The 55th anniversary of a turning point in technology is almost upon us: it was on 25 August 1967 that the then German Vice-Chancellor, Willy Brandt, inaugurated the age of the colour television by pressing a button at the International Radio Exhibition in Berlin. This innovation was made possible by the PAL system developed by Walter Bruch. Although there had been colour TV pictures in the USA before the German's invention, Phase Alternating Line, or PAL for short, quickly established itself in western Europe especially – Switzerland introduced the colour television on 1 October 1968 – and in many African and Asian countries. With this sea change in technology, demand for rare earths mushroomed. In particular, the metal europium was needed in order to generate the colour images on TV appliances. In the periodic table europium is in the lanthanide series. Headed by lanthanum, this group comprises 15 chemical elements that are known as rare earths.
The adjective "rare" does not reflect a natural scarcity of the raw materials group, which was discovered by a Swedish geologist as long ago as the late 18th century. Rare earths are in fact very common on our planet: even the rarest of the class occurs 200 times more frequently than gold. Nevertheless, rare earths are usually found in not very great concentrations, and that means complex metallurgical processes are needed in order to obtain the metals, which are always only present together, from the respective base rock. The continued development of the television world has rendered PAL technology now more or less obsolete. With rare earths, the opposite is the case: thanks to the rapid pace of technological progress, their importance is greater than it has ever been. Fortune Business Insights puts the volume of the global market for 2021 at USDbn 2.831. By 2028, annual turnover with these important elements is set to rise to more than USDbn 5.5. That means the experts anticipate an average annual growth rate of 10%.
Fortune Business Insights gives as a central driver the increasing demand for tablets, laptops and smartphones. In the last of these devices, rare earths perform a variety of functions. They are, on the one hand, used to polish the glass surface. At the same time, smartphones contain magnets which, for instance, enable the high-quality sound of their speakers. Alongside the digitalisation of the working and consumer environment, e-mobility plays a key role. The elements neodymium and dysprosium are particularly to be found in electric vehicles, in which they are needed for high-quality neodymium-iron-boron magnets. Rare earths of this composition are also used in the motors of wind turbines, where they help to make a turbine particularly effective. According to Lynas Rare Earths, a 3 MW system (direct drive) contains almost 2 metric tons of rare earth permanent magnets. In view of global efforts to switch energy generation to renewable sources, it is not surprising that demand from this sector is set to rise sharply in the years to come (see graph).
Whether the enormous demand can be met will depend largely on China. The Middle Kingdom dominates the global market, producing 140,000 tons of rare earth oxide (REO) in 2020, according to Statista. That gives the People's Republic a share of almost 60% of worldwide mine production (see graph). While Australia occupies 4th place in this ranking, the sector down under features a great many individual companies. This is evident from a look at the Swissquote Rare Earth Index, where Australian equities account for nearly 30% of the capitalisation of this theme benchmark. In general, the index launched at the start of 2019 offers a good opportunity to invest with broad diversification in the growth potential of rare earths. As important as these raw materials are for technological progress, however, the market comes with a raft of specific risks, such as those associated with setbacks in the exploration and extraction of rare earths. For that reason alone, a broad-based and also expertly selected position makes sense.
Past performance is not a reliable indicator of future performance.
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