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Miners in the US central to build a rare earth supply chain in the country have stopped shipping concentrates to China after being caught up in a trade war between the two countries.
Las Vegas-based MP materials have emerged as the US’s greatest hope to overcome China’s tensions over the production of rare earths, a group of minerals essential to the belts of high-tech industry. New York-listed stocks rose more than 60% this year, giving the group a market capitalization of $4.3 billion.
However, the company sells the majority of its production of rare earth concentrates, the world’s leading processing and separation centre for such materials to China.
Those sales have stopped, the three well-versed people who are familiar with the issue told the Financial Times. One China’s retaliatory tariffs on US products at 125% have made sales uneconomical.
MP sales to Shenge Resources, a major rare earth group, a provincial-backed partner in China, accounted for roughly 80% of revenue last year. Shenghe buys MP concentration at market price and reduces import duties and other expenses, the filing shows.
After being asked for comment, MP Material issued a statement acknowledging it had stopped shipping to China.
“Selling these important materials at 125% tariffs is commercially reasonable, but not consistent with national interest,” the miners said.
MP added that it has invested nearly $1 billion to restore the US full rare earth supply chain. He said he currently uses refineries in California to process half of its production and sells almost all of that material outside of China.
The company’s shares fell more than 4% on Thursday. MP reported a net loss of $65 million last year, with long-term debt of $851 million and $999 million at the end of the year.
Shenge declined to comment.
MP races to isolate and process more rare earths in the US, and will be fed online to a permanent magnet factory in Texas, eventually providing the group with a complete domestic value chain for its output.
Morgan Stanley previously estimated that MP’s centralized sales to China will fall to 40% of revenue this year. This is from 70% as its processing and Texas factory comes online.
Morgan Stanley analyst Carlos de Alba said he saw “two opposing units of stocks.”
MP CEO James Lichinski told investors in February: “The United States currently has MP champions and is able to provide domestic supply chain solutions for rare earth magnets.”
The group’s permanent magnet factory is currently facing another important Chinese challenge. So far, MPs have been able to separate and process light rare earths, but the equally essential heavy rare earth earth earth required to make high-performance permanent magnets, especially dysprosium and terbium, can enter F-35 fighter jets, cars, MRI machines and other electronics.
According to Chinese market participants, export control on April 4th, April 4th, almost completely stopped shipping heavy rare earths as staff introduced a licensing regime.
Yang Jie, an export control lawyer for Chinese company Huiye, said he expects that such a regime will take six months. “There is no hope for rare earth exports,” he said.
The MP’s timeline for separating heavy rare earths is unknown. Australian mining group Lynas Rare Earths has a heavy rare earth separation plant in Malaysia that will appear online mid-year, and is building a similar facility in Texas.
For now, analysts say China is the only source of the world’s isolated, heavy rare earth source.
“The US has two options: it can disrupt the supply chain or negotiate,” said Gracelin Baskaran, a key mineral expert at the Center for Strategic and International Research. “It’s going to be painful.”
“China went for our deepest vulnerability. They weren’t the ones that we were very vulnerable, and we weren’t completely vulnerable,” she said.
MP said it was “quickly moving forward with our heavy rare earth capabilities,” and was confident that it would reach a timeline for magnet production and fulfill its commercial commitment.
Additional reports from Camilla Hodgson, Cheng Leng and Nicfold
