Navigating away from fossil fuel dependence places a greater demand on rare earth magnets. Congress has introduced a bill offering a tax credit for US rare earth magnet production. This would result in the construction of a local supply chain in an attempt to wean a reliance on China.
Terbium, neodymium, and dysprosium are just a handful of rare earths needed to help fuel offshore wind turbines, electric vehicles, and are also useful in robotics. A report from Wood Mackenzie’s Rare Earths Market Service pegs the demand for rare earth oxides to grow from 171,300 metric tons currently to 238,700 tons by 2030.
On the border of Nevada and California sits the Mountain Pass mine. Soon after the gold rush in the late 1800s, Mountain Pass initiated operations producing zinc, lead, copper, and gold. Over the years production shifted to rare earths and from roughly 1960 to 1990 Mountain Pass was the principal source (globally) of rare earths. Environmental and financial struggles eventually led to suspended operations in 2002 but the purchase of the mine by MP Materials Corp has some believing that Mountain Pass could be the critical source (and production) of US rare earths moving forward.
The Rare Earth Magnet Manufacturing Production Tax Credit Act of 2023 proposes a $20-a-kilogram credit for all US-made magnets. Those manufacturers that can source 90% of component parts from stateside producers would receive a $30-a-kilogram credit and the eventual phase-out would be in December of 2035. Currently, nearly 60% of rare earth minerals are mined in China. Mountain Pass, Myanmar, and Australia are the other major sources. The rare earth supply chain is divided into mining and concentration, refinement, and then production. While China is home to 60% of the source, the Asian giant controls 91% of all refining activity and 94% of production. This is near market dominance.
The biggest hurdle for Mountain Pass and others will be building out a supply chain that only China knows how to run. Expertise is concentrated and junior mining projects will need to lure investment in uncertain times. Once a site is discovered, continued exploration and development coupled with permitting (in a stricter regulatory environment as compared to China) can result in a decade or longer before full-scale operation is achieved. Another challenge is no two deposits are alike and this means the same processing equipment cannot always be employed. The mining and concentrate stage can cost $1 billion-plus to implement and with MP Materials (US) and Lynas Rare Earths Ltd (Australia) as the only players outside of China and Myanmar, without attractive credits legislators fear the US will not be able to de-couple itself from China.
The Russian invasion of Ukraine taught the world what an overreliance on Russian oil means. The US is attempting to avoid a similar outcome.
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