REE, or lanthanides, are minerals found in natural deposits and can be separated based on their atomic weight into two sub-categories: (i) HREE: yttrium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium, (ii) LREE: lanthanum, cerium, praseodymium, neodymium, and samarium. Despite their name, REE are more common than silver, gold and platinum in the earth's crust; however, mining of REE is less common as they are not typically concentrated in economic quantities. Furthermore, REE mining is usually associated with radioactive elements such as thorium or uranium, which can be difficult and expensive to handle. The majority of known global REE production originates from China, followed by the U.S., Myanmar, Australia and others.

Demand for REE has grown considerably over the last three years. The driver of this increase has been the consumption of REE in growing applications, such as permanent magnets used in EVs, offshore wind turbines and other technological applications. According to Adamas, permanent magnets accounted for approximately 35% of REE demand by volume and approximately 91% by value in 2018.

The strongest known permanent magnet is the Nd magnet, also known as an NdFeB or Neo magnet, and is the most widely used commercial REE magnet. Dy and Tb are critical metals to the magnet's composition to increase its operating temperature from 60 °C up to a maximum of 240 °C (Adamas Intelligence). This characteristic, inherent to Dy and Tb, is a necessary feature for permanent magnets used in EVs, as well as military applications, and various electronic devices, where an operating temperature greater than 80 °C is required (Argus, Adamas Intelligence).

REE magnets are shaping the future of the EV and wind power generation industries. Coordinated global efforts by countries to de-carbonize their economies has spurred research and development in green energy technologies. Innovations in the chemistry of Nd magnets has resulted in the improved strength and operating characteristics of REE magnets; by substituting small amounts of Nd with Dy, Nd magnets are able to improve the magnet's resistance to demagnetization, and by extension, performance at high temperatures. As a result, Dy demand is expected to outpace supply through to 2030.

Automobile manufacturers are in the midst of a large-scale electrification in order to meet government policies and regulations aimed at reducing the sale of vehicles with internal combustion engines, and have publicly committed to the electric revolution: Tesla (estimates 1.4 million EV production capacity by 2022), Volkswagen (targets approximately 50% batteryelectric vehicle sales by 2030); Toyota (in the U.S., targets 70% sales from EV by 2030); Mercedes (aims to become all-electric by 2030); Ford (targets 40% global sales from EV by 2030); Honda (in North America, targets 40% sales from EV by 2030, 80% by 2035 and internal combustion engine eliminated by 2040); BMW (targets 20% sales from battery/plug-in hybrids by 2023); and Volvo (targets 100% sales from EV by 2030). In addition, by 2035, the U.K. is expected to prohibit the sale of nonelectric vehicles, while in China, the country is aiming to sell exclusively "eco-friendly" focused on new-energy and hybrid vehicles according to Nikkei Asia, and California targets 100% EV adoption by 2030.

REE based permanent magnets have emerged as the leading technology in EV motors. In 2017, Tesla announced it was shifting away from the induction motor, based on copper coils, to REE based magnets due to their lower cost, higher power density and increased range. In early 2021, General Motors announced a target to be exclusively selling zero emissions vehicles by 2035 with each car featuring permanent magnet motors in addition to a smaller induction motor.

Government policies, industry offerings and consumer adoption of EV technology has the industry poised for rapid growth. According to the IEA, EV demand is estimated to have a CAGR of 31% in the Sustainable Development Scenario (SDS) and a CAGR of 24% in Stated Policies Scenario (STEPS) from 2020 to 2030.

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