➤ Overreliance on China or any other nation for critical minerals such as rare earth elements is an economic and national security concern.
➤ Rare earth magnet supplies outside of China will be limited for decades despite current domestic interest and investments.
➤ A limited workforce and insufficient investment levels are the main obstacles to building out a rare earth magnet supply chain in the US.
As sales of energy technologies such as electric vehicles and wind turbines grow, so does the demand for rare earth elements commonly used in the magnets supporting the technologies' electric motors. Rare earths mining and processing is heavily concentrated in China. The US and members of the EU have said they want to diversify their supply chains.
USA Rare Earth LLC is a Florida-based company focused on rare earths processing and magnet production. The company has majority ownership of the Round Top rare earths project in Texas, and is developing a magnet production plant in Oklahoma.
S&P Global Commodity Insights recently spoke with USA Rare Earth CEO Tom Schneberger about the state of US rare earths production, challenges to the domestic supply chain and environmental concerns associated with rare earths mining. The following conversation has been edited for clarity and length.
S&P Global Commodity Insights: USA Rare Earth is working on building out a domestic supply chain of rare earth materials. Can you give some detail on what your company is doing to this end?
Tom Schneberger: We actually consider ourselves a magnet technology company. When you look at the rare earth value chain right now, even if you mine rare earths and mine them cost effectively, all of that processed material then needs to go through China to be processed further into salable products, and then eventually to be turned into metals and turned into magnets.
At USA Rare Earth, we've purchased equipment that used to produce rare magnets in the US, and we're reconstructing that equipment to produce magnets again here in the US. Our team is engaged with customers on building recipes for magnets. And we have technologies to tie all the way back through the value chain to our mine near El Paso, Texas, to supply the magnet production.
When you talk about the concentration of the rare earths supply chain in China, how is that different on the mining versus the processing side?
If you start with the transition we're going through right now — the energy transition to electric vehicles and the transition to robotics as we digitize our manufacturing, for example — all of this requires rare earth magnets.
92% of rare earth magnets right now are made in China ... Even if you go further back in the value chain, if you take rare earths out of the ground, you have to separate them, and you have to turn them into metals long before you even create magnets out of them. 90% of that processing in general is all in China right now.
As the industry stands today, essentially all rare earths, whether they're mined in China or elsewhere, find their way to China, and then China is controlling manufacturing and distribution of those rare earths.
There has been commentary about how concentrated reliance on single nations for critical minerals, including rare earths, can create risk for energy technology supply chains and contribute to national security concerns. Is that a sentiment you agree with?
I think that the national security implications are clear, and it's not just because the production is in China. Any overreliance on a single country creates a vulnerability.
In this case, rare earths are so vital to many things. There was the shutdown of F-35 [fighter jet] production as a result of concerns over that supply chain. Recently, we've seen in the press China's indication that they're going to stop exporting gallium. Gallium is used for processing [semiconductor] chips, used in everything ranging from 5G cell networks to artificial intelligence and a lot of the technology we've come to rely upon.
It is both an economic and a national security concern, and that's a big part of the focus that we have on making sure that we provide reliable supply chains for the US.
Has there been an increase in investor interest around building a domestic rare earth supply chain in light of these overreliance concerns, and what other factors might motivate investment in rare earths mines?
There's quite a bit of investor interest, and it's really stemming from investors looking to get returns on their funds, primarily from what they're seeing in the energy transition and the transition in the automotive sector.
There's been so much investment in battery facilities and the production of new electric vehicle offerings by US original equipment manufacturers. There is simply an undersupply of the rare earth magnets needed for traction motors and electric vehicles.
What magnets do fundamentally is they can convert electricity into motion, and rare earth magnets are high-performance magnets. They allow for smaller and less expensive batteries, so they're very cost effective for the manufacturers. Over 90% of electric vehicles use these types of traction motors with rare earth magnets.
Even if we begin to ramp up and continue to ramp up rare earth magnets, it's going to be decades that we're short on supply outside of China. It's going to take a long time to reduce the overreliance to a point of stability.
What are the main barriers that prevent the US from building out a domestic rare earths supply chain?
The first barrier comes down to making sure that we develop the right talent. This industry used to exist and be very capable in the US in the 1980s. Over the past few decades, it's offshored along with a lot of our manufacturing.
USA Rare Earth has had a lot of talented engineers and product designers, who are knowledgeable in magnetics and who operated these facilities in the past, come to our organization. They're excited to bring the industry back to the US.
With that, we're coupling younger engineers and folks that are newly interested in this industry in order to make sure that we build out the workforce that we need. It's going to take more talent and the development of talent and technologies to do this.
The second thing is, if you look at this entire value chain, it's going to take over $1 billion of investment all in. That is a significant capital outlay for any investors and any collection of investors.
Normally, that type of investment, both to execute smoothly and to get to scale quicker, requires some form of support from the government. That support can come in a number of ways.
Have existing policies such as the CHIPS and Science Act or the Inflation Reduction Act helped with these talent or investment challenges, since they target industries that use rare earths?
I think they're starting to. The policies are strong and they're in the right place and have the right intent. What we're seeing, at least from our perspective right now, is the different departments trying to interpret what these policies mean and how the departments work with each other to get the funding to the right place. And it's caused a little bit of a slow process as a result, and that's the part that we're working through right now.
Where are the major environmental issues associated with building out a domestic rare earths supply chain, and how do you protect against those impacts?
At USA Rare Earth and throughout my career, [I've] come to believe that sustainability just makes sense. You end up with better production and usually end up with lower costs if you find the right combination.
One of the tricks to mining is finding the right technologies to match up to the resource. And that's one of the things that USA Rare Earth has done very well. The [Texas] resource is an aboveground resource that's easy to break apart, and that allows for noninvasive production of the ore. We don't have to do blasting, underground mining or anything like that. From there, we're able to leach the materials of interest into a solution and use continuous ion exchange for separation.
It's a closed process. It allows for recycling of the materials used for the leaching and it allows for a very targeted separation. That helps us both on the cost side and on the waste side. There's very little waste, and it's not the same type of process like the solvent extraction processes which create waste and organics that could go into the environment.
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