Why an Obscure Element Has the EV Industry in a Panic

Electric vehicles (EVs) are widely seen as the future of transportation, offering cleaner, more efficient alternatives to internal combustion engine vehicles. However, behind this progress lies a critical challenge—rare-earth minerals, specifically dysprosium, which are essential for manufacturing the magnets used in EV motors. While the potential for EVs is massive, the dependence on these minerals has created a precarious situation for automakers, particularly in light of recent trade tensions between the U.S. and China.

What Element is this Important?

Dysprosium, a rare-earth mineral with atomic number 66, is integral to the production of permanent magnets used in many modern technologies, including electric vehicle motors. Over 90% of the world’s refined dysprosium comes from China, and recent moves by the Chinese government to slow the export of this vital mineral have sent shockwaves through the EV industry. In retaliation for U.S. tariffs, China has imposed stricter export controls on rare-earth minerals, including dysprosium, putting pressure on the automotive industry in the U.S., which relies on China for refining the majority of these minerals.

The scarcity of dysprosium is particularly concerning for U.S. automakers, as it is a critical component in the magnets that power EV motors. Without these magnets, electric motors cannot function, and production of electric vehicles would be severely impacted. As one senior automotive executive noted, "You cannot build the motor without the magnet." The slowdown in exports has raised significant concerns about the ability to maintain a consistent supply of dysprosium for the growing EV market.

This crisis highlights the vulnerabilities in the U.S. supply chain for EVs. While the U.S. is working to secure its own sources of rare-earth minerals, including dysprosium, the process is fraught with challenges. There is only one large-scale dysprosium mine in the U.S., and its capacity is insufficient to meet the demands of American manufacturers. Furthermore, the refining processes required to transform dysprosium into a usable material are complex and largely concentrated in China. Experts estimate that it could take decades to develop alternative domestic sources or refining capabilities to match China's existing infrastructure.

Its Use in Other Things

Tesla’s CEO, Elon Musk, has even weighed in on the issue, mentioning that the lack of access to these critical magnets could disrupt the company's plans for building its Optimus humanoid robot. Musk expressed hope that Tesla could secure a license to use the rare-earth magnets, but acknowledged that the Chinese government is hesitant to approve such exports without assurances that the magnets wouldn’t be used for military purposes.

As the EV industry seeks to wean itself from its reliance on Chinese supply chains, the cost of these rare-earth minerals is skyrocketing. Prices for elements like terbium, which are also used in magnets, have surged by as much as 25% in recent months. These price increases could further strain automakers as they work to keep costs down while trying to secure the necessary materials for production.

This situation underscores the broader challenge of securing a stable and reliable supply of critical minerals. Despite efforts by the U.S. to develop its own sources of dysprosium, the country faces significant hurdles. Mining operations take years to establish, and even once a mine is operational, the costs of refining these minerals are much higher outside of China. For instance, the cost of producing dysprosium from ore in China is about $11 to $15 per kilogram, while in countries like Brazil, it’s closer to $35 to $40 per kilogram, and even higher in the U.S. and Australia.

The refining process for rare-earth minerals is another bottleneck. Much of the specialized know-how for refining dysprosium is concentrated in Chinese companies, making it difficult for other nations to ramp up their own refining capabilities. As Gracelin Baskaran, a director at the Center for Strategic and International Studies, explained, the challenges surrounding rare-earth mineral production are not only about permitting but also about the technical expertise required to refine these elements efficiently.

What’s at Stake Here?

This shortage of rare-earth materials serves as a stark reminder of how interconnected global supply chains are, and how efforts to reverse globalization, such as the U.S.-China trade war, can expose vulnerabilities in industries that rely on materials sourced from across the globe. While some automakers are looking for alternatives to rare-earth magnets, there are currently few viable substitutes that can provide the same level of efficiency for electric motors.

One possible solution is to revert to older technologies, such as electromagnets, which were used in early versions of Tesla’s Model S. However, the switch to rare-earth magnets has already been made due to their superior efficiency, allowing EVs to achieve longer ranges on a single charge. Returning to electromagnets would be a step backward, reducing the performance of EVs and undermining the advantages that rare-earth magnets provide.

The question now is how the U.S. can address its reliance on China for critical minerals like dysprosium. Some experts believe that expanding domestic mining and refining operations is necessary, but this will take years and significant investment. The urgency of securing alternative supply sources has never been more apparent as the demand for electric vehicles continues to rise, and the consequences of continued reliance on Chinese rare-earth minerals could be severe.

In conclusion, the EV industry is facing a critical challenge in securing a reliable and sustainable supply of rare-earth minerals like dysprosium. While alternatives may eventually emerge, the path to achieving energy independence in the EV sector is complex and fraught with challenges. Until then, the U.S. must find ways to navigate the uncertainties of global trade and rare-earth mineral supply to ensure that the transition to electric vehicles can continue without disruption.

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