LONDON (Reuters) – The U.S. Department of Defense has just committed funding for two rare earth separation plants on U.S. soil.
It’s a small step toward the Trump administration’s stated goal of breaking the country’s dependence on Chinese supplies of critical minerals.
But the Pentagon’s direct involvement underscores the scale of the task associated with creating a non-Chinese rare earths supply chain from scratch.
Last year, the United States was almost totally dependent on imports of rare earth compounds and metals, just like the year before and the year before. China remained the top supplier accounting for about 80% of all imports, according to the United States Geological Survey (USGS).
This reliance on China for minerals with critical uses in a wide range of civilian and military applications is becoming increasingly problematic as Sino-US relations deteriorate.
However, breaking it, as the United States is finding, requires a mix of direct government support, alliances with like-minded countries, and a long-term focus on the six-step process chain from ore to the rare earth magnet.
LINK THE CHAIN
The United States is now producing rare earths at the reopened Mountain Pass mine in California, bought out of bankruptcy in 2017 by MP Materials, an investment vehicle backed by US funds JHL Capital Group and QVT Financial.
The mine produced 26,000 tons of light rare earth oxide in concentrate form last year, which represents 12% of global production, according to the USGS.
China’s dominance over the first leg of the global rare earth chain is weakening, partly due to the return of Mountain Pass and partly due to the shift of highly polluting heavy rare earth mining from China to Myanmar, which produced 22,000 tonnes of concentrate last year.
However, China’s control over global processing capacity is almost total, with the exception of Australia’s Lynas Corp, which operates a separation plant in Malaysia.
What is currently mined at Mountain Pass is shipped to China for processing into compounds and products which are then shipped back to the United States.
MP Materials is one of three companies chosen to receive direct government funding for a separation plant, but only after a review by its Chinese shareholder, Shenghe Resources.
Lynas, meanwhile, is partnering with Texas-based Blue Line on a heavy rare earth separation plant.
The problem, however, is that the oxide generated at the two separation plants may still need to be transported to China for further processing.
As the U.S. chases China down the rare earth value chain, it finds that each segment poses its own problem all the way to the finished product.
The country currently has virtually no production capacity for neodymium-iron-boron (NdFeB) magnets, the most common end application for rare earths and one that is expected to grow exponentially as the global automotive industry migrate to electric vehicles.
Ironically, General Motors, which held one of the two original patents for such magnets, sold the rights to China. Japan’s Sumitomo sold the other to Hitachi, which is now the main supplier outside China.
“China is where most magnets are made,” Pol Le Roux, vice president of sales and marketing at Lynas Corp, told Argus Media. (“Argus White Paper: How to Build a Rare Earths Supply Chain”, July 2020).
“So where are we going to expand? In the USA and in Europe? But there is very little magnet manufacturing there. So if we make more oxides, the only customer is China,” Le Roux said.
THE MARKET IS NOT ENOUGH
Building the full chain from mine to magnet will require customer and government support, according to Le Roux.
Market forces were the reason Mountain Pass shut down and the US abandoned the rare earths business.
Market forces are actively working against rebuilding this domestic capability, with automakers having an incentive to choose low-cost Chinese magnets over more expensive Western start-ups.
Lynas’ Mt Weld project in Australia only succeeded thanks to the support of the Japanese government, which provided loans and lowered interest rates during the difficult start-up phase, Le Roux said.
The main takeaway is that the Japanese “have a different approach to the supply chain – they place a higher value on stability of supply,” Le Roux added.
The United States is catching up, and the Department of Defense’s mandate to invest directly in separation capability is an acknowledgment of the challenging role the government will have to play.
The same goes for US Senator Ted Cruz’s proposed bill to fund both rare earth production projects and massive tax breaks for companies using US-made magnets.
The United States is also learning that it will need allies to regain some control of the rare earth sector.
“I think it’s clear at this point that if you really want to build a rare earth supply chain outside of China, there will have to be cooperation between countries,” said Ian Higgins, chief executive of the British neodymium producer Less Common Metals, also speaking at Argos.
Lynas’ involvement in the Texas project brings together a manufacturer of rare earth compounds with the only company outside of China with experience in the commercial-level separation of rare earth concentrates.
The United States has been busy forging potential alliances with Australia and Canada on a range of critical minerals.
It’s pretty clear that if he wants to fill his national magnet-making void, he’ll need Japanese help.
Not only is Hitachi the only non-Chinese sizable player, but Japan is further along the path of severing rare earth ties with China after finding itself at the end of a Chinese export ban a few years ago. ten years.
Japan’s accompaniment of Lynas through its early start-up problems grew out of this supply shock.
It took a decade for Japan to loosen China’s grip on its rare earth supplies and the United States also faces a long road.
“Multi-billion dollar supply chains don’t move overnight (but) supply chain transition has to happen, and it will happen over time,” said James Litinsky, co-chairman of MP Materials, who also gave an interview to Argus for his white. paper.
Department of Defense funding for MP Materials and Lynas/Blue Line is an important step on this road, but the road is expected to be very long.
The opinions expressed here are those of the author, columnist for Reuters.