Prices of key rare earths, specifically neodymium praseodymium oxide (NdPr), have registered a significant increase over the past seven months, reaching $123 per kilogram. This represents the highest level since July 2022 and has far exceeded the minimum floor of $110 per kilogram set by the U.S. government to financially support MP Materials, one of the leading mining companies in this sector.
MP Materials, no need for subsidies
This rebound eliminates, at least temporarily, the need for the Pentagon to subsidize MP Materials’ production. In 2023, the Department of Defense signed an agreement with the miner to secure domestic supply of NdPr, offering financial support if prices fell below USD 110/kg. Thanks to current values, MP can operate without government assistance and maintain its domestic production.
China and supply strategy
The price increase occurs in the midst of a restricted supply from China, which accounts for 70% of mining production and 90% of global rare earths refining capacity. Industry analysts point out that the Asian giant has limited its mining and smelting quotas, although the Chinese government has not issued official statements on the matter.
This scenario has benefited U.S. and allied companies, in a context where Western governments seek to reduce the structural dependence on Beijing for the supply of strategic materials.
Agreement with strategic terms
As part of the agreement with MP Materials, the US government required the company to stop exporting raw material to China, a decision that affected between 7% and 9% of the Chinese supply of NdPr in the last three years. This measure seeks to strengthen the value chain within the country and prevent critical resources from feeding foreign industrial capacity.
Demand does not slacken
The growth in the price of NdPr is linked to a strong demand for permanent magnets used in electric vehicles and defense systems. According to Benchmark Mineral Intelligence, the tension between limited supply and sustained demand has been the central factor behind the recent rise.
However, analysts also caution that this juncture could be transitory. Neha Mukherjee, rare earths research manager at Benchmark, noted that a price correction is expected towards the end of March as market flows adjust.
Window of opportunity for the West
As long as rare earth prices remain above the agreed threshold, companies outside China will have more room to expand their capacity without subsidies. The current situation offers a critical opportunity to consolidate an autonomous industrial infrastructure and respond to global technological demand without relying on the Asian giant.
Source: Reuters