For USA Rare Earth, it was the best of timing and the worst of timing.
Last month, the Tampa-based firm went public on the Nasdaq via a SPAC merger, taking a major step toward breaking China’s monopoly over the metals and magnets needed for electric vehicles, consumer electronics, and fighter jets.
This month, in retaliation to President Donald Trump’s trade war, Beijing banned exports of the exact metals and magnets USA Rare Earth aims to mine and manufacture.
USA Rare Earth’s stock has surged as investors bet on one of the only companies promising to supply the country’s automakers, electronics factories, and defense contractors with American-mined and -made magnets forged from sintered neodymium mixed with iron and boron — a blend that, thanks to its underlying atomic structure, produces one of the world’s strongest commercially available types of magnets. Shares of the firm, whose planned mine in Texas contains all of the so-called heavy rare earths China halted shipments of, soared nearly 60% to more than $14 in the week after the ban went into effect.
But there’s a big problem: China is cutting off exports right now, and USA Rare Earth is years away from realizing its plans.
“We’re starting to get a lot of phone calls, as you can imagine. That’s good for us,” Josh Ballard, USA Rare Earth’s chief executive, told Sherwood News. “Unfortunately, none of this turns on a dime.”
How the US lost its metal edge
The United States once produced most of the world’s supply of rare earth elements, a family of 17 minerals in growing demand amid a global push for electrification, digitization, and rearmament. Contrary to their name, the metals aren’t actually rare, but they are difficult to refine out of ore and the mining can cause a lot of pollution.
In the 1980s, much of that production left the US and went to China’s Inner Mongolia province. Today China mines 60% of the world’s rare earths, and processes upward of 90% of what’s on the market. When it comes to so-called “heavy” rare earths that are even harder to extract — such as the yellowish and malleable terbium, which can change the shape of magnetic fields, or the butter-soft, silvery dysprosium, an ingredient that keeps magnets from overheating — China controls over 98% of all refining capacity.
Vials hold the raw ore and test samples of the rare earth metals extracted from rusty colored rocks in Mountain Pass, CA (Don Bartletti/Getty Images)
For decades, China’s tightening grip over rare earth supplies went largely unnoticed. The first real blip of awareness came in September 2010, when Beijing embargoed shipments of metals to Japan for two months during a territorial dispute.
Yet countries, including the US, only grew more dependent on China for the metals. Despite being the only remaining active rare earths facility in the US, the Mountain Pass mine in California struggled for years. The owner, Molycorp, declared bankruptcy in 2015. Production dwindled, and the mine was put up for auction.
After finding a purchaser, Mountain Pass staged a revival in 2020, coming back as MP Materials and going public via a SPAC deal that year. In December 2021, General Motors signed a contract with MP Materials to boost production and build a magnet manufacturing plant in Texas.
By the end of this year, MP Materials expects to produce 1,000 tons of magnets at the facility. That’s less than 1% of what China manufactured in 2018, when the country churned out 138,000 tons of neodymium-boron-iron magnets. Last year, China produced an estimated 330,700 tons.
Additionally, MP Materials’ assembly line is limited to the sizes, shapes, and coatings GM’s cars need, and MP Materials still depends on China for processing its ore into rare earth oxides that can be used in magnet manufacturing.
All of this means that USA Rare Earth has an opportunity to buy some of its would-be rival’s extra supply of rare earth oxides.
The rare (earth) opportunity and challenges ahead
Under the Biden administration, the Department of Defense awarded Australian-based Lynas Rare Earths’ US subsidiary, Lynas USA, more than $150 million in money from a seldom-used wartime manufacturing law called the Defense Production Act to kickstart a processing facility for rare earths.
So far, only USA Rare Earth has established the seeds of a total mine-to-magnet supply chain. In January, the company announced a breakthrough when its pilot-scale processing laboratory in Wheat Ridge, Colorado, refined ore from its proposed mine in Texas into a rare earth oxide with over 99% purity.
Still, the Center for Strategic and International Studies, an industrial think tank in Washington, DC, cautioned this month that “significant work remains to turn production of samples in a laboratory into full scale commercial production capable of reducing reliance on China.”
Rare earth mine at Bayan Obo Mining District in Baotou, Inner Mongolia Autonomous Region of China (Wu Changqing/Getty Images)
USA Rare Earth’s Ballard agreed. Even in the most optimistic scenarios, starting mining at the company’s Round Top site in western Texas, less than 20 miles from the Mexican border, will take years, he said.
Instead, USA Rare Earth is planning to build a magnet manufacturing plant in Oklahoma first, establishing a revenue stream that could help support the costlier work of opening a mine. Last month, the company commissioned a laboratory in the town, roughly an hour west of Tulsa, to test “innovative processing techniques” to ultimately refine its minerals in-house.
But in the meantime, USA Rare Earth signed a deal with Australian Strategic Materials to process its rare earths at a refinery in South Korea before shipping the metals back to its factory in Stillwater, Oklahoma. The plan, Ballard said, is to maximize its use of “feedstock,” or raw materials for magnets, domestically and “then augment with feedstock from South Korea.”
Some of that domestic feedstock may come from recycled metals. USA Rare Earth is in talks with REEcycle, a Houston-headquartered magnet-recycling startup that aims to extract as much as 100 tons of raw materials to make new magnets from scrapped wind turbines, hard drive disks, and defunct MRI machines.
“Some of these guys building mines are saying they can solve the problem, and that may be true, but it’s 7 to 10 to 15 years away. That’s not a near-term solution,” Rasmus Gerdeman, the chief executive of REEcycle, said.
With the US throwing away 20,000 tons of recyclable magnets per year, Gerdeman estimates his industry could pull as much as 6,000 tons of reusable materials out of that waste. REEcycle’s first commercial-scale plant is expected to begin operations by June of next year.
“That’s as big as a mine,” he said, “and you can actually put that back into the market much faster.”
Recycling is a potentially faster way to put domestically produced rare earths on the market and could meet a lot of the demand for imports today, which rose to about 8,000 tons of rare earths last year. But that doesn’t count the majority of rare earths coming into the US as finished products, like magnets. If more of those magnets are manufactured in the US, the demand for rare earths will increase, making more mined material necessary.
China remains far ahead. Last year, MP Materials ramped up mining enough to extract a record 45,000 tons of raw rare earths, up from 41,600 in 2023, according to US Geological Survey data. During that same period, Chinese production leapt to 270,000 tons from 255,000 tons, but USGS warned that could be undercounting the total output. Australia, the third-largest foreign producer of rare earths after China and war-torn Myanmar, may represent the best option for the US to import more materials from an ally. But the country’s rare earth production dropped to 13,000 tons last year from 16,000 in 2023.
For now, manufacturers’ dependence on imported materials will likely make any magnets more expensive for the time being, said Neha Mukherjee, a London-based rare earths analyst at the battery metals consultancy Benchmark Mineral Intelligence.
“Until they ramp up, downstream producers are going to be heavily reliant on imported materials, which will increase prices,” she said. “With tariffs coming into place, we might see a slowdown. Slow growth is still growth… but this is all going to be slower than we thought.”
“This is a Marshall Plan moment”
Ballard is hoping the federal government will step in to speed things up.
In March, Trump promised to invoke rarely used wartime powers to bolster domestic mining. The Financial Times recently reported that the administration plans to stockpile metals collected from mineral-rich nodules on the ocean floor, a boon to the nascent deep-sea mining industry.
But Ballard said Trump needs to think bigger.
“To me, this is a Marshall Plan moment, a build-the-nuclear-bomb moment,” he said. “You’ve just got to throw resources at it.”
With enough capital and fast-tracked permitting, Ballard said, USA Rare Earth’s Oklahoma plant could be up and running next year. The factory would require “less than $1 billion this year” in public support, he said, with “a couple extra billion if you wanted to scale things up in the next couple of years.”
Since mining is a more expensive endeavor, Ballard said the size of a government program to sufficiently subsidize USA Rare Earth’s production in Texas would fall in the ballpark of $2 billion — and billions more if federal agencies were to support additional mines.
After giving it some thought, he said, a better analogy for a federal program might be the 2008 bailout of automakers, when the government bought equity stakes in car manufacturers to avert an industry collapse amid the global financial crisis.
“Look at what we did with auto manufacturers. Find companies that can do this quickly. Put in equity. Get paid back,” Ballard suggested. “If we do this with private capital, it’s going to take decades. If the government can come in and take risk off the table with price guarantees and allow us to take the risk to build the mine faster, then everything can move faster. But it’d take a real partnership.”
There are potential avenues for doing so. The US International Development Finance Corporation has a lot of experience with mining projects overseas, but it’s unclear whether the federally owned lender can invest in a domestic project. The Department of Energy’s Loan Programs Office is another option, but the Trump administration has targeted the lender for massive job cuts and Ballard said it would be years before USA Rare Earth generated revenue, so the deal would need to be structured with far-off deadlines for paying back the money.
Either way, he said, “It’s going to be a rough couple of months. There’s no way it will happen this year. If you’re doing a Marshall Plan, maybe next year. But 2027 is more likely.”
He added, “The government needs to do something that typically they’re not good at: they need to take action fast in order for us to have the supply we need a year from now. If the capital is there, we can move pretty quickly — not overnight — but faster than we’re planning.”
Alexander C. Kaufman is an award-winning journalist whose work has appeared in The Atlantic, Heatmap, Canary Media, and HuffPost, and who writes the Field Notes newsletter.
