The Rare Earth Element (REE) supply chain has been a worry for U.S.-based high-tech companies and defense contractors for years mainly because China controls 80% of the market.
However, things could be changing--if only slightly--with new investments by U.S. companies.
REEs are elements such as Neodymium (Nd) used in magnets and Yttrium (Y) used in superconductors and lasers. The U.S. Geological Survey lists 17 REEs on the periodic table. The military uses them for electric motors and guidance in aircraft and other equipment.
Going back to 2010, China excavated more than 90% of rare earth ores and then acquired nearly all the processing capability of those ores into end products, dramatically impacting REE prices. China imposed quotas in 2009 and 2010, causing prices to spike and sparking a panic, although prices leveled off in subsequent years. The U.S. trade war with China in 2019 has again raised worries that China could quickly impose a tariff on REEs.
Even if the U.S. mined rare earth minerals, there would be no sizeable refineries for converting them into separate elements useful in technology, according to analyst Robert Castellano, author of Semiconductor Deep Dive, in a recent article posted on Seeking Alpha.
But things may be changing some.
In April, Australia’s Lynas Corp and privately-held U.S. firm MP Materials announced they had been awarded Pentagon funding for separate rare earths separation facilities. Then on May 22, the Pentagon reversed its decision because six U.S. senators only wanted funding for U.S. rare earth projects. Lynas is Australian, although with U.S. venture partner Blue Line Corp., and MP Materials has a minority stake that is held by a Chinese company.
Despite the Pentagon reversal, Castellano predicted the Pentagon will probably re-approve the Lynas funding.
Also, Texas Mineral Resources with USA Rare Earth LLC announced June 11 the commissioning of a rare earth and critical minerals pilot plant in Wheat Ridge, Colorado. The plant will be initially separating rare earths into dysprosium, terbium, neodymium and praseodymium.
USA Rare Earth also has a Round Top processing project in West Texas and has acquired a magnet plant formerly owned by Hitachi. It wants to set up a domestic supply chain for rare earth magnets that are used in electric vehicles, wind turbines, smartphones, medical devices and 5G networks. According to Castellano, USA Rare Earth would generate $140 million in annual sales.
“Defense and military contractors will benefit from sources of rare earth metals in the U.S. instead of China,” Costellano said. For investors, the S&P Aerospace and Defense Index has been down 16% in 2020 but up 7% over three years.