Communications of the ACM

ride compounds was developed to replace rare earth materials in lighting. However, Neatby says, some products simply require rare earths in order to provide the level of performance demanded by customers.

Indeed, suitable substitutes for neo-
dymium magnets, which are valued
because they are extremely powerful
and lightweight, have yet to be found,
Neatby says. “So, the neodymium mag-
net is still the most powerful magnet in
the world, and for [electric] car applica-
tions, you do want the smallest, light-
est, motor, because the heavier the
car, the bigger the engine has to be in
order to move it forward,” Neatby says.
“Whether it’s an F- 35 [fighter jet], a big
submarine, or electric car, rare earth
magnets are going to be used.”
Production of military equipment,
such as the aforementioned F- 35, is at
risk of being impacted by the escalating
U.S.–China trade war, as are other key
pieces of military equipment, such as
night-vision goggles, precision-guided
weapons, communications gear, GPS
systems, batteries, and other defense
electronics, each of which requiring
rare earth metals as key ingredients.

A provision in the National Defense Authorization Act signed into law in August 2018 bars the U.S. Department of Defense (DoD) from buying permanent rare-earth magnets made in China after December 2018. As there is no domestic source of the materials used to make those magnets large enough to support current demand, the measure will likely force the DoD to purchase rare earths from Japanese producers of rare-earth elements, the main source for rare earths outside China.

The U.S. Geological Survey estimated U.S. manufacturers consumed 11,000 tons of rare earth elements in 2017. Although the Trump administration backed down from imposing steep tariffs on rare-earth elements from China after appeals from U.S industrial consumers of the elements, China has not reciprocated, and U.S. rare earth exports have been hit with a 10% duty now, which could rise to 25% later this year. This tariff is expected to negatively impact the sole U.S. rare earth mine in operation, located at Mountain Pass, CA, and the ability of the U.S. manufacturers to reestablish a self-sufficient rare earths manufacturing industry.

The Mountain Pass mine was acquired last year by U.S.-owned consortium MP Mine Operations LLC, after being shuttered since 2015 by its previous owners, MolyCorp. Inc., when that firm went bankrupt. Mountain Pass operations were restarted in 2018, with the mine’s rare earth compounds now being shipped to China for separation into individual rare-earth oxides, though steep tariffs are likely to negatively impact the company’s ability to compete against Chinese producers.

“The Chinese are still the kings of
downstream production of materials
that use rare earths; Molycorp has gone
bankrupt, and the only outside signifi-
cant producer of rare earths is Lynas
(Corporation of Australia), but they’re
producing essentially light rare earths,”
Neatby says. “All of the heavy rare earths
still come from China, and you have a
situation where electric vehicles in the
future are going to use electric motors
that use rare earths, and demand is
starting to pick up.”
Due to the threat of the supply of
rare earths being cut off, many compa-
nies have stockpiled larger supplies of
rare earths. Despite the forces impact-
ing the supply side of the market, de-
mand is likely to remain strong.

“In general, you’ve got a rare earth mar-
ket that is quite solid,” Neatby says. “All of
the applications that were probably not
economic have gone away, and so now
[the market] is efficient, and focused on
neodymium and presidium, and maybe
a bit of dysprosium for high-temperature
magnets. And traditional applications
for lanthanum, cerium, for lanthanum
for cracking catalysts for oil and gas, con-
tinue to be used. Those are bigger vol-
umes, but [account for] less value.”
The most prudent strategy to ensur-
ing the steady supply of rare earths to
manufacturers around the world is to
increase mining and refining outside
of China. The only current major rare
earths producer outside of China is Ly-
nas, which operates the Mount Weld
mine in Western Australia, and produces
more than 5,000 metric tons of neodym-
ium and praseodymium (NdPr) per year,
with most of its output committed to
Japanese buyers. Other projects in Aus-
tralia, Russia, and Brazil are set to enter
production over the next several years.

Moreover, there was a large dis-
covery last year of hundreds of years’
However, the major challenge in-
volves efficiently and cost-effectively
separating these rare earths, and a
consortium of Japanese government-
backed entities, companies, and re-
searchers plans to conduct a feasibility
test within the next five years.

Still it is likely that, regardless of the outcome of any trade negotiations to reduce or eliminate tariffs, or the development of a new way to extract rare earths from new deposits, U.S. manufacturers’ best hope for securing rare earths will be the redevelopment of a domestic rare earths industry.

A source close to MP Mine Operations said that the company’s operating plan is to create processing capacity to allow a full, end-to-end mining, extraction, and processing capability in the U.S. within 18 months, which may help to alleviate the pressure on the market. According to a source close to the company, MP Mine Operations is trying to create an American supply chain and is hoping the U.S. government will pressure China to reduce or eliminate import tariffs that affect the company.

James Litinsky, chief executive officer of JHL Capital Group LLC, the majority owner of the Mountain Pass consortium, told Bloomberg News last September that Mountain Pass’ “self-sufficiency will serve as a foundation for an Ameri-can-based rare earths industry.”