The prices of rare earth elements that are key materials used in batteries for electric vehicles and electronic devices are rallying, weighing on South Korean EV and smartphone makers that heavily rely on imports for rare earth materials.

According to Korea Resources Corporation, the price of neodymium - which is used to make magnets for electric vehicle motors - has hit $70,450 per ton as of August 17, up 43.95 percent from the previous month’s average of $21,508. The price has also soared 77.03 percent from the average in the previous year. The price of dysprosium - a rare earth for emerging technologies - has also jumped 29.6 percent to $228 per kilogram from the previous month’s average.

Neodymium and dysprosium are rare earth minerals that cannot be substituted by any other minerals and are key ingredient for magnets used in vehicle and wind turbine motors as well as various electronic devices such as smartphones.

The recent surge in the prices of rare earth resources comes after the Chinese government has maintained supply of rare earth materials tight. According to an unnamed official from Korea Resources Corporation, despite the growing demand for electric motors every year, China controlling about 90 percent of the world’s rare earth supply is not expanding the country’s overall production quota for rare earth materials, limiting their annual output at 155,000 tons for this year, unchanged from last year.

The Chinese government has also been cracking down on illegal miners of rare earth minerals and scrutinizing overall retail network, a move that has placed legitimate rare earth suppliers in China to gain an edge on negotiating prices.

The weakening U.S. dollar has also fanned speculative demand for rare earth minerals in the third quarter of this year, inflating their prices, according to market experts.

The soaring rare earth prices are giving a headache for Korean finished vehicle manufacturers and renewable energy generators that fully rely on imports for rare earth materials. An unnamed official from the local vehicle manufacturing industry said local auto makers are keeping a close eye on auto components suppliers amid soaring prices of rare earth minerals.

Because the rally in the price of rare earth minerals has also tightened supply of rare earth mineral magnet, the key component for electronic devices, the price of electronic devices including smartphones would rise, industry watchers worried.

By Lee Jae-cheol and Park Chang-young

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]