Rare earth supply chains mobilize as US-China truce seen as temporary fix

China's resumption of rare earth exports to the US may only be a temporary fix for strained Western supply chains, which have finally swung into action this year, miners said at a major Australian industry conference.

"It has been a very eventful year," Rowena Smith, managing director and CEO of rare earths developer Australian Strategic Materials Ltd., told the Diggers and Dealers Mining Forum in Kalgoorlie, Australia, on Aug. 4.

The vulnerability of over 90% of rare earths midstream processing, refining, metallization, alloying and magnet production being "controlled in China" has been known for some time, Smith said. However, it "has not really been felt" until this year, which has seen a "shift to an urgency around establishing these alternative supply chains."

"The Western world has been moving to address this [vulnerability] situation, but it's been turbocharged recently by the US introducing tariffs on China," Darryl Cuzzubbo, managing director and CEO of Arafura Rare Earths Ltd., told forum delegates on Aug. 5.

China responded by ceasing the export of permanent magnets, both to the US and to the rest of the world. This has "set in train a chain of events where not just the US" but magnet producers and users like car manufacturers, robotics and defense industries across the EU, South Korea and Japan have mobilized to secure raw materials supply, Smith said.

"China and the US then had a truce, and China has selectively started exporting rare earth magnets again. However, these agreements are only three to six months. So this supply crisis is far from resolved and still has a long way to play out," Cuzzubbo said.

The consequences of the ex-China market's "risky" reliance on single-source supply chains for defense and decarbonization technologies were seen during and after the pandemic, Alex Logan, general manager of development at Lynas Rare Earths Ltd., told forum delegates on Aug. 5.

There has been much expectation of the growth of magnet maker capability outside of the incumbents Japan and China throughout Logan's 13-year career in rare earths. However, this growth "didn't really happen until today... new metal and magnet projects are in development across [South] Korea, Vietnam, Europe, Canada and the US. A vibrant outside-China rare earths industry is emerging," the Lynas executive said.

"Where we have seen a lot of talk in recent times, in the last few months we've really seen it drive to action," Smith said.

Momentum developing

In July, the US Defense Department signed an agreement with MP Materials Corp. to establish a domestic supply chain for rare earth magnets, including a $150 million loan to expand the Mountain Pass operation in California. Cuzzubbo also noted that the US government placed a floor price of $110 per kilogram for neodymium and praseodymium (NdPr), which was "nearly double the price at the time."

"These initiatives by the US are the most significant action from governments since the Japanese invested in Lynas in 2010 and further highlight that governments and [original equipment manufacturers] are finally making tangible actions to reduce exposure to single-source supply chains and monopoly markets," Logan said.

"Recent policy initiatives by the US government to establish a local supply chain are industry-shaping, and that turbocharges the already strong momentum on developing the rest-of-the-world industry."

This is filtering through to increased demand from existing customers, OEMs and new magnet makers, Logan said. This is evidenced by the July 24 memorandum of understanding Lynas signed with South Korea's JS Link Inc., which is building a permanent magnet factory in-country that is due to start production this year.

Semiconductor comparison

The "train crash" that has seen electric vehicle production lines shut down across the US, Japan and Europe has been coming for over three decades, Cuzzubbo said. During this time, China has built out its own supply chains, and "to address it structurally is not going to happen overnight."

Western countries not being able to manufacture EVs at carmakers' full capacity with the average price of the vehicle at $47,000 is similar to the semiconductor chip crisis post-pandemic, "where you couldn't produce vehicles because you didn't have access to relatively inexpensive chips," the Arafura executive said.

"The big difference between the semiconductor chip prices and what we're seeing with rare earths supply is that for semiconductor chips, you can build out capacity of two to three years, whereas with rare earths, mining typically takes 18 years to find the resource and bring it into commercial production," Cuzzubbo said.

To help alleviate supply chains, Australian Resources Minister Madeleine King said at the forum on Aug. 5 that the government was contemplating a floor price and offtake for rare earths and other critical minerals projects as part of the planned A$1.2 billion strategic reserve. The country is one of the only rare earth producers outside of China.