Tax credit bill focuses on US production of magnets

Recent reintroduction of a bipartisan bill in Congress to stimulate the production of rare earth magnets in the US has won mining industry support but comes at a precarious time amid attacks on federal spending and high-level discussions over the federal deficit have dominated discourse in the nation’s capital.

For USA Rare Earth CEO Tom Schneberger, all the calamitous controversies in Washington of recent weeks must be balanced alongside the nation’s long-term need to help secure the domestic supply chain, especially in ways that support the materials needed for semiconductors and motors.   Magnets are essential for motors used in many machines, including electric vehicles--a high priority of the Biden administration.

“The need for rare earths is essential to support the economy and our way of life…as we transition from fossil fuels to electric,” he said in an interview with Fierce Electronics.  “Ninety percent of rare earth magnets come from China…adding a vulnerability.  The way you improve that is to diversity the supply globally…and create supply chains with scale.”

No domestic manufacture of rare earth magnets currently exists, but Rare Earth is gearing up to begin production in 2024 using a mine at the Round Top Heavy Rare Earth and Critical Minerals deposit in Hudspeth County in west Texas, and a manufacturing facility for magnet production in Stillwater, Oklahoma.

The Rare Earth Magnet Manufacturing Production Tax Credit Act would create a $20 per kilogram production tax credit for magnets that are manufactured in the US or $30 per kilogram for magnets both manufactured in the US and for which all component rare earth material is produced and recycled and reclaimed wholly within the US.  US Reps Eric Swalwell, D-California, and Guy Reschenthaler, R-Pennylvania, are chief sponsors.

Unlike the CHIPS Act, which passed Congress with bipartisan support, the Magnet Act provides no outright grants to build facilities.  Commerce Secretary Gina Raimondo recently said the CHIPS Act was “vastly oversubscribed,” an indication that not all the chip companies will get the grants they applied for but also a sign of private sector interest in creating domestic supply chain resiliency.

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Schneberger said he feels the CHIPS Act and the proposed magnet bill are equally important. Asked if he felt the Magnet Act was looking at more fundamental needs than domestic chip production and possibly more important, he recalled interest in the CHIPS Act was invigorated when widespread automotive production was stalled during the pandemic. “It’s not a matter of one or the other. Both are truly important.”

“Politics are never unavoidable, but these are matters where both sides truly understand the need,” he said.

The magnet bill is endorsed by USA Rare Earths and by MP Materials, the National Mining Association and the Zero Emission Transportation Association. Rare Earth announced in February that former US Secretary of State Mike Pompeo joined the company as a strategic advisor.

Schneberger is relatively new to USA Rare Earth as well, having been named CEO in December. He holds a B.S. degree in chemical engineering from Lehigh University and an MBA from UC Berkeley as well as 30 years of experience in senior leadership in chemical manufacturing and mining. Among other roles, he grew FMC Lithium to enable its IPO as Livent.

The company currently has 50 employees across a range of engineering disciplines and expects to surge to 100 by the end of 2023.  It has received $70 million in private investment. “We’re still early,” he said, but noted USA Rare Earths has purchased Hitachi manufacturing equipment for magnet production in Oklahoma as early as 2024.

He also told Fierce that US rare earth mining interests are cooperating through industry groups on long-term objectives they hold in common.  The global Rare Earth Industry Association is holding an annual meeting June in Barcelona.

MP Materials owns and operates the Mountain Pass mine on the border between California and Nevada, the primary global source of rare earths from the 1960s to the 1990s. Mining was suspended in 2002, before MP  bought and restarted production in 2017.  The company is investing $700 million in a magnet production facility in Fort Worth, Texas, a potential competitor to USA Rare Earth.