In a bid to challenge China’s stranglehold on the production and supply of rare earth metals, several Canadian, German, and Australian mining companies are devising strategies to offer quality, consistency, and sustainable sourcing for critical minerals used in electric vehicles (EVs) and renewable energy technologies. The move is intended to reduce reliance on China as the dominant producer and price-setter in this industry, a development that could have far-reaching implications.
China currently controls a staggering 95% of rare earth metals production, a key ingredient in the production of magnets used in EVs and wind farms. This monopoly has allowed China to wield significant influence over prices and disrupt global markets through export controls. Mining companies like Aclara Resources and Ionic Rare Earths, as well as Neo Performance Materials and Vacuumschmelze, are among those seeking to loosen China’s grip on the critical minerals market.
These mining companies are pursuing plans that could lead to market-determined prices for critical minerals, with an expectation that end-users, such as original equipment manufacturers (OEMs), will pay a premium for a more reliable and sustainable supply chain. They argue that geopolitical tensions between the West and China pose a significant risk to the reliable supply of rare earth minerals. Export restrictions by China on commodities like germanium and graphite have already raised concerns about future supply.
Rare earth metals, a group of 17 elements used in a variety of products, have gained renewed attention due to China’s recent announcement of export permit requirements for some graphite products. This move is ostensibly aimed at protecting national security, further highlighting the potential risks associated with China’s control of these critical minerals.
For example, neodymium, a rare earth metal used to create powerful magnets, currently fluctuates in price between $73 and $520 per kilogram. Mining companies suggest that prices outside of China could be as much as 30% higher than the current quoted price.
Ramon Barua, CEO of Aclara Resources, emphasized that relying on Chinese prices for rare earth elements will not foster the development of Western supply. He argued that the West can offer environmentally responsible and traceable rare earths but at a premium cost.
These miners believe that manufacturers should be willing to absorb the extra costs associated with new environmental, social, and governance-related legislation and tax incentives. They argue that a premium price is justified for a reliable and sustainably sourced supply of rare earths, which are crucial for the transition to cleaner energy.
Badrinath Veluri, chief specialist at Grundfos, an OEM based in Denmark, stressed the importance of a transparent, sustainable, and reliable pricing model to create a global level playing field. He expressed the desire to see specific merits behind any supplier’s claims of added value through higher prices.
Discussions on pricing have become a recurring theme in the Rare Earth Industry Association. U.S.-based MP Materials and Australia’s Lynas, the world’s two largest rare earths companies outside of China, have yet to comment on these developments.
The challenge of developing rare earth mining projects, coupled with investor risk aversion, has hindered the viability of projects outside of China. While countries like Vietnam, Malaysia, and Myanmar offer potential alternatives, production remains in the distant future.
Companies are exploring pricing alternatives, such as selling rare earth concentrates at half their production cost plus capital expenses or capping prices at levels offered by Chinese rare earth manufacturers. These mechanisms could raise the cost of EVs, which rely on rare earth magnets in their motors, by 30% to 50%. However, the industry contends that these increases are a trade-off for sustainability, reduced carbon footprints, and a secure supply chain.
In the end, as miners aim to challenge China’s dominance in the critical minerals market, the industry faces a complex web of factors that will determine the future landscape of these essential materials. The pursuit of sustainable and reliable sources comes at a cost, one that manufacturers and end-users must grapple with as they navigate the shifting tides of this critical industry.
(Source: Divya Rajagopal | Denny Thomas | Marguerita Choy | Reuters)
