INSIGHT- West scrambles fill the heavy rare earth gap, as China rivalry intensifies

Western efforts to create a domestic magnets supply chain in order to reduce their reliance on China, led by the massive U.S. support for Nevada-based MP Materials, are running into a major problem: a scarcity of heavy rare earth elements.

United States and its allies are scrambling to find an alternative supply chain for super-strong rare earth magnetic components, which are essential in everything from electric vehicles and defence technology to electronics and windmills. MP Materials has ambitious plans for producing magnets in the next few years. This is backed by a deal signed with the U.S. Government that included billions of dollars. It announced its success in July, when it increased the processed output of light rare earths this quarter by 51%.

Analysts say that the shortage of heavy elements such as dysprosium, terbium and neodymium could be a weakness for MP Materials' campaign to create a magnets sector away from geopolitical turmoil which has constrained supply from China.

The Mountain Pass Mine in California, MP's only contains traces of these two elements. They are essential in magnets and are used in very small quantities. Magnets that are used in EV engines, for example, retain their magnetic properties under high temperatures thanks to terbium and dysprosium.

Ilya Epkhin, senior principal at consultants Arthur D. Little, said that "MP Materials could face a daunting challenge." They'll have to travel to Brazil, Malaysia or other African countries to find these resources. But it could take a long time.

Michael Rosenthal, Chief Operating Officer of MP, said in a conference call with analysts on November 6 that the company was "actively engaging" with several potential feedstock suppliers for heavy metals. He did not identify them. Apple's recycled materials containing heavy rare earths will also be used as feedstock under a $500-million deal to supply magnets by MP to the tech giant.

Matt Sloustcher is MP's executive vice president for corporate affairs.

MP is an example of how the West's continued reliance on China in the processing of heavy rare earths has impacted the West. Benchmark Mineral Intelligence estimates that the West will continue to rely on China by 2030 for 91% its heavy rare earths requirements, a slight decrease from 2024's 99%. In some cases, the Chinese export restrictions on magnets containing heavy rare earths imposed in April have caused auto plants to suspend operations and sparked the West's response. Beijing agreed on October 30 to defer new controls as part of a U.S./China agreement.

SCRAMBLE TO LINE-UP HEAVIES The proportions of heavy rare Earths in deposits are much lower than those of other magnet elements. In fact, the global ratio of heavy earths is only half that of permanent magnets.

Fastmarkets, a data provider, says that the high price of dysprosium oxid in Rotterdam is more than three times the price in China ($255).

Erik Eschen is the CEO of Vacuumschmelze, one of Germany's rare earth magnet producers.

VAC has been busy signing deals with miners that produce heavy rare Earths to supply the new U.S. facility in South Carolina, which recently opened.

VAC has signed supply agreements for heavy rare Earths with Torngat Metals, a privately held Canadian company from Quebec, and Aclara Resource from Brazil's Carina Project.

Eschen stated that "even with limited capacity in Western Europe, we are securing the necessary capacity." According to Adamas Intelligence, magnet production outside of China or Japan will reach 70,000 metric tonnes a year in 2030. This would require 1,650 tons of dysprosium dioxide a month.

Adamas' managing director Ryan Castilloux said: "Heavys are the next puzzle piece that must be solved to enable widespread Western magnet production on a large scale."

According to CRU, a London-based commodity consultancy, despite the recent flurry and rhetoric from the West, it is predicted that mines outside China will only meet 29% of heavy rare earths used outside China for the wind and auto sectors by 2035.

Piyush Goel, CRU, said that to close the gap more mines will need to be produced at higher costs than current supply.

Projects can take years

Many companies have announced new projects and facilities to process heavy rare earths. However, it will be many years before they are realized.

Both MP Materials of Western Australia and Lynas, a company that processes rare earths, are looking for more ore, as their mines do not contain enough heavy elements.

Lynas began heavy rare earth separation in Malaysia earlier this year, becoming the first producer of its kind outside China.

The Australian group announced that it would increase its production of heavy rare Earths to 250 tons of dysprosium per year and 50 tons of Terbium, but did not give a timeline. They said it was dependent on regulatory approvals.

Amanda Lacaze, CEO of Lynas, told analysts in a conference call on 30 October that the company planned to source its heavy rare earths from both Mt. Weld in Australia, and Malaysia where the processing plant is located.

We have a team that works with different Malaysian partners to develop this process.

CRU forecasts a global imbalance of 2,920 tonnes in the supply/demand of terbium and dysprosium oxides by 2035.

Iluka Resources is another Australian company building a refinery in Eneabba, Western Australia. This refinery will be able process up to 750 tonnes of heavy rare Earths per year. The refinery is expected to open in 2027.

The company said it has moderate quantities of heavy rare Earths in its material. It has also agreed to a deal with Northern Minerals for the supply of heavy rare Earths from their new mine in Western Australia. Production is expected to begin in 2028.

The mine of MP MATERIALS has a limited amount of heavy materials

MP Materials, the owner of the U.S.'s only rare earths mine, wants to increase magnet production to 10,000 metric tonnes per year.

The company plans to open a facility for heavy rare earth separation next year, which will be able eventually to produce 200 tonnes of dysprosium per year.

MP Materials' mine, however, produces mostly light rare earths. Its deposit contains less than 1.8% of medium and heavy rare Earths.

According to its website, MP has stockpiled hundreds of tons of medium and heavier rare earth concentrate for magnet production. However, this only contains 4% dysprosium or terbium.

BOTTLENECK AS A REPRESENTATION OF ENVIRONMENTAL CONCERNS

Brazil is becoming a major exporter of heavy rare earth ore (HREE), but the real problem lies in processing capability, according to Neha Mukherjee a rare Earths analyst at Benchmark Mineral Intelligence.

Mukherjee stated that, "while the technology of HREE refining will be available worldwide by 2029," costs outside China are still 5-7 times more expensive.

In ionic-clay mines, the heavy rare earths can be found in greater quantities. The standard extraction method involves flushing out the deposit with chemicals. This has led to contamination of water sources and deforestation in Myanmar.

Western miners say they use environmentally-friendly extraction methods, but they have sometimes met with scepticism and opposition by residents to mine plans.

The monazite ore mined for rare earth deposits contains radioactive elements such as uranium, thorium and cesium. These can be dangerous to dispose of.

CRU's Goel stated that the negative environmental impact of mining and processing heavy rare earths will have a major effect on new production.

Eschen said that some companies, such as VAC, produce magnets without the heavy rare earths. However, they are only suitable for slow-moving turbines.

The heavies are needed when you start looking at other applications. For example, a motor that is turning fast and going up to 120 or 140 degrees Celsius.

(source: Reuters)