Rare earth elements (REEs) have emerged as essential building blocks for enabling the energy transition. This is particularly true for specific REEs needed to make REE magnets, which are used in e-motors and wind turbines.
With an expected surge in demand for REEs in the next decade facing a mined and refined supply that is highly concentrated in China, global and local supply chains will need to navigate significant geopolitical developments, such as China’s recent export restrictions on specific medium and heavy REEs1 and unique sustainability challenges. In addition, the recent rise of REEs to the top of resilience agendas in many countries is expected to accelerate these trends, creating new opportunities for circular REE magnet value chains by resolving current recovery challenges.
Materials Circularity
This series by McKinsey is a practical resource for leaders looking to build circular value chains.
This article is part of a series on increasing the circularity of materials. To tap into the growing secondary REE market, recyclers can manage volatile scrap pools by evaluating opportunities in appliances and electronics recycling. Doing so will likely require developing and scaling cost-effective technologies for dismantling magnets over the medium term while positioning to capture the uptick in battery electric vehicle (BEV) and wind turbine recycling over the long term.
Apple and McKinsey unlock low-carbon sourcing
How recycled materials drive greener supply chains
Accelerating the energy transition requires a stable supply of REEs to meet demand for new, more materials-intensive technologies while reducing materials emissions. Recycling postconsumer REE magnets could serve both purposes, and long-term collaborations across the value chain can help address some of the challenges of REE recycling. For example, producers and OEMs can help recyclers focus on the right devices by providing transparency on magnet location, composition, and value—an effort that regulators have also acknowledged is important. Powering the energy transition’s motor begins with understanding the dynamics around scrap pools, which technologies are competitive today and which will be competitive in the years to come, and how to build alliances and integrated value chains to help those technologies get off the ground.
