(MENAFN- ProactiveInvestors)One sector set to benefit from the recent ground-breaking climate deal in Paris and moves to create a lower carbon world is rare earths which are now seeing a revival in demand. Leaders pledged to limit global temperature rises to 1.5 degrees Celsius above pre-industrial levels which is obviously a boon for green energy. Talk of rare earths was buzzing a few years ago but slipped away along with prices alongside the general commodity slump and a dearth of development projects getting off the ground. But rare earths and renewables go together like mince pies and custard as such metals are critical in high strength magnets used in wind turbines and also in photovoltaic cells for solar panels - just two obvious ways we might cut greenhouse gases. They are also used in conventional and hybrid electric vehicles - undoubtedly a hot topic at the moment. If the names of the 17 generally grouped together are unfamiliar to you here are some ? Lanthanum cerium neodymium and terbium. Will Dawes chief executive at Africa-focused rare earths development firm Mkango Resources (CVE:MKA) says the Paris deal was positive for rare earths and the wider "technology" metals (used in industrial processes) and reckons the market is only just beginning to grasp the significance. China as with all mining is key to the rare earth sector's fortunes as it is the largest producer (90% of world output) and consumer (70%) of such minerals. And aside from the whole green energy debate it is seeing a structural shift in its growth development - away from infrastructure and bulk commodities to more high tech goods and consumables due to a burgeoning middle class. In fact Dawes notes that while recent talk has been of the death of the mining "supercycle" which drove the prices of the bulks and base metals he thinks a new "cycle" of Chinese growth may now be upon us. "We are now moving into a new cycle of the technology metals and rare earths" he says. "And the whole green energy side is going to be a part of that transition from commodities to technology metals and rare earths" he added. A Chinese five year plan set to be published next quarter reinforces the significance and demand for such metals as it prioritises such things as green energy value-added technology products and IT growth. According to one industry source Chinese domestic consumption of rare earths is expected to increase nearly 8.3% in 2015 to 97700 tons and to reach nearly 150000 tons in 2020 doubling from about 90000 tons last year. Prices enjoyed a boom four years ago but were hit by oversupply issues as global output only amounts to around 180000 tonnes a year but prices are now showing signs of turning a corner not least due to structural changes like tax changes in China. Analysts at Capital Economics reckon 2016 should see a turning point in prices but also sees risks. 'First Japan has invested heavily in supply in Kazakhstan and India and production from India has been rumoured to have already begun. Second recent research has discovered new ways to recycle REEs while stricter recycling standards in China are set to come into force next year' said economist Melanie Debono. In addition illegal production continues to be a huge issue with the black market put at around 40000 tonnes a year. How quickly the Chinese government is able to clamp down on this will certainly determine the speed of any price recovery. Indeed the irony of the rare earths situation is that in giving up on coal and gas we may be trading in one resource shortage for another in the hunt for rare earths and there may be just as many environmental concerns to exploiting rare metals. There is also a big question mark over whether demand can keep up with supply. Supply lines can take up to 20 years to develop and there are high costs of opening a mine and environmental concerns. Often these metals are also the by-products of other processes. One area where there has been a more tangible trajectory has been in the electric car market and therefore rare and light metal lithium which is used in high spec batteries. The market for lithium has grown between 8-12% over the last 15 to 20 years and is only set to grow. A big name in the space and a reason for experts saying we face a shortage is New York listed Tesla - maker of the Model S and Model X electric cars and much in the news. It is building in the Nevada desert the world's largest battery plant - a Gigafactory - which will supply batteries for the 500000 cars Tesla hopes to produce by the end of the decade as well as to power homes. However it has still not announced any supply deals with the globe's biggest producers. So although such metals' relevance to a future greener world is undoubted the whys and wherefores of how they will be exploited and mined responsibly and is still very much a live question.
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