US invests more in rare-earth firms to reduce China dependence
On Monday, the Commerce Department and Pentagon committed to providing financing and possible equity stakes in a domestic producer of rare-earth magnets, which are pivotal in the ongoing trade conflict with China, the leading global supplier. The Commerce Department has signed a non-binding, preliminary letter of intent to allocate $50 million from the 2022 CHIPS Act to Vulcan Elements for the acquisition of equipment necessary for the production of permanent magnets. These magnets are essential for fighter jets, wind turbines, and various other critical goods, as stated in a departmental announcement. Vulcan Elements has announced that it is set to receive a $620 million direct loan from the Pentagon’s Office of Strategic Capital, along with $550 million in private capital, to construct a 10,000-metric-ton magnet facility in the United States. ReElement Technologies Corp., a partner in the venture, receives a $80 million direct loan from the Pentagon office to enhance its recycling and processing capabilities, with that amount matched by private capital.
“It’s a dream come true,” said John Maslin in an interview. “This is all about ramping up the existing production that we have and getting to a scale that is meaningful to the country.” The announcements represent the most recent actions by the federal government aimed at directly investing in the supply chain of permanent magnet production, an industry largely controlled by China. It serves as additional evidence of the Trump administration’s commitment to establishing a rare-earth and magnet market independent of China’s influence — a bold gamble, yet one that has the potential to reduce the US and its allies’ reliance on the world’s second-largest economy. It remains uncertain how all elements of the arrangement will unfold, given that the CHIPS Act funds are part of a non-binding agreement.
The Pentagon confirmed the details of the arrangement in a statement, noting that funding for the conditional loans originated from the One Big Beautiful Bill Act signed in July, which allocates $100 billion in lending authority for critical minerals production and associated industries and projects. “These agreements will support the production of advanced rare earth element separation, metallization, and magnet manufacturing capabilities in the U.S.,” the statement said. ReElement meticulously separates and refines rare earths from mined concentrate, as well as waste or recycled materials, resulting in oxides that are essential for the production of metal used in magnets. In a September interview, Shane Tragethon, the company’s vice president for international strategy, stated, “it’s the only operation in the US that separates heavy rare earths — the type targeted by China’s export controls — on a daily basis.”
Earlier this year, Commerce Secretary Howard Lutnick converted CHIPS act funds to equity in struggling US chipmaker Intel Corp. The possibility of a comparable investment in Vulcan, a supplier of magnets in the US for both defense and commercial applications, illustrates the influence Lutnick is prepared to exert to establish a presence in the semiconductor sector while seeking to secure a return for the US government. “Our investment in Vulcan Elements will accelerate US production of rare-earth magnets for American manufacturers,” Lutnick stated. “We are laser-focused on bringing critical mineral and rare earth manufacturing back home.” The partnership entails the Pentagon acquiring warrants in both Vulcan Elements and ReElement, although the specific value of those warrants remains undisclosed. The warrants provide the opportunity to ultimately acquire shares in the privately held companies. Shares of American Resources Corp., which includes ReElement among its holdings, experienced a surge of up to 28% after the announcement, before subsequently trimming those gains. The stock finished the day with a 3.9% increase in New York.
