A couple of hours outside of Houston, in a distant field near a Dow Chemical Co. factory, America is attempting to China’s grasp for The global supply of rare earth minerals necessary for top technology remains to be pending.
Even if so, China’s dominance out there – it controls about 70% of the performance and greater than 90% of refining – implies that this goal is prone to remain unattainable.
The Texas plant, to be built by Australia’s Lynas Rare Earths Ltd., represents only a fraction of the billions of dollars in subsidies and loans promised to the United States and its key allies for the production and refining of the minerals. Lynas has won greater than $300 million in contracts from the Pentagon for the 60-hectare site. If all goes to plan, the corporate shall be operating a rare earth processing plant there in two years.
But while national security is a key driver of the programs within the U.S. and elsewhere, a price collapse since 2022 has undermined the economics of those projects, raising questions on whether this and similar efforts can evolve right into a supply chain that may compete with Chinese firms protected by their government.
“These market conditions have now destroyed most of the hoped-for projects from a few years ago,” said James LitinskyCEO of MP Materials Corp., the corporate that owns the one rare earth mine within the United States and currently has a Factory to fabricate magnets in Texas.
“Despite the efforts and investments of many governments, Chinese control over most of the supply chain remains,” said Litinsky. said during a conference call on quarterly results last month.
The metals the U.S. and its allies are targeting aren’t actually “rare,” but they rarely occur in concentrations high enough to justify mining them, often at a value to the environment. They include 17 chemically related elements whose properties help boost the performance of electronic devices from cell phones to fighter jets.
To underline its dominant role out there, Beijing announced at the tip of last 12 months stricter restrictions on technologies related to rare earths, with the aim of creating it tougher for this industry to develop outside of China.
Laura Taylor-KaleDeputy Minister of Defense for Industrial Policy, promised Earlier this 12 months, she announced that by 2027, the U.S. could have a “sustainable mine-to-magnet supply chain capable of meeting all U.S. defense needs.” She said once the Lynas project in Texas is operational, the corporate will “produce about 25% of the world’s rare earth oxide needs.”
In recent years global price decline was driven by increased supply from China and other countries in addition to the weakening Chinese economy, which led to domestic industry cannot handle the upper performance.
China’s Ministry of Natural Resources and Ministry of Industry didn’t reply to requests to clarify their reasons for increasing rare earth mining quotas in 2023 and 2024. Analysts say this has contributed to a drop in prices.
“Most rare earth mines are struggling to break even at low prices, while early-stage projects are struggling with delays and financing constraints,” a September 3 study said. report in Benchmark Source. These aspects “may slow down Western efforts to reduce dependence on Chinese supply chains,” it said.
Some projects are already reporting setbacks.
Arafura Rare Earths Ltd. is one company that appears to be struggling to ramp up operations as planned. secured An Australian government loan of AUD 840 million (US$560 million) was granted this 12 months. In July, the corporate raised further capital and said the project was ready to begin construction.
It signed Purchase agreements with two Korean automotive groups for 2022 for production from Nolan’s project north of Alice Springs, Australia, but construction has not yet begun.
“We have the debt, we have the permits, the acceptances are mostly in place,” said CEO Darryl Cuzzubbo. “The only missing piece is the equity. We’re aiming to get that by the end of the year – then we could start construction next year.”
Cuzzubbo said his goal is to get half of the equity from “cornerstone investors, which is going very well,” adding: “Once we get that done, we will turn to the rest of the market for the remaining 50%.”
Iluka Resources Ltd. is one other company facing increasing hurdles in investing in rare earth production in Australia. The company received a loan in 2022 to develop Australia’s first integrated rare earths refinery, which is scheduled to open in 2026. But this 12 months announced The project could cost as much as 1.8 billion Australian dollars, well above original estimates.
Earlier this 12 months, the corporate’s CEO accused China of trying to control prices and take control of the industry in Australia.
“China’s influence on the global rare earths market is pervasive,” CEO Tom O’Leary said in May. “It is this monopolistic production, combined with interference in pricing, that leads to market failure.”
Lessons from Japan
With an analogous experience, Japan began to cut back its dependence on China for rare earths over a decade ago. The results show that these projects are taking longer and being costlier than originally expected.
Tokyo invested In 2011, the corporate invested $250 million in Lynas after Beijing temporarily suspended supplies as a result of a territorial dispute. According to the corporate, it took two years for trial production to start and even longer to succeed in planned levels. The company has not make a profit until 2018.
It was the support of Japanese firms and the federal government that kept Lynas afloat, CEO Amanda Lacaze said in an interview. Japan supported Lynas by “providing a little bit of money for capital, investment and development of our assets, but also supporting us during a period of very, very low prices,” she said.
Japan has finally reduced its dependence on Chinese rare earth supplies from 80-90 percent to around 60 percent, former Economic Security Minister Takayuki Kobayashi said in an interview.
But patience is much more necessary, Lacaze said. That was underscored by an announcement the corporate made last month: An issue with wastewater permits means earthworks planned for this 12 months on the Texas facility are unlikely to go ahead, Lynas said in its latest earnings report.
“Patient capital is really important in mining and also in an area where you are doing something for the first time,” said Lacaze in August“If we really want an industry, we have to recognize that we are playing a 30-year game of catch-up.”
