The demand for heavy rare earth elements is likely to rise as the use of green energy technologies increases and supply remains tight – while some light rare earths are moving to a position of oversupply.

According to a report by research firm MarketsandMarkets, the demand for rare earth metals is estimated to reach 192,000 tons by 2018. Demand is strongest in the Asia-Pacific region, with China accounting for 60 per cent of global rare earth consumption.

Although light rare earths such as lanthanum (used to make nickel metal hydride batteries for electric and hybrid vehicles) and cerium (used to polish glass, metal and gemstones) capture around 62 per cent of the market share, they are more abundant in the earth’s surface, and it is the heavier rare earths which will see their value increase.

Rarer heavier earths which will be in demand include yttrium, europium and terbium used in energy efficient fluorescent lamps and bulbs, erbium which is used in lasers for medical and dental use, and dysprosium, used in the manufacture of neodymium-iron-boron high-strength permanent magnets.

Paul Lusty, team leader of Ore Deposits and Commodities at the British Geological Survey, says: “Heavy rare earth elements are more expensive than the light rare earths because of their geological availability and market demand for them, which is generally expanding because of specialist applications in new technologies.

“There is limited scope for rare earths to be substituted for other materials in these applications and the heavy rare earth elements are essential for their performance. Projections suggest supply will be problematic for yttrium, europium and terbium and may be challenging for other important elements such as erbium and dysprosium. They are more likely to sustain higher prices or see some price increase going forward.

“For elements like terbium the supply situation is going to continue to be quite tight over the next few years, probably at least up to 2016 or the end of the decade until we see some significant heavy rare earth producing operations outside China actually coming online. The real major growth areas are associated with green or clean energy technologies. Many of the rare earths have important magnetic characteristics. They are used in industrial motors, hard disk drives, hybrid electric vehicles and wind turbines. Analysts are predicting increased demand for magnets which use rare earths.”

At the moment, China has the monopoly in the rare earth market, but the emergence of new players in the industry is likely to have an impact on prices. China accounts for 85 per cent plus of global rare earth production, though Lusty says that new operations in the US and Australia are starting to make an impact on China’s share of the market for some elements. Companies such as US-based Molycorp and Australian firm Lynas have both started operating their rare earth mines which will see production of rare earth metals increase substantially.

But Lusty says such changes will take some time to affect the industry’s strategy. “In terms of the future it takes a long time for the mining industry to respond to changes in demand,” he says. “It is probably going to be at least another 10 years before we see a diverse supply base outside China. The processing of rare earth is complex. It is unlikely that more than a handful of those projects that are currently being explored will reach the commercialisation stage and become producing mines.”

Countries such as the US are also looking at recycling to improve the supply base of rare earth metals. According to MarketsandMarkets, the existing recycling rate for the rare earth metals is 1 per cent, which presents a significant opportunity for important recycling efforts. Rare earth metals are an important part of the production of green technology, and it will be the heavier kind used in these devices where supply is tight which will likely see prices rise the most.