Recent moves by U.S. President Donald Trump defining rare earths-related processing capacity as crucial for the U.S. defense sector could open the door to federal funding for U.S. projects, experts say.
Trump made a series of "presidential determinations" on July 22 under Section 303 of the Defense Production Act, labeling domestic separation and processing of rare earths and production of some rare earth-containing products as "essential to the national defense." The determinations covered production of light rare earth elements, heavy rare earth elements, rare earth metals and alloys, neodymium-iron-boron rare earth sintered material and permanent magnets, and samarium-cobalt rare earth permanent magnets.
They come as part of a broader push by the Trump administration to protect, or consider protections, on domestic materials it sees as critical to the economy and defense sector.
Tom Hicks, a managing director with the Mabus Group and former deputy under secretary of the Navy who is familiar with presidential determinations, said moves like these do not happen in a vacuum.
"It's not like the president wakes up one morning and says, 'Hey, I've got a great idea. We need to focus on rare earth metals,'" he said.
The process of arriving at a presidential determination is deliberative, Hicks said, and typically comes with potential projects in the pipeline. "So at this point, what that tells me is they have specific projects in mind," he said.
The Defense Production Act gives the federal government sweeping authority to ensure it has access to materials that it considers critical to the defense sector. Under Title III of the act the U.S. has various levers to boost domestic supply of essential materials.
"Authorized incentives include loans, loan guarantees, direct purchases and purchase commitments, and the authority to procure and install equipment in private industrial facilities," the Congressional Research Service said in a 2018 overview of the act.
Title III of the act also establishes the Defense Production Act Fund to help back projects. The Congressional Research Service said that, since 2000, the average project size under Title III was US$25.1 million, with an average US$14.0 million coming from the fund, US$950,000 from other government sources and US$10.21 million coming from the private sector.
A source close to the U.S. rare earths mining sector, who did not want to be named, said the determinations could help free up funds to back rare earth processing projects. "It will release parts of the government, like the Department of Defense, to make grants," the source said, giving one possible example.
"I think you'll see some money released," the source said. "It's not earth-shattering in size. We'll need to see something legislative ... to be really big. But it's a nice movement to show there's going to be some real action."
The U.S. is heavily reliant on China for refined rare earths, which encompass a slew of different metals that are used in small amounts in various electronic products and defense applications. U.S. dependence on rare earth imports has gained a higher profile amid trade-related negotiations between the U.S. and China, given China's clout in the sector.
While the U.S. is a significant producer of rare earths in concentrate, it lacks processing capacity, a Chinese strength. In the U.S., MP Materials produces more than 5,000 tonnes per month of rare earth-containing concentrate at its Mountain Pass mine in California, which accounts for about 10% of the global market, the company has said.
But its concentrate goes to China to be processed where it is subject to a 25% tariff.
In the wake of Trump's determinations, smaller cap companies in the U.S. touted the decision as positive for their sector. "The determinations issued this week by the White House are yet another aggressive step towards the U.S. acting quickly to rectify this disadvantage," said Ucore Rare Metals Inc. President and CEO Jim McKenzie in a July 25 statement. Ucore owns the Bokan Mountain rare earths project in Alaska.
Corby Anderson, a professor at the Colorado School of Mines and a metallurgical expert, told S&P Global Market Intelligence that Trump's determinations heighten awareness of U.S. dependence on outsides sources of metals and minerals and might help give the U.S. sector a boost.
"Perhaps that will allow more domestic production," he told S&P Global Market Intelligence. "Time will tell."