Rare Earth Risk

The Supply Chain Risk

Rare earth elements are starting to gain increasing coverage in the mainstream media and trade press, yet their importance to the offshore wind industry is very poorly understood. Forecasts show that global annual demand for neodymium oxide (used to make magnets) will substantially exceed demand by 2030 leading to shortages of this critical materials if additional sources of supply are not developed. Forecast demand growth would require an increase in rare earth production of 15% each year, equivalent to opening a new mine the size of California’s Mountain Pass each year or the size of Batou mine in China every three years.

With over 90% of rare earth element mining and production controlled by China, even if countries such as the US or UK manage to build rare earth mines it could take at least a decade to produce the quantities of magnets needed for wind turbines, electric vehicles and other high-growth industries to meet aggressive clean growth targets.

Already in 2021, the price of neodymium has increased by 42% from the start of the year. The March 2021 price of 885,000 CNY (Chinese Yuan Renminbi) is an all-time high since China ended its export restrictions in 2015. Analysts point to increased demand from rapid growth in EV markets, as well as increased geopolitical tensions as the reason for the price increase.

So, the crux of the matter is: we have limited time to secure the materials needed to drive the transition to cleaner energy with offshore wind and electric vehicles.Electric vehicle (EV) roll out and uptake is accelerating ahead of global forecasts, thanks to reductions in technology price, and also to increased policy support. Rare earth magnets make up 60% of the value of an electric motor, making the EV sector exposed. The sector expects shortages of REEs to drive up prices of EV motors as soon as 2022. To replace today’s vehicle fleet with EVs would require a 655% increase in rare earth production.

Offshore wind alone is expected to become one of the big demand users of rare earth magnets. The sector is currently estimated to use 10% of annual production. However, growth projections show that rapid scale up of demand will mean that offshore wind’s annual rare earth magnet demand will exceed total current world supply by 2035.

Without significant additional production coming on stream within the next 5 to 10 years there will almost certainly be rare earth shortages, which is why GreenSpur are investing heavily in a substitution technology.

Our objective is to work with a network of international partners to co-develop our generator to deliver a commercially viable and environmentally friendly solution for the offshore wind sector.