China fights back with rare minerals
Competitors face uphill battle as rare-earth output is given a boost
Surging rare-earth production in China is presenting a new challenge to budding efforts in the US and elsewhere to undercut the Asian giant’s dominance in a market for exotic materials used in everything from smartphones to fighter jets.
China this month said it is raising its annual mining quota for rare earths to 132,000 tonnes, 10 per cent above last year’s record. It’s a move likely to weigh on global prices, dealing a blow to rivals including the US and Australia, countries that agreed just last week to jointly accelerate new projects in a push to diversify the supply chain.
China produces about 70 per cent of mined rare earths and controls 90 per cent of a US$4 billion ($6.2b) global market for the materials used in phones, wind turbines, electric vehicles and military hardware.
With the US and China locked in trade talks, there were fears China may restrict access to the minerals. Instead, it is bulking up, potentially pushing companies elsewhere “into a tight cash situation” just as they seek to invest in new projects, says Ryan Castilloux, managing director at critical metals consultancy Adamas Intelligence.
In the US, that puts a target squarely on MP Materials, which runs
America’s lone operating rare-earth mine, Mountain Pass in California. The site, less than an hour’s drive from Las Vegas, resumed sales last year after being mothballed in 2015.
This year the company expects to double its output to more than 30,000 tonnes, or about 15 per cent of the global total, according to a person familiar with the operation who asked not to be named.
Now that production is sent to China to be processed. By the end of next year, though, that could change, says James Litinsky, chief executive of JHL Capital Group, the majority owner of MP Materials.
The company is working to open its own processing centre by then, which should be able to handle all of the mine’s production, says Litinsky.
“If people focus on the short-term supply issues, they miss the bigger picture,” he says. “Tens of millions of jobs and trillions of dollars of downstream GDP, that’s what the Chinese are after.”
What the US wants is “a level playing field”, Litinsky adds. “We’re concerned China takes predatory actions with pricing and supply.”
Rare earths are 17 chemically related elements that have magnetic and fluorescent properties. While they’re not as rare as gold or silver, the elements aren’t often found in large volumes and require intensive processing to produce materials for end users.
The Chinese Government decided 30 years ago to make rare earths a strategic material and ban foreigners from mining them. As the largest producer of both the minerals and magnets, China is drawing support from electric-vehicle makers including Tesla, which has built a factory on the outskirts of Shanghai, and Ford, which is considering making its new electric Mustang Mach-E in China.
President Donald Trump in July ordered the US Defence Department to spur production of a range of rareearth magnets used in military hardware amid concerns China could, at any time, restrict exports of the products. Scientists from the US Geological Survey have also visited projects in Australia in the past year, including Northern Minerals’ Browns Range development.
Malaysia-based Lynas, the largest supplier of rare earths outside China, has a mine in Australia and a major processing plant in eastern Malaysia, and is advancing plans to add a facility in Texas, chief executive Amanda Lacaze said last month.
Meetings this month between US and Australian officials have formalised a partnership intended to bolster supply of rare earths and other critical minerals from outside China.
Developers in countries from Greenland to India are also seeking to build new rare-earth operations but have made slow progress amid limited access to funding and price fluctuations. Lynas, which began production in 2013 and is now the world’s second-biggest supplier, recorded its first annual profit only last year.
“There is a genuine need to fund greenfield projects” to diversify global supply, with Lynas currently the only major producer outside China, says Dylan Kelly, a Sydney-based analyst at Ord Minnett. “The world is littered with projects that have tried to get up but have failed miserably.”
Tens of millions of jobs and trillions of dollars of downstream GDP, that’s what the Chinese are after.
James Litinsky, JHL Capital Group