5 days ago
UAE likely to play key role in global rare earths supply chain
One of the key elements in the global trade wars has been the rare earths sector, which play a critical role in fostering industrial development linked to renewable energy systems, electric vehicles and defence applications.
As the UAE progresses towards its ambitious economic diversification agenda, the country is exploring ways to localize elements of the rare earths supply chain. Given local deposits in the UAE are limited, the country is focusing on the midstream processing and logistics, assisted by trade partnerships. This move is part of a larger strategy to establish a strong presence in the midstream supply chain, benefitting from the UAE's geopolitical neutrality and sovereign wealth fund power, which could help reduce global rare earth reliance on China, experts say.
In this regard, there is interest in establishing trade and processing hubs in the country, and freezones such as Khalifa Economic Zones Abu Dhabi (Kezad) are prime locations for such activities in the emirate. With a business friendly environment, excellent logistics, infrastructure and global connectivity, establishing a rare earths hub in the country would help mitigate some of the geopolitical tensions between China and the West. 'Rare earth refining is mostly concentrated in China today, with parallel supply chains being developed elsewhere (e.g. Australia) as a means to reduce that market concentration. The UAE, could position itself as a natural bridge between miners in Africa and Asia and Western technology and manufacturing firms, supported by sovereign wealth funds that invest in mining assets abroad. Furthermore, establishing industrial activity in Kezad tied to rare earths (e.g. processing) would boost local advanced manufacturing (e.g. electric vehicles) which heavily rely on rare earths such as neodymium for magnets,' Alexios Zachariadis, Partner at Deloitte Middle East, told Khaleej Times.
The UAE's 'Make it in the Emirates' and Operation 300bn initiatives promote local manufacturing of elements reliant on rare earths, such as electric vehicle components (e.g. magnets, batteries), renewable energy systems (e.g. wind turbines) and high-tech industries (e.g. drones, defense technologies). 'Investing in rare earths processing alone could enable the country to add value to imported raw materials and export technology products which are in high demand, but also further scale up the UAE's domestic renewable energy projects,' Zachariadis said.
COP28 emphasized the role of critical minerals for the energy transition. 'Post-COP28, the UAE is leveraging its Brics membership to secure upstream rare earth supplies, whilst at the same time positioning itself as an alternative trading hub, vying to attract Western and Asian companies seeking to de-risk global supply chains which have been affected by geopolitical tensions and trade barriers. It is however important to balance environmental concerns with industrial growth,' Zachariadis said.
Nations across the GCC are pursing aggressive strategies to reduce reliance on hydrocarbons, with a growing emphasis on mining as a potential sector to generate new revenue streams. 'The GCC could become a key supplier of critical minerals required for the global energy transition, competing with Latin America, Africa and Australia. New trade alliances are also likely to emerge, focusing on raw material import/export activities,' Zachariadis said.
Further down the line, enhanced regional collaboration is possible whereby individual nations focus on their key added value. For instance, a plausible scenario is one where Saudi Arabia and the UAE continue leading in mining investments (e.g. Ma'aden, EGA and international assets through sovereign wealth funds), Oman would develop metal processing hubs given its ports and smelting capacities, and Qatar and Bahrain would continue focusing on downstream industries, Zachariadis said.
'This stronger regional collaboration would in turn incentivise new infrastructure and logistics investments (e.g. railways) and create cross-border value chains in the GCC as a means to establish a regional industrial eco-system in critical minerals and rare earths to manufacture products in demand locally/regionally and by other export markets,' he added.
