TOPIC:MARKETS-COMMODITIES-METALS

WASHINGTON, Oct 18 (Reuters) – The United States⁣ and Australia have forged a​ deal to accelerate‍ the development of rare earths refining⁣ capacity, a move aimed at diversifying supply chains and lessening China’s dominance in the critical⁤ minerals sector, though ⁤experts⁣ caution it will take years to significantly alter the global landscape.

The agreement,announced ⁣Wednesday,will see the U.S. Department of Defense ‍provide up to $6.7 million in funding to‌ Lynas⁤ Rare Earths, an Australian company, to build a heavy rare earth separation facility in texas. This facility will process material from Lynas’ mine in Western ⁢Australia,aiming⁣ to produce separated ⁤rare⁤ earth products vital for electric vehicles,defense technologies,and ⁤other key industries. ‌Currently, China processes‍ the vast majority of the world’s rare earth elements, ⁣controlling a‌ crucial link in the supply chain.

While⁤ the U.S.-Australia partnership represents a significant​ step towards building a more resilient ⁣supply chain, analysts say it’s unlikely ⁤to challenge⁣ China’s⁢ dominance in the short to medium term. ‌China’s established infrastructure, ‌lower costs, and extensive refining capabilities mean ‍it will remain the primary global supplier for the foreseeable future. The new facility is projected to produce enough separated⁤ rare earths​ to support 10% of the annual demand for permanent magnets in electric vehicles by 2027, according to a U.S. official.

“This is a welcome development, but ‌it’s ⁢a marathon, not a sprint,” said Jon Hyner, director of the Atlantic Council’s GeoTech Center. “Building a fully independent, competitive rare earth supply chain outside of China will require sustained⁢ investment, strategic partnerships, and a long-term commitment.”

The deal builds ⁤on previous ⁣U.S. efforts to‌ bolster domestic rare earth production, including funding for MP Materials’ Mountain Pass mine in California. Though, even with increased domestic⁣ production, the U.S. ⁢still relies heavily on China for processing. Lynas’⁣ Texas facility aims to address this processing bottleneck, ⁢but ‌scaling up production and navigating regulatory hurdles will be key challenges.

The ⁤U.S. government ​views securing access ‌to rare ‍earths as a national security priority, citing ‌concerns about potential⁤ supply disruptions and China’s⁣ potential to weaponize ​its dominance in the sector. The agreement with Australia is part of a broader strategy to diversify critical‌ mineral supply chains and ‌reduce reliance on a single⁤ country.