Brazil joins race to loosen China’s grip on rare earths industry
Reuters | June 17, 2024
Caldeira rare earth project in Brazil. Image from Meteoric Resources.
Mining giant Brazil has big ambitions to build a rare earths industry as Western economies push to secure the metals needed for magnets used in green energy and defence and break China’s dominance of the supply chain.
Working to its advantage are low labour costs, clean energy, established regulations and proximity to end markets, including Latin America’s first magnet plant which would provide a ready buyer for the metals.
But low rare earths prices, technical challenges and nervous lenders pose challenges to the Latin American nation’s hopes to propel itself into the world’s top five rare earths producers.
The pace at which Brazil’s rare earths projects come together will be a test for how successful the West may be at building a new advanced industry almost from scratch to break China’s grip.
Brazil holds the world’s third-largest rare earth reserves. The country’s first rare earths mine, Serre Verde, started commercial production this year.
Output is set to grow, analysts, mining CEOs and investors say, supported by Western government incentives that are also accelerating a global rare earths refining and processing industry.
“Brazil as a source of potential rare earths is a very exciting proposition because there have been some very meaningful discoveries made in the past couple of years,” said Daniel Morgan of Barrenjoey investment bank in Sydney.
“I do think outside of China, Brazil’s projects are the most economic greenfield projects available.”
The US and its allies, almost entirely dependent on China for rare earths metals and magnets, set out to build a separate supply chain by 2027 after deliveries were disrupted during the Covid-19 pandemic early this decade.
Long haul
China produced 240,000 metric tons of rare earths last year, more than five times the next biggest producer, the United States, according to US Geological Survey data. It processes around 90% of the global supply of rare earths into permanent magnets used in everything from wind turbines to electric vehicles and missiles.
For countries like Australia, Vietnam and Brazil looking to catch up, progress is slow. Serra Verde has taken 15 years to get into production. It is expected to produce 5,000 tons this year and could double output by 2030, its CEO said.
“Serra Verde and Brazil have significant competitive advantages that could underpin the development of a globally significant rare earths industry over the long term,” Serra Verde CEO Thras Moraitis told Reuters.
Those include attractive geology, access to hydropower, established regulations and a skilled workforce, he said.
“It is still a nascent sector which will require continued support to establish itself in a highly competitive market. Key processing technologies are controlled by a small number of players,” he said.
Brazil could have two or three more rare earths mines by 2030, potentially exceeding Australia’s current annual output, said Reg Spencer, an analyst at broker Canaccord.
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