US is rebuilding rare earth magnet supply chain

The United States is reconstructing the supply chain of rare earth magnets. Because it is a strategic material that can be used in pure electric vehicles (EVs), it hopes to reduce its dependence on China and shift the production process, of which China has a high share, within the United States. With government support, the pace of investment by U.S. companies is accelerating.

The Mountain Pass mine, the world’s leading source of rare earths, which went into production in the 1950s, is more than an hour’s drive from the centre of Las Vegas, Nevada, in the western United States. Pits and processing facilities line the 8.9 square kilometres, and the stronghold, which was once an abandoned mine in the mid-2010s, is now embarking on a massive reinvestment.

US Department of Defence provides $45 million in assistance

The company will invest a total of $700 million by 2024 to improve its facilities, one of which is a “separation-refining” process that extracts high-purity metals from mined ore. China accounts for 90 per cent of the world’s share of the separation-refining process.

The mine has previously processed ore into intermediate products and exported them to China. In the future, it will continue to export, but at the same time, it will gradually start up new facilities and do some of the processing itself.

After refining, Sumitomo Corporation plans to purchase neodymium used in magnets for electric car motors directly from MP, and then process it into alloys in Southeast Asia to reduce the supply chain’s dependence on China.

The Biden administration is also giving a boost to this move against the backdrop of the US-China rivalry. In order for MP to introduce the new process, the US Department of Defence has provided a cumulative total of about $45 million in assistance. The U.S. government has designated rare earths, which are widely used in all-electric vehicles and military products, as a strategic material.

MP gained business in 2017 after the former owner’s operation went bankrupt and pushed ahead with reforms. Replaced old equipment and improved start-up rates. Employees’ willingness to work has also improved through the introduction of a stock-based compensation system, etc. Matt Slascher emphasised that “profits can be made through low-cost operations.” The company has continued to run surpluses from fiscal year 2021 (ending December 2021) onwards. Production of the intermediate product called concentrate is at a record high in the more than 70-year history of the mine.

With the spread of EVs, the demand for rare earths has greatly expanded. Canadian research company Adamas Intelligence predicts that the world demand for neodymium magnets will grow at an annual rate of 7.5% by 2040, expanding to 3.4 times in 2023, reaching 670,000 tons. Turbines for EVs and wind power will do the pulling.

It is not easy to fundamentally adjust the supply chain that has been dependent on China for many years. The United States, which has high material costs and logistics costs, also has disadvantages in terms of costs. There are also many opinions that: “It will take 10 years to really get rid of China” (automaker executives).

The U.S. Department of Defense has also supported Niron Magnetics with about $35 million, which means that rare earth production and security are inseparable. While the barriers to entry are high, supply chains have indeed begun to change.