Rare earth producers hope US-led growth will challenge China
A Noveon Magnetics Inc. facility in Texas is leading the charge to enhance US production of the small yet essential industrial components central to a global trade conflict. The company’s inaugural facility, located less than an hour from Austin, commenced the commercial sale of rare-earth magnets in 2023, following a decade of development. The operation is modest, yet its ramp-up symbolizes the significant shift occurring as the West endeavors to keep pace with China’s extensive rare-earths industry. Following the announcement of export controls by the Asian nation earlier this year, Scott Dunn was met with a flood of calls. “Not only were we being asked to do what we had planned, we were asked to increase those volumes for what was planned by multiples,” said Dunn, whose company has inked deals with customers from carmaker General Motors Co. to automation company ABB Ltd. China, the leading global producer of rare earths, announced supply restrictions in April as a reaction to a series of tariffs enacted by Washington. It detailed plans to broaden the restrictions this month, including mandating that overseas shippers of items containing even trace amounts of specific rare earths obtain an export license. The future of those measures is uncertain following comments from US Treasury Secretary Scott Bessent, who stated, “I expect China to offer a deferral of its curbs to seal a trade deal.” President Donald Trump and his counterpart Xi Jinping are scheduled to convene for trade discussions later this week, with rare earths featured prominently on the agenda.
Regardless of the outcome, the industry is confident that the world will not revert to relying on a single supplier. Discussions with over a dozen rare-earth executives and industry veterans illustrate a commercial landscape that is in its early stages yet swiftly evolving as investor interest intensifies and governments — particularly the US — initiate more significant actions to establish a supply chain independent of China. According to the sources the current development of US magnet facilities has the potential to significantly increase capacity, potentially enough to counterbalance imports by 2028. That necessitates everything to proceed according to plan and function at maximum capacity, and it will not serve as a sustainable solution as demand surpasses supply growth. Nonetheless, it starts to indicate a direction toward a significant and sustainable industry — even if that objective remains far off, due to the lengthy process of establishing mines, the specialized knowledge and technology needed to manufacture magnets, and China’s extensive head start over the years. “This year has been exhilarating, daunting, stressful, exciting, all of the adjectives,” said James Litinsky.
MP is the operator of the only American rare-earths mine. In July, it secured a significant $400 million investment from the Pentagon, which enabled the company to finance a new magnets plant. This agreement included guaranteed purchases at minimum prices, effectively establishing a national champion. This month, government support intensified as Washington and Canberra reached an agreement to jointly invest in Australian mines and processing projects. Both countries also committed to employing trade measures such as floor prices to mitigate competition. Those deals indicate a shift in strategy, characterized by the emergence of significant state support and intervention. Rare-earth stocks around the world have surged significantly, often reaching valuation levels that suggest extraordinary and nearly unbelievable growth. “To attract investors you need to do two things — to increase returns, but also to decrease risk,” said Nick Myers, a rare-earths refiner. “By stating that another entity, such as the US government, is present with substantial funding, it significantly mitigates the risks associated with the space.”
“All of this is reminiscent of China’s playbook,” said Ryan Castilloux. The rare-earths industry in the country is characterized by stringent regulations and significant state control. Beijing has consistently backed strategic enterprises, whether through direct support or indirect methods such as low-interest loans or assistance with permits, contrasting sharply with the West’s market-driven approach. “This moment creates discomfort for some, but I think it’s hard to argue that the alternative approach was bearing fruit,” he stated. “Something new was needed.” Rare earths, featuring names such as neodymium and samarium, are primarily utilized in the production of super-strong, heat-resistant magnets. The government’s interest arises from the vast array of products that depend on them, ranging from smartphones and vacuum cleaners to fighter jets. Late last month, at the sector’s largest assembly since the onset of China’s trade restrictions, a canine-like robot named Spot — created by Boston Dynamics Inc. — posed and shook “paws” with attendees during a coffee break. A speech was delivered by a former Canadian fighter pilot who is now at the helm of drone manufacturer Horizon Aircraft. Magnets play a crucial role in various industries due to the significant power they can provide in relation to their size and weight. In robots, magnets embedded in compact motors enable precision and versatile movements; in missiles or drones, they are crucial for fine-caliber steering to achieve a direct hit.
The industry has been in a state of anticipation, awaiting further policy measures. “I talk to folks in the administration frequently enough to know that a copy-and-paste of the MP deal is probably not going to happen,” Abigail Hunter stated at the Rare Earth Mines, Magnets and Motors conference in Toronto. “However, the crucial aspect is the commitment to engage with the market and the companies regarding their unique challenges, ensuring that they are adequately protected and ultimately capable of enduring.” The question remains: to what extent can the West act, and at what speed? China possesses half of the world’s rare-earth reserves and a significant portion of its refining capacity. The Asian nation commenced its expansion in the 1980s and currently accounts for over 90 percent of all rare-earth magnets sold. Past crises, such as China’s 2010 embargo of exports to Japan, sparked a surge of global interest but ultimately did not undermine Beijing’s supremacy. According to analysts at Goldman Sachs Group Inc., constructing a new mine can require eight to ten years, while refineries typically take around five years.
Currently, the sector is significantly smaller than nearly all industrial metals, with a production value of approximately $6.5 billion in 2024, as per reports, making it 33 times smaller than the copper market. The trade remains opaque and illiquid, limiting miners’ capacity to hedge against price volatility. Nonetheless, supply disruptions have both immediate and extensive consequences. After China imposed its initial restrictions in April, Ford Motor Co. was compelled to temporarily close a factory in Chicago due to a shortage of rare-earth components, while the assembly of Tesla Inc.’s Optimus humanoid robot faced similar challenges. The European Union’s Chamber of Commerce in China reported that shortages led to seven production stoppages at companies within the bloc in August, with further disruptions anticipated. Despite the evident excitement permeating the halls of the Toronto gathering, there remains no assurance that the anticipated American and other non-China plants currently in progress will be completed on schedule — or capable of meeting diverse customer demands, considering the intricate processes associated with rare-earth magnets.
“There’s not a cookbook for magnet production,” stated David S. Abraham. “There’s time needed to ensure the product you are selling to customers meets their exact specifications.” Noveon has recently entered into an agreement with Australia’s Lynas Rare Earths Ltd. to work together on sourcing light and heavy rare earths, as well as supplying magnets for the US defense and commercial sectors. This year, the company faced an overwhelming influx of inquiries, resulting in it having to decline more than it could accommodate. Dunn acknowledged that, across the industry, installed capacity does not equate to immediate capability. “You’re dealing with requirements that are the result, in some cases, of decades of what China has delivered,” he said. Sourcing heavy rare earths, many of which were affected by the restrictions in April, presents another obstacle to further expansion. The metals serve as additives in magnetic materials, guaranteeing performance even at elevated temperatures. However, the majority are sourced from China or conflict-affected regions of neighboring Myanmar, where they are also refined. Ultimately, it remains uncertain whether customers will be prepared to shoulder the cost. Initiatives such as floor prices for producers, designed to nurture the industry during its development, impose a burden on consumers. Although some might theoretically view this as a safeguard against geopolitical risk, the objectives of the government do not always coincide with those of purchasing managers. Several industry veterans stated that China would ultimately continue to dominate due to its technical expertise, low costs, and depth of supply offerings.
Entrepreneurs are eagerly seizing the chance to advocate for alternatives to China. In the United States, several magnet facilities are currently under development, including those from USA Rare Earth Inc., Vulcan Elements Inc., Germany’s Vacuumschmelze GmbH & Co KG, and South Korea’s JS Link Inc. Others are striving to repurpose existing resources. Cyclic Materials Inc., with support from Amazon.com Inc. and Microsoft Corp., plans to commence the production of magnet materials at a recycling facility in Canada next year. During the Toronto event, a sequence of panels highlighted companies engaged in projects spanning from Africa to Australia. Adamas anticipates a global increase in the use of rare-earth magnets at a rate of 9 per cent per annum over the next decade. Total US demand by 2033 will be five times today’s level, and demand in Europe will more than double. By employing the long-threatened critical mineral weapon once more ahead of this week’s discussions, China has certainly spurred production beyond its borders, and even fostered collaboration. Trump is poised to sign critical minerals deals with trading partners during his trip to Asia, and this is unlikely to change even if a trade agreement is reached between Washington and Beijing. Dunn is focused on increasing magnet production at Noveon in Texas to meet the plant’s current annual capacity of 2,000 tons. He stated, “There’s a burden on the many aspiring players outside China — and across all parts of the supply chain— to prove they can deliver.” “Customers want to know that there is some sort of visibility and certainty and stability that they can pin their near-term future on,” he said.
