MP Materials, the only active rare earths mining company in the U.S., is making great progress. And yet at the same time, the company just reported a financial loss. The contradiction illustrates the challenges involved for the U.S. in rebuilding a rare earths industrial capability.
In the quarter to June, MP doubled its output of neodymium-praseodymium (NdPr) to 272 metric tons. NdPr is the most important single rare earth product, used to make the magnets that go into electric motors in electric vehicles (EVs), wind turbines, and other vital industrial products. MP is now the world’s second largest miner of rare earths, all of them from a mine at Mountain Pass in the desert in southern California. Last year, MP Materials produced 12% of the world’s rare earth concentrates. That’s a considerable improvement over 2017 when U.S. production was zero.
MP’s growth in production and diversification shows the success of U.S. policy in supporting the domestic production of vital industrial materials and components. Its financial loss shows the risks and dangers of such a policy in an industry that remains dominated by China.
In addition to mineral concentrate, MP is today producing four rare earth compounds at its Mountain Pass facility– neodymium-praseodymium oxide (NdPr), lanthanum carbonate, cerium chloride and SEG+ (heavy rare earth concentrate). Meanwhile in Fort Worth, Texas, it has built a factory to turn NdPr into metal and ultimately, finished neodymium magnets. MP has a contract with General Motors. GM will buy the magnets, which should begin to come off the Fort Worth production line late next year, for use in its Ultium electric motors for GM EVs. MP is also talking to other EV manufacturers. The domestic content rules in the Inflation Reduction Act led many carmakers to explore ways to increase the U.S. content in their EVs.
That’s the good news. The bad news is that in the June quarter, MP lost $28 million on revenue of $31.3 million. Sales of rare earths concentrate were down in the quarter due to some technical problems at the mine. But the real driver of the loss was the drop in prices for rare earths. The price realized in the second quarter, $4,183 a tonne, was 33% down on the year-earlier price.
Slumping prices for rare earths are due to Chinese overproduction. China dominates the industry. The world’s largest rare earth mine is in Mongolia. But China’s real trump card is in refining. Other mines around the world send minerals containing rare earths to China, which dominates global rare earth refining. The Chinese government incentivizes and subsidizes the refiners to keep on producing, despite a global slump in demand. Even China’s own rare earth producers are losing money at current prices, according to press reports from Asia. The slump is caused by China’s own economic slump, as well as the global shortfall in EV demand. Everybody in the industry agrees that in five or ten years, global demand for rare earths will be much greater than today, but the road to get to that point will be rocky.
Faced with a market slump, China has taken aggressive action to manage its rare earths industry and maintain its dominance. In June the Chinese government announced a series of measures to reinforce control over its rare earths industry. This included government ownership, traceability, and prohibition of the export of rare earths refining technologies. Firstly, it declared that all rare earth minerals mined in China belong to the Communist government, not the private companies mining them. Next it issued a requirement for all rare earth miners and refiners to report on the volumes of production and refining. This could be a prelude to industry rationalization. Finally, it prohibited rare earth technology export, to make it more difficult for companies in the west to obtain Chinese technologies. These policies are a reaction to efforts in the U.S., EU, and elsewhere to levy tariffs on the import of Chinese EVs.
Rare earths are a strategic technology, as is recognized by the U.S., China, the EU, and Japan. For example, the Virginia class of nuclear submarines now being built for the U.S. Navy are powered by giant electric motors which use rare earths. These are 377-foot long submarines carrying 40 torpedoes, lasers, and other weapons, at a cost of about $2.8 billion each. Yet a few hundred pounds of rare earth metals are needed for the motors. The Department of Defense is well aware of the critical importance of rare earth production in the U.S., which is why it invested $45 million in MP Materials back in 2020 and 2022.
MP Materials is in no immediate financial danger. It has $937 million of cash on its balance sheet and the cash outflow in the first half of this year was just $10 million. But the current depressed prices make other companies and investors reluctant to get involved in the industry.
Earlier this month, MP chief executive Jim Litinsky told investors: “These market conditions have now destroyed most of the hoped for projects from just a couple of years back…what remains certain is the strategic and irreplaceable value of the platform we are building at MP.”
It’s not just the EV industry that needs rare earths and the magnets that come from them. Wind turbines use the magnets. The humanoid robots that tech pioneers like Elon Musk are promising for our AI future are likely to use two to five times the rare earth magnet content as an EV.
The U.S. needs a more robust supply chain, from mining through refining and magnets to electric motors. To rebuild that supply chain, the private sector needs to see that the government is committed to maintaining a stable environment allowing for reasonable profitability at every step of the supply chain. In a globally competitive world, there is no such thing as a “pure” private sector solution. Government must take the lead, as the Department of Defense has long recognized.
MP Materials Rare Earth Production Rises, But Price Slump Challenges Industry
China Still Dominates Global Rare Earth Industry
MP Materials, the only active rare earths mining company in the U.S., is making great progress. And yet at the same time, the company just reported a financial loss. The contradiction illustrates the challenges involved for the U.S. in rebuilding a rare earths industrial capability.
In the quarter to June, MP doubled its output of neodymium-praseodymium (NdPr) to 272 metric tons. NdPr is the most important single rare earth product, used to make the magnets that go into electric motors in electric vehicles (EVs), wind turbines, and other vital industrial products. MP is now the world’s second largest miner of rare earths, all of them from a mine at Mountain Pass in the desert in southern California. Last year, MP Materials produced 12% of the world’s rare earth concentrates. That’s a considerable improvement over 2017 when U.S. production was zero.
MP’s growth in production and diversification shows the success of U.S. policy in supporting the domestic production of vital industrial materials and components. Its financial loss shows the risks and dangers of such a policy in an industry that remains dominated by China.
In addition to mineral concentrate, MP is today producing four rare earth compounds at its Mountain Pass facility– neodymium-praseodymium oxide (NdPr), lanthanum carbonate, cerium chloride and SEG+ (heavy rare earth concentrate). Meanwhile in Fort Worth, Texas, it has built a factory to turn NdPr into metal and ultimately, finished neodymium magnets. MP has a contract with General Motors. GM will buy the magnets, which should begin to come off the Fort Worth production line late next year, for use in its Ultium electric motors for GM EVs. MP is also talking to other EV manufacturers. The domestic content rules in the Inflation Reduction Act led many carmakers to explore ways to increase the U.S. content in their EVs.
That’s the good news. The bad news is that in the June quarter, MP lost $28 million on revenue of $31.3 million. Sales of rare earths concentrate were down in the quarter due to some technical problems at the mine. But the real driver of the loss was the drop in prices for rare earths. The price realized in the second quarter, $4,183 a tonne, was 33% down on the year-earlier price.
Slumping prices for rare earths are due to Chinese overproduction. China dominates the industry. The world’s largest rare earth mine is in Mongolia. But China’s real trump card is in refining. Other mines around the world send minerals containing rare earths to China, which dominates global rare earth refining. The Chinese government incentivizes and subsidizes the refiners to keep on producing, despite a global slump in demand. Even China’s own rare earth producers are losing money at current prices, according to press reports from Asia. The slump is caused by China’s own economic slump, as well as the global shortfall in EV demand. Everybody in the industry agrees that in five or ten years, global demand for rare earths will be much greater than today, but the road to get to that point will be rocky.
Faced with a market slump, China has taken aggressive action to manage its rare earths industry and maintain its dominance. In June the Chinese government announced a series of measures to reinforce control over its rare earths industry. This included government ownership, traceability, and prohibition of the export of rare earths refining technologies. Firstly, it declared that all rare earth minerals mined in China belong to the Communist government, not the private companies mining them. Next it issued a requirement for all rare earth miners and refiners to report on the volumes of production and refining. This could be a prelude to industry rationalization. Finally, it prohibited rare earth technology export, to make it more difficult for companies in the west to obtain Chinese technologies. These policies are a reaction to efforts in the U.S., EU, and elsewhere to levy tariffs on the import of Chinese EVs.
Rare earths are a strategic technology, as is recognized by the U.S., China, the EU, and Japan. For example, the Virginia class of nuclear submarines now being built for the U.S. Navy are powered by giant electric motors which use rare earths. These are 377-foot long submarines carrying 40 torpedoes, lasers, and other weapons, at a cost of about $2.8 billion each. Yet a few hundred pounds of rare earth metals are needed for the motors. The Department of Defense is well aware of the critical importance of rare earth production in the U.S., which is why it invested $45 million in MP Materials back in 2020 and 2022.
MP Materials is in no immediate financial danger. It has $937 million of cash on its balance sheet and the cash outflow in the first half of this year was just $10 million. But the current depressed prices make other companies and investors reluctant to get involved in the industry.
Earlier this month, MP chief executive Jim Litinsky told investors: “These market conditions have now destroyed most of the hoped for projects from just a couple of years back…what remains certain is the strategic and irreplaceable value of the platform we are building at MP.”
It’s not just the EV industry that needs rare earths and the magnets that come from them. Wind turbines use the magnets. The humanoid robots that tech pioneers like Elon Musk are promising for our AI future are likely to use two to five times the rare earth magnet content as an EV.
The U.S. needs a more robust supply chain, from mining through refining and magnets to electric motors. To rebuild that supply chain, the private sector needs to see that the government is committed to maintaining a stable environment allowing for reasonable profitability at every step of the supply chain. In a globally competitive world, there is no such thing as a “pure” private sector solution. Government must take the lead, as the Department of Defense has long recognized.
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