Global demand for magnetic rare earth elements (REEs)—chiefly neodymium, praseodymium, dysprosium, and terbium—is projected to rise from 59 kilotons in 2022 to 176 kilotons by 2035, according to McKinsey MetalSpans data.
These materials are indispensable in the permanent magnets that power electric vehicle (EV) drivetrains and wind turbine generators. Yet, based on announced mining and refining projects, supply is on track to undershoot demand by approximately 60 kilotons, or 30% of projected 2035 needs. The shortfall is compounded by the industry’s dependency on China, which currently accounts for over 60% of mined supply and more than 80% of refined output.
While some governments are pursuing domestic extraction and processing capacity, historical growth rates suggest China’s market dominance—particularly in heavy REEs critical for high-performance magnets—will persist through at least 2035. Beijing’s recent export restrictions on certain medium and heavy REEs add a further layer of uncertainty for global buyers.
The REE value chain could generate roughly 40 kilotons of preconsumer manufacturing scrap and 41 kilotons of postconsumer scrap by 2035. However, recovery rates for postconsumer REEs remain marginal, with only a small fraction of collected magnets actually processed for reuse. Most preconsumer scrap is already recycled within Chinese manufacturing clusters, but the post-use material stream is geographically fragmented and technologically underutilized.
Even if collection systems improved, dismantling and isolating magnets—especially small and medium-sized ones embedded in appliances and electronics—remains costly and technically complex. Current recycling infrastructure prioritizes higher-value or higher-volume materials such as copper, gold, aluminum, and steel, leaving REEs as an afterthought.
Shifting Scrap Pools Could Improve Economics—Eventually
The composition of REE scrap pools is expected to change significantly by mid-century. Today, more than 80% of postconsumer scrap comes from consumer electronics, appliances, and internal combustion engine vehicles, all containing small magnets with low heavy-REE content. By 2050, scrap from EV drivetrains, industrial motors, and wind turbines—housing larger magnets with higher-value material profiles—could represent a comparable share.
This shift could improve recovery economics, but it will take decades before these large-format magnets enter recycling streams in substantial quantities. Until then, recyclers must contend with dispersed, low-yield sources.
Several experimental approaches aim to improve REE recovery. Robotic disassembly systems could enable targeted extraction, while hydrometallurgical and pyrometallurgical processes offer bulk separation options. Hydrogen decrepitation—a process that fractures magnets for easier material extraction—has shown promise but remains limited to R&D and pilot phases.
Alternative sourcing from mine tailings, coal combustion residues, and industrial byproducts is also being explored, yet none of these pathways is ready for commercial-scale deployment. Integrating REE recovery into existing recycling ecosystems will require collaboration between OEMs, recyclers, and regulators to ensure magnets are identifiable, accessible, and economically recoverable.
