Incentives increasing to boost domestic REE production

A bipartisan bill set to be introduced in Congress this week would offer a tax credit for establishing rare-earth magnet production in the U.S., a crucial component for the clean-energy transition. MP Materials efforts to build a local supply chain demonstrate the challenge for American producers.

The bill, to be introduced by Rep. Guy Reschenthaler (R., Pa.) and Rep. Eric Swalwell (D., Calif.), includes a $20-a-kilogram credit for U.S.-made magnets, while manufacturers sourcing 90% of their component parts from U.S. producers could be entitled to a $30-a-kilogram credit, according to a draft seen by The Wall Street Journal. The credit is planned to be phased out by Dec. 31, 2035.

The bill, known as the Rare Earth Magnet Manufacturing Production Tax Credit Act of 2023, is the latest in a list of incentives to encourage rare-earth production as more attention is being focused on the metals and where they come from.

Rare earths such as neodymium, dysprosium and terbium are used in permanent magnets that are needed to help drive motors in electric vehicles, offshore wind turbines and increasingly within robotics. According to experts, they are going to become more crucial as the drive to adopt clean-energy technology grows. Wood Mackenzie’s Rare Earths Market Service estimates demand for rare-earth oxides stood at 171,300 metric tons in 2022 and projects it to grow to 238,700 tons by 2030.

The bill comes amid efforts to revive the Mountain Pass mine, that sits on the border between California and Nevada. It was once the world’s No. 1 source of rare earths—elements valued for their magnetic and conductive properties. Now it is looking to get back in the game and deliver a domestic supply of them for the energy transition, all the way from mine to magnet.

The Mountain Pass mine started life soon after the gold rush in the 1870s, producing mainly gold, copper, lead and zinc. Production changed over the years, and from the 1960s to the 1990s, it was the primary global source of rare earths. After financial and environmental struggles at the turn of this century, mining at the site was suspended in 2002 before being bought and restarted in 2017 by MP Materials Corp. , a Las-Vegas-based rare-earth producer.

“Mountain Pass is arguably the best rare-earth asset in the world. If it were oil, it would be Saudi Arabia,” says James Litinsky, chief executive of MP Materials, which continues to own and operate the mine.

Yet, during the time when mining was suspended at the site, the rare-earth industry shifted from niche products to reaching critical status in the U.S., Europe and Japan. Now, roughly 60% of all mined rare-earth minerals are sourced from China. Three other major sources exist in Myanmar, Australia and Mountain Pass.