World Economic Outlook presented; rare earth industry dominated by neodymium, praseodymium, dysprosium, and terbium.
The International Monetary Fund (IMF) this week presented its latest World Economic Outlook. It forecasts moderate global economic growth of around 3.1% for the current year, which is expected to be dampened by the war in the Middle East through higher energy prices and rising inflation. Emerging markets and resource-importing economies in particular are coming under pressure.
Overall, downside risks currently dominate, according to the authors. Political tensions and shifts in trade policy are increasingly interacting and reinforcing uncertainty. An additional source of conflict arises from the growing strategic importance of rare earth elements, which play a central role in global supply chains. The IMF dedicates a separate chapter to the risks associated with disruptions in the supply of this group of raw materials.*
Significant Declines in GDP Threatened
The IMF’s model simulations show that the economic consequences of such supply disruptions depend heavily on the extent to which rare earths can be substituted. In the short term, when companies have only limited substitution options, economic losses could be substantial. In the United States, gross domestic product could decline by around 1.5%, while Germany could face a decrease of approximately 1.2%.
Neodymium, praseodymium, dysprosium, and terbium are of particular economic importance. These four elements, which are essential for permanent magnets, account for 96% of the total market value of rare earths, the authors note.
As a response to the high concentration of supply, countries and companies are pursuing various adjustment strategies: stockpiling can cushion short-term shortages but does not eliminate structural dependency. Recycling offers long-term potential, but at present cannot meet growing demand. Large-scale substitution remains limited due to the unique technical properties of high-performance magnets. As a result, diversification of imports and the reshoring of production are gaining importance. However, their implementation is hindered by long lead times, coordination challenges, and shortages of skilled labor.
*The full economic outlook will be published at the end of April on the IMF’s website.
Photo: via Canva, montage rawmaterials.net