Rare earth elements (REEs) are a group of 17 metals that include the lanthanides, as well as scandium and yttrium, on the periodic table. Notably, elements such as neodymium and dysprosium are essential for modern technologies like hard disk drives, smartphones, electric vehicles (EVs), and wind turbines. Recognising their importance, governments in the United States, the United Kingdom, Canada, and the European Union have classified REEs as critical raw materials.

Despite their crucial role, the supply chain for REEs is predominantly linear, with few innovative solutions to prolong product lifecycles and retain their economic value. This challenge is exacerbated by geopolitical risks, distinctive market dynamics, environmental concerns, and a lack of transparency throughout the value chain, highlighting the industry's current dilemmas.

Adopting circular economy principles could offer viable solutions to these challenges. By sustaining the value of materials and products within the economy, we can begin to address these obstacles.

Addressing the Challenges

Geopolitical Risks: With the majority of the world's REEs being extracted and processed in a few countries, geopolitical risks arise. Disruptions in these regions, due to political instability or trade restrictions, could significantly impact the global supply of REEs. A circular supply chain can mitigate these risks by retaining these critical metals within the economies where they are utilised, thus reducing dependence on a limited number of supplying nations.

Unique Market Dynamics: The REE market is distinctive and complex. Although it is small compared to common metals like iron or copper, its strategic importance is significant due to REEs' critical role in various modern technologies. This can lead to unpredictable market dynamics and price volatility. A circular supply chain can help stabilise these fluctuations and address the supply-demand imbalance.

Environmental Impact: The extraction and processing of REEs are often linked with considerable environmental harm, including the release of toxic and radioactive substances. It is crucial to understand and quantify this impact to drive supply chain circularity, potentially mitigating environmental damage and acknowledging necessary trade-offs.

Opaque Value Chain: The value chain for REEs, from mining to processing to manufacturing, involves multiple stages and stakeholders. This complexity can result in lost or distorted information, leading to diminished material and product value. Creating a circular supply chain enhances material traceability and stakeholder transparency regarding the origins and destinations of materials.

Creating a Circular Supply Chain

Circular supply chains are not solely about recycling. It's essential to explore other aspects of the circular economy, often encapsulated in the hierarchy of the 7 Rs (Reduce, Reuse, Recycle, etc.). Recycling, while important, is near the end of this hierarchy. To foster a more circular supply chain, businesses must rethink and redesign their models, products, and services, focusing on material circularity at the product and component levels.

Applying Circular Principles to REEs

From a company-centric perspective, each entity in the value chain should innovate in offering products containing REEs. Electric motor manufacturers, for example, should enhance motor designs to optimise performance without increasing REE usage, exploring alternative magnet types for less demanding applications. Magnet producers can reduce REE content without compromising performance, recollect magnets from end-of-life products for reuse, and recycle magnet scrap in-house to augment recycled content in their products.

Collaboration Across the Supply Chain

A circular supply chain requires the concerted effort of all actors. EV magnet manufacturers, for instance, need cooperation from OEMs and EV producers to establish effective collection systems for permanent magnets from end-of-life vehicles. Governments also play a critical role in regulation and incentivising innovation for circularity.

The Role of Digital Technologies

Digital technologies are pivotal for enhancing transparency and traceability across the supply chain, facilitating efficient recycling processes, and enabling inter-industry collaboration. With robust data protection, these technologies can maintain competitive advantages while fostering a sustainable, circular supply chain.

The Path Ahead

Rare earth elements (REEs) are at the heart of many modern technologies, yet their supply chain faces numerous challenges. By shifting from a linear to a circular model, we can address geopolitical risks, market dynamics, environmental impacts, and transparency issues. This transformation goes beyond just recycling; it necessitates a fundamental change in business models, product design, and materials management. Collaboration is key, requiring all stakeholders, from OEMs to manufacturers, to come together, with digital technologies playing a crucial role in enabling transparency and traceability. We urge all stakeholders to actively participate in this transition, leveraging digital innovations and inter-industry cooperation to establish a more resilient and circular REE supply chain.