【By Liu Bai, Observer】The Trump administration was determined to avoid being "strangled" by rare earths. According to a November 3 report by the Wall Street Journal, two start-up companies aiming to achieve self-sufficiency in American rare earth magnets have reached a $1.4 billion deal with the U.S. government and private investors, sending a strong signal from the Pentagon about its determination to build a supply chain to weaken China's control.

Vulcan Elements, the company leading this transaction, stated on the 3rd that the U.S. Department of Defense's Strategic Capital Office would provide a $620 million loan to build and operate an American factory capable of producing up to 10,000 tons of magnets annually. The U.S. Department of Commerce will contribute $50 million, while private investors will add another $550 million.

Vulcan Elements, a U.S. start-up based in North Carolina, was founded in 2023 and currently has fewer than 50 employees.

The new element technology company (ReElement Technologies), also participating in the transaction, has received $160 million in funding from the Pentagon and private investors. The company is a subsidiary of American Resources Company, specializing in the recycling and refining of rare earth materials, processing upstream rare earth raw materials through high-tech methods to produce high-purity single rare earth oxides, supplying downstream magnet manufacturers like Vulcan Elements.

Vulcan Elements stated that as an investment return, the U.S. Department of Commerce will receive a $50 million equity stake in the company, while the Pentagon will receive warrants for both companies, i.e., the right to purchase shares at a set price.

May 9, 2023, Mountain Pass, California - MP Materials mine area using 100-ton trucks to transport ore for processing. IC Photo

The report said this is the latest move by the U.S. government to invest in private companies to promote technological development, and it is the latest sign of its efforts to build a domestic rare earth supply chain and break China's dominance in this field.

In July, the largest U.S. rare earth miner MP Materials announced that the Pentagon had acquired a 15% stake in the company. In August, the U.S. government also acquired a 10% stake in Intel, and reached an agreement with AI chipmaker NVIDIA and AMD to extract 15% of their sales to China.

This transaction is of great significance for the newly established Vulcan Elements company. The company launched its first commercial production facility in March this year. This summer, the company announced a $65 million venture capital round. Since China imposed export restrictions on rare earths and critical minerals, demand for the company's magnet products has surged, as these minerals are difficult or even impossible to obtain elsewhere.

Additionally, the participation of ReElement Technologies indicates that the recycling of rare earth magnets, rather than just mining, will play a key role in the supply system of the new factories in the United States.

Rare earth magnets are essential for the manufacturing of artificial intelligence (AI) data centers, electric vehicles, motors required for consumer electronics, and defense systems such as missiles, drones, satellites, ships, jet fighters, etc. China has long dominated the entire supply chain from mining to processing.

Since the end of last year, when China implemented strict export restrictions on critical minerals, and further restricted the export of rare earth magnets in April of this year, U.S. manufacturers and defense contractors have been scrambling to find alternative sources. This shortage exposed the vulnerability of the U.S. reliance on China. Afterward, U.S. companies had to obtain Chinese approval and prove that their products were not used for military purposes.

China has repeatedly emphasized on the issue of rare earth exports, stating that the relevant measures are normal practices to improve China's export control system in accordance with laws and regulations, reflecting China's responsibility as a major country to maintain world peace and stability. China is committed to maintaining the safety and stability of the global supply chain.

After the meeting between the leaders of China and the United States, Trump told the media that the dispute over rare earths "has been resolved." However, on November 2, U.S. Treasury Secretary Bensons stated that if China continues to block rare earth exports, the U.S. may impose additional tariffs on China.

In response, Foreign Ministry Spokesperson Mao Ning stated that the Chinese authorities have repeatedly explained their position on China's rare earth export control policy. The achievements of the economic and trade consultations in Kuala Lumpur fully demonstrate that dialogue and cooperation are the correct path, and threats and pressure are unhelpful in solving the problem. Both sides of China and the United States should earnestly implement the important consensus reached during the summit between the two heads of state in Busan, injecting more certainty and stability into Sino-U.S. economic and trade cooperation and the world economy.

Despite the efforts of the West to try to reduce dependence on China for rare earths, industry insiders generally believe that this is not something that can be achieved overnight.

Scott Dunn, co-founder of Noveon Magnetics in the United States, told the media that after China announced the implementation of rare earth export controls earlier this year, he received many calls, "clients not only requested to proceed as planned, but also wanted to increase the original output several times."

When mentioning this, Dunn looked troubled, "the standard of some clients' demands is something that China's decades of industrial accumulation can achieve."

A report published by the Wall Street Journal on the 28th also noticed this surge in rare earth financing. The report stated that China's deterrent measures have indeed driven the recovery of the Western rare earth industry to some extent. However, regardless of the time needed to rebuild the Western rare earth supply chain, the industry has already experienced multiple "false booms" before. The fact is that the rare earth industry outside of China lacks experience and professional technology.

This article is an exclusive work of Observer, and without permission, it cannot be reprinted.

Original: https://www.toutiao.com/article/7568768853950333486/

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