Forecasting Rare Earth Element Demands for Clean Energy Technologies with the Bass Diffusion Model

Abstract

The push to decarbonize has spurred the demand for clean energy technologies such as electric vehicles (EVs) and wind turbines (WTs). These technologies rely on rare earth permanent magnets (REPMs), namely Neodymium-Iron-Boron (NdFeB) magnets that in turn rely on rare earth elements (REEs), including Neodymium (Nd), and Dysprosium (Dy). As the demand for clean energy technologies increases, so will the demand for Nd and Dy-containing REPMs. Both Nd and Dy are critical elements that are prone to supply chain risks. As our reliance on them increases, it becomes essential to anticipate future market dynamics for these elements. This paper aims to address the current gap in the literature in the context of forecasting future Nd and Dy demand quantities. The Bass Diffusion Model is a widely used approach to forecast the adoption of new products or technologies and, to predict demand trends. Over the years, the model has found applicability in a wide variety of sectors including consumer durables, medical services, and agricultural innovations. This paper demonstrates the use of the Bass Diffusion Model to estimate future global Nd and Dy demands, enabling a better understanding of swiftly evolving clean energy technology and REPM-related market dynamics.