Baku: Demand for rare earth metals is rapidly increasing, but production and supply are unable to fully meet this growth, APA-Economics reports, citing the International Energy Agency's (IEA) report titled 'Rare Earth Elements: Pathways to Secure and Diversified Supply Chains.'

According to Azeri-Press News Agency, 17 rare earth metals are critically important for future technologies. These elements are used in sectors ranging from electric vehicle production and artificial intelligence data centers to robotics and the defense industry. In particular, demand for neodymium, praseodymium, dysprosium, and terbium-essential for permanent magnets-is growing rapidly. Since 2015, demand for these elements has doubled and is expected to increase by more than 30% by 2030.

The main issue is that a large share of rare earth elements is mined and processed in China. Specifically, China accounts for 60% of global production and more than 90% of processing of these elements. In addition, approximately 95% of global permanent magnet production is concentrated in China. All of this makes global supply chains highly vulnerable.

The report notes that export restrictions imposed by China in 2025 caused significant short-term disruptions, with some manufacturers outside China facing difficulties in securing key components and, in some cases, being forced to reduce production. The report indicates that if such restrictions are fully implemented, approximately $6.5 trillion worth of economic activity outside China could be at risk annually, with the automotive, electronics, and transport sectors being the most affected.

'Approximately $60 billion in investment will be required over the next decade to develop diversified supply chains. Although this is a significant amount, it is small compared to the scale of potential economic losses resulting from supply disruptions,' the report emphasizes.

The report lists measures to support diversification, including strengthening emergency preparedness, increasing investment at key stages of the value chain, accelerating both supply- and demand-side innovation, and improving price transparency.

Note that rare earth metals (REM) consist of 17 elements (scandium, yttrium, and 15 lanthanides) and are critical raw materials for modern high technologies, the defense industry, electric vehicles, and renewable energy.