Amid increasing demand, US rare earth minerals company MP Materials has halted exports of raw materials to Chinese magnet manufacturers, causing prices of the two rare earth elements needed for super magnets to soar to their highest levels in over two years.
China dominates 90% of global rare earth refining capacity and produces about 70% of the mined output. Due to China weaponizing materials related to rare earths like magnets, limiting exports, the US and other Western countries are facing challenges of magnet shortages. In response, the US signed an agreement with its largest domestic rare earth producer, MP Materials, in July to refine rare earths domestically.
According to a report by Reuters on August 26, consulting firm Adamas stated that in the past three years, MP Materials’ rare earth exports supplied 7% to 9% of China’s rare earth oxide production. These oxides originate from the rare earth elements neodymium and praseodymium (NdPr), which are crucial for magnets used in electric vehicles, wind turbines, and defense equipment.
“MP’s shipments represent a significant portion of the rare earth oxide supply for Chinese plants, leaving a huge gap,” said Ryan Castilloux, managing director of Adamas.
The benchmark price of Chinese rare earth oxides has surged from $63 per ton on July 9 to 632,000 yuan per ton (approximately $88 per kilogram), reaching the highest level since March 2023.
The US government announced a milestone agreement with MP last month, requiring the company to stop shipments to China and provide price support for the NdPr it produces. The selling price of such products from MP is $110 per kilogram, roughly double the Chinese price at the time. This move aims to safeguard US companies’ revenue and fend off damage caused by China manipulating market prices.
After experiencing several years of sluggishness, MP’s products are now gaining traction, which will boost the prospects of mining projects seeking investment outside China as Western countries strive to reduce dependence on China.
MP currently operates the only rare earth mine still in commercial operation in the US, located in Mountain Pass, California. Although other mines in regions like Elk Creek, Nebraska, or Brook Mine, Wyoming, are in the development stage, they have not commenced commercial operations yet. As critical minerals gain increasing attention, MP’s stock price has risen by 332.8% this year.
On August 7, MP released its latest financial report, showing that despite being in a loss-making state in the second quarter, NdPr production increased by over double annually, and total revenue exceeded market expectations. This reflects that their strategy of transitioning from raw material exports to high-value magnetic materials is proving effective.
Analysts noted that due to high tariffs, MP suspended exports to China in April, but with China’s export restrictions causing weak demand for magnets, it masked the supply shortages. They added that US supply of rare earth ore to China dropped in May, reaching zero in June, and then saw a significant increase last month, likely due to MP’s final batch of supplies.
After relaxing export controls in Beijing and reaching a series of agreements with the US and Europe, China’s rare earth magnet exports surged to a six-month high in July.
Neha Mukherjee, rare earth research manager at consulting firm Benchmark Mineral Intelligence, stated, “China is currently in the peak season for the production of electric vehicles, wind turbines, and consumer electronics. This seasonal demand increase is putting additional pressure on existing NdPr supplies.”
The uncertainty surrounding China’s rare earth mining and smelting quotas is also providing support for prices, as the announcement of this year’s quotas hasn’t been publicly declared as usual.
Castilloux mentioned that some industry insiders may anticipate a reduction in quotas. He further noted that it is expected that China’s rare earth production will grow modestly by 5% this year, while demand is anticipated to increase by about 10%.