materials’ annual output, of neodymium and praseodymium oxide (or oxide equivalents).

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