The demand for magnets in electric vehicles and green energy is soaring globally, prompting a reshaping of the rare earth supply chain. Brazil, the world’s third-largest rare earth producer, is eager to develop its rare earth industry, with the West providing incentives. Experts say that the enhancement of Brazil’s rare earth industry will break China’s monopoly in the rare earth production sector, carrying significant implications.
Rare earth processing is primarily divided into two stages: first, extracting rare earth from ore containing other minerals and concentrating it into mixed rare earth concentrates or carbonates; second, separating rare earth into individual oxides and then converting them into metals used for magnet production.
The United States and its allies rely heavily on rare earth metals and magnets from China. According to data from the U.S. Geological Survey, China produced 240,000 tons of rare earths last year, more than five times the output of the second-largest rare earth producer, the United States. China processes about 90% of the world’s rare earths into permanent magnets, used in various fields from wind turbines to electric cars and missiles.
After disruptions in rare earth supply due to the COVID-19 pandemic, the West is planning to establish independent supply chains by 2027 to diversify permanent magnet production and break China’s industry monopoly.
Reuters recently listed companies worldwide preparing to build rare earth compound, metal, and magnet production facilities, aiming to reduce the West’s reliance on imports from China. Among them, Brazil has advantages such as low labor costs, clean energy, established regulations, and proximity to end markets, including owning the first magnet factory in Latin America.
Reports indicate that Brazil’s first rare earth mine, Serra Verde, began commercial production this year, with an expected output of 5,000 tons for 2024 and a potential doubling by 2030.
Thras Moraitis, CEO of Serra Verde, told Reuters, “Serra Verde and Brazil have significant competitive advantages to sustain the global rare earth industry development long-term.”
Analysts, mining executives, and investors suggest that with support from Western government incentives, production will increase, accelerating the global development of rare earth concentrates and processing industries.
Brazilian Rare Earths also has deposits in the early stages of development, with a large rare earth deposit in the Northeast region supported by Australia’s richest person, Gina Rinehart.
Flavio Roscoe, Chairman of the Federation of Industries of Minas Gerais (FIEMG), stated that Brazil is also constructing a proof-of-concept magnet factory, set to begin operations later this year. Roscoe noted, “Brazil has the opportunity to be an alternative beyond China.”
Analyst Reg Spencer from Canaccord stated that by 2030, Brazil could possess two to three more rare earth mines, potentially exceeding Australia’s current annual output.
On June 18, Associate Professor Sun Guoxiang from the Department of International Affairs and Business at Nanhua University in Taiwan highlighted the importance of rare earths in high-end manufacturing, primarily in battery energy storage for the new energy industry. He emphasized the severe environmental impact of rare earth development, requiring developing countries to adhere to environmental assessments, thereby incurring higher costs to meet environmental standards. Sun stated that if developed countries’ mining companies invested in Brazil, it could expedite rare earth development.
“Following the reorganization of supply chains post-COVID-19, the world is searching for new sources of rare earths. If Brazil starts production, it would become a significant player for manufacturing in North America. Whether the U.S. is rebuilding manufacturing bases, or Canada, or their tariff-free partner Mexico, all hold significant implications.”
Sun explained that China had previously used rare earths as an economic threat against Japan, banning exports to the country. Therefore, Brazil’s potential production carries triple significance.
“Firstly, in certain scenarios, it can compete with China, counteracting its use of rare earths as geopolitical tools. Secondly, for the production of the U.S., Canada, and Mexico in the free trade zone, a shorter supply chain effect occurs where they would not need to purchase rare earths from China but import directly from Brazil.
Therefore, Brazil’s rare earths play a role in current geopolitical competition by offering an alternative to China. If China tries to leverage rare earths for strategic and geopolitical means, currently, it would be unable to do so.”
The third significance lies in establishing fundamental technological competition within the U.S.’s Indo-Pacific strategy. Sun suggested that if Brazil’s rare earth industry matures, Western reliance on Chinese rare earths would diminish. Accessing rare earth resources from Brazil, free from technological control, would allow the Western world to have independent control of rare earths. This development would enable the U.S. and its allied nations, such as Japan or South Korea in Northeast Asia, to conduct broader and sustained strategic competition against China without being constrained by it.
Tzu-Yun Su, Director of the Institute of Strategic and Resource Studies at the Taiwan Institute for National Defense and Security Research, shared on June 18 that due to the West’s reliance on rare earth metals from China, a disruption in relations could impact precision industries if supplies are cut off. Diversifying sources is essential for ensuring industrial stability.
Regarding Beijing’s use of rare earths as a tool for sanctions, Su recalled China’s control of rare earth exports towards Japan in 2010 as a form of retaliation amid disputes over the sovereignty of the Diaoyu Islands (known as Senkaku Islands in Japan), where rare earth prices skyrocketed.
Su mentioned that thus far, China still hopes to use rare earths as a strategic tool to counter economic sanctions in the U.S.-China trade war. However, their calculations may not succeed as other countries rapidly seek alternatives, explore new mineral sources, engage in recycling, or develop technologies to reduce rare earth demand. “Countries are moving away from the red supply chain, reducing their reliance on Chinese rare earths annually.”