Infrastructure legislation includes plans to rebuild rare earths supply chain

April 19, 2021

Part of President Biden’s sweeping $2 trillion infrastructure legislation looks to rebuild the nation’s power and transportation markets as well as the country’s semiconductor industry. This follows Biden signing an executive order in February designed to review gaps in the domestic supply chains for rare earths, medical devices, chips and other key resources. These efforts will require domestic mining and production of rare earth elements.

In March, the Department of Energy announced a $30 million initiative that will tap into researching and securing the U.S. domestic supply chain for rare earths and other important minerals in battery-making such as cobalt and lithium.

“It’s absolutely correct there is a cornering of the market with lithium and other rare earths,” Biden climate envoy John Kerry recently said at a CNBC Evolve summit on the future of energy innovation.

In a recent interview with CNBC following the UAE’s Regional Climate Dialogue, Kerry addressed the president’s $2 trillion infrastructure proposal in relation to rivalry with China. The legislation includes $35 billion for climate research and innovation, $46 billion in renewable energy manufacturing and $174 billion to boost the electric vehicle market.

But efforts in the recent past to rival China in the rare earths market and rebuild a domestic industry have been stymied.

“It’s technically possible to try and rebuild the entire supply chain because we once had it,” says Jane Nakano, a senior fellow at the Center for Strategic International Studies’ Energy Security and Climate Change Program. “It’s not that we’re not experienced, it’s not that we have no idea of what the domestic supply chain may look like,” Nakano said, but she added that business, environmental and political factors may make the effort difficult to achieve, especially over a short-time frame.

CNBC reported that success is dependent on whether the U.S. can quickly scale up processing and refining after the mining of the resources, and compete on cost with a magnet-making and processing market that’s heavily dominated by China.

These 17 elements — which are subdivided into the light rare earths and heavy rare earths subsets based on their atomic weights — exist in natural deposits globally.

Heavy rare earths are often harder to source. They include metals like dysprosium and terbium, which play a critical role in defense, technology and electric vehicles. Neodymium and praseodymium are some of the most sought-after light rare earth elements crucial in products such as motors, turbines and medical devices. Demand for them exploded in recent years with the growth of technology and will continue to climb amid the ongoing race to create a large electric vehicle market.

The three most important materials used in magnets include neodymium, dysprosium and terbium. Terbium is one of the toughest to come by because production, extraction and magnet-making are focused on China. Trade wars and retaliatory tariffs can leave many companies sourcing these crucial materials in limbo, even if they make up just a small portion of a product.

Market dynamics can escalate so quickly that companies without a diversified supply chain bid aggressively, materials get scarce and prices go up. In 2011, for example, rare earth prices shot up when China restricted exports to maintain supplies for domestic industries, which was the case again during the 2019 trade war.

Domestic efforts to extract rare earths are taking place in states including Wyoming, Texas and California, but the recent past provides cautionary tales, such as Molycorp, which reopened the longstanding Mountain Pass Mine in California in the early 2000s, only to go bankrupt in 2015.

MP Materials bought the mine and restarted production in 2017. The Las Vegas-headquartered company is vying to restore the domestic rare earths supply chain from mine to magnet, and is hedging its bets on neodymium-praseodymium, with the hope of becoming the lowest-cost producer.

In recent years, the Las Vegas-headquartered company received a myriad of grants and contracts from the Department of Defense and Department of Energy to research and improve domestic capabilities. One of the company’s largest customers is Shenghe Resources, a Chinese company responsible for processing, distributing and refining, which also owns a stake in the company. The connection raised some concerns among DOE scientists, according to Reuters, but government funding has continued for a rare earths separation facility.

Another key player in the space is Lynas Corporation, one of the largest processors of rare earths outside China. The Australian mining company, which operates a separation facility in Malaysia, recently received $30.4 million in funding from the Pentagon to build a Texas light rare earths processing facility and earned another contract, in partnership with Blue Line Corp., also based in Texas, to build a heavy rare earths separation facility.

A Lynas spokeswoman referred to the new facilities in an email to CNBC as an “essential foundation” for renewing downstream metal making and implementing magnet manufacturing into the U.S. She wrote that diversifying outside the Chinese magnetic materials supply chain is important to create competitive markets and meet the growing demand for 21st-century technologies.

Some companies have proposed extracting rare earths from coal, while others suggest setting up a system for recycling old batteries or disk drives. Suggestions include calls to utilize shipping services like Amazon or USPS to set up a recycling system, but these endeavors can be costly, Nakano says. Recycling of key raw materials used in the EV space is receiving greater investment focus. Some emerging battery recycling leaders include Redwood Materials, a start-up from former Tesla CTO JB Straubel, and Li-Cycle, which recently announced plans to go public through a SPAC-merger.

“We already have the magnets here,” says Tom Lograsso, director of DOE’s Critical Materials Institute at Ames. “Why can’t we just retain that and close the circle domestically rather than throwing them in a landfill.”

 


 

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