Heavy Rare Earths (HREE): The Supply-Constrained Cluster
Heavy rare earths (HREE) comprise the nine elements with higher atomic numbers: europium (Eu), gadolinium (Gd), terbium (Tb), dysprosium (Dy), holmium (Ho), erbium (Er), thulium (Tm), ytterbium (Yb), and lutetium (Lu). HREEs are significantly scarcer than LREEs, more difficult to process, and command premium prices. Dysprosium and terbium face the tightest supply constraints in the REE complex due to high-temperature magnet demand.
Why HREEs Command Price Premiums
HREEs trade at 5-20x the price per kilogram of comparable LREE. This reflects three factors:
- Lower crustal abundance: HREEs are genuinely less abundant than LREE in most ores.
- Higher separation costs: Chemical separation of HREEs is more challenging. Solvent extraction efficiency drops for higher atomic numbers.
- Geopolitical concentration: HREE processing is even more China-dominated than LREE. New HREE separation capacity is rare.
The Nine HREE Elements
Europium (Eu) & Gadolinium (Gd)
Phosphor applications (Eu) and MRI contrast agents (Gd). Stable demand, moderate pricing. Eu guide | Gd guide
Dysprosium (Dy)
CRITICAL BOTTLENECK. High-temperature magnet performance enhancer. Tightest supply constraint in REE complex. Premium pricing. Dy guide
Terbium (Tb)
CRITICAL BOTTLENECK. Ultra-high-purity magnet additive. Even scarcer than Dy. Extreme price premium. Tb guide
Holmium (Ho) & Erbium (Er)
Magnets, lasers, optical fiber applications. Moderate demand and pricing. Ho guide | Er guide
Thulium (Tm) & Ytterbium (Yb)
Portable X-ray, lasers, niche applications. Low volume, specialty markets. Tm guide | Yb guide
Lutetium (Lu)
PET scanners, catalysts, specialty applications. Smallest production volume among HREE. Lu guide
HREE Market Dynamics
Supply Concentration
China produces 85-95% of global HREE separation capacity. Non-China HREE supply projects are actively pursued but face long development timelines and technical hurdles. This concentration creates geopolitical leverage and price volatility.
Demand Drivers
- High-temperature magnets (Dy, Tb): EV motors and wind turbines operating at elevated temperatures require Dy/Tb doping. Structural demand growth.
- Phosphors (Eu, Y): Display backlights, phosphorescent screens. Cyclical demand tied to consumer electronics.
- Specialty applications: MRI agents, PET scanners, lasers. Steady but low-volume demand.
Dysprosium and Terbium: The Critical Bottleneck
Dy and Tb merit special attention. These two elements represent the tightest supply constraint in the entire REE complex.
Dysprosium (Dy)
- Current supply: ~8,000-10,000 tonnes/year globally. China: 70-80% of separation.
- Demand: EV motor magnets require 2-5% Dy in magnet alloys. Each EV motor uses ~50-200g Dy. Demand growth: +10-15% CAGR through 2030.
- Supply-demand gap: Persistent deficit. New supply projects are high-priority.
- Pricing: 5-10x Nd on per-kg basis. Volatile. Supply shocks drive 50%+ price spikes.
- Investment angle: New Dy supply projects or separators with Dy capability command premium valuations.
Terbium (Tb)
- Current supply: ~600-800 tonnes/year globally. China: 85%+ of separation.
- Demand: Specialty magnet applications. Lower volume than Dy but equally supply-constrained.
- Supply-demand gap: Severe deficit. Inventory drawdown has occurred.
- Pricing: 3-5x Dy on per-kg basis. Extreme premium. Highly volatile.
- Investment angle: Tb supply projects are rarities. Extreme supply constraints support premium equity valuations.
HREE Investment Strategy
HREE investing requires distinguishing between high-constraint elements (Dy, Tb) and commodity HREE (Eu, Gd).
Risks and Considerations
- China dominance: Reducing dependency on Chinese HREE separation takes time. New capacity faces capex and technical challenges.
- Cyclical demand: HREE demand is cyclical through EV and electronics cycles. Producers face downside risk during slowdowns.
- Technology substitution: Alternative magnets or recycling could reduce HREE demand. Risk is low through 2030 but worth monitoring.
- Price volatility: HREE prices swing sharply. Investors must size positions for downturns.
Equity Exposure
HREE investment is accessed through:
- Integrated REE producers: Companies with both LREE and HREE exposure. REE stock list
- HREE-focused projects: New separation plants or magnet REE developers focused on Dy/Tb supply.
- REE ETFs: Bundled exposure to REE supply chain. ETF comparison
Key Takeaways
- HREEs are genuinely scarcer than LREE and command 5-20x price premiums.
- Dysprosium and terbium are the critical bottlenecks, facing decade-long supply deficits.
- New HREE separation capacity outside China is a policy priority and investment focus.
- HREE investors should differentiate between high-constraint (Dy, Tb) and commodity HREE (Eu, Gd).
- Supply-chain position matters: mining vs. separation determines margin and risk profile.