The United States is on track to establish a domestic rare earths supply chain to meet its defense needs by 2027, according to a senior defense official. Rare earths are a group of metals used in magnets for green energy industries and defense applications, and the U.S. has been working to build out a global supply chain beyond the dominant producer, China.
Laura Taylor-Kale, Assistant Secretary of Defense for Industrial Base Policy, stated at a mining conference in Perth, Australia, that “We are on track to meet our goal of a sustainable mine to magnet supply chain capable of supporting U.S. defence requirements by 2027.”
The U.S. has classified Australia, Canada, and the UK as domestic sources of supply for critical minerals under the Defense Production Act, and has been offering funding opportunities to Australian mine developers to help build out the supply chain.
Specifically, the U.S. has extended support to two Australian-listed rare earths projects with up to $850 million in funding. It has also funded Australian producer Lynas Rare Earths, the world’s biggest producer outside of China, to build a new rare earths processing facility in Texas.
The Australian government has also pledged a A$1 billion ($667 million) loan to mineral sands producer Iluka Resources to build a new minerals processing plant on the country’s west coast.
However, these expansion projects have come as prices for rare earths have slumped, hurt by rising supply as China exports more to global markets. As a result, the cashflows and accounting profits of rare earths producers in the West, as well as China’s top three rare earths producers, have declined.
Iluka’s Tom O’Leary argued that the current market conditions are not normal and that prices of Western rare earths need to delink from Chinese prices. Lynas CEO Amanda Lacaze agreed, stating that “the important thing is growing the non-Chinese industry” to address the current market imbalance.
The U.S. government’s efforts to establish a domestic rare earths supply chain are driven by the need to secure critical materials for its defense industry, as well as the broader shift towards a more sustainable and resilient global supply chain.