Goldman Sachs has said the West may need more than $25 billion in investments to match China's supply of rare earths, as export curbs by Beijing on minor metals fuel fears that rare earths could be next.

Europe and the U.S. are scrambling to wean themselves off rare earths from China, which account for 90 percent of global refined output. Concerns about supply were heightened this week by China's decision to impose export restrictions on two minor metals used in semiconductors and electric vehicles.

The market for rare earths neodymium and praseodymium (NdPr), used in magnets in sectors from electrified transport to defense, will be well supplied in the medium term due to increases in China's mining quotas, analysts at the bank said in note, predicting a market surplus until 2027.

Mining more than 70 percent of the world's NdPr and accounting for more than 90 percent of the downstream metal and magnet segment, China increased its output to around 45 kt (50,000 st) this year from about 31 kt (34,000 st) in 2021, the bank said.

The market was pushed into a surplus after China hiked its production quota for the first half of 2023 by 20 percent, Goldman said, cutting price forecasts for NdPr.

Replicating China's 45 kt/a (50,000 stpy) output could cost the West anywhere between $15 billion and $30 billion, Goldman estimated.

It expected demand for NdPr could outpace supply from 2028 onward, driven by the share of demand for electric vehicles and wind turbines doubling to 50 percent by 2030.

But out of more than 20 projects outside China that could produce some 18 kt (20,000 st) of NdPR every year, Goldman believes that "only 2-3 of these projects can get off the ground this decade."

(Reporting by Deep Vakil in Bengaluru; Editing by Conor Humphries)
 

Photo: Rare earth production in Jiangxi province, central China. Shutterstock