In a bid to challenge China’s dominance in the rare earth magnet industry, several U.S. companies have embarked on ambitious projects to manufacture neodymium-iron-boron (NdFeB) magnets domestically. These powerful magnets are critical components in a wide range of applications, from electric vehicles and wind turbines to military systems and precision-guided weapons.
MP Materials Leads the Way
Leading the charge is MP Materials, a top U.S. materials company that announced in mid-January the start of trial production of NdFeB magnets at its facility in Fort Worth, Texas. The facility, named Independence, currently has an initial capacity of 1,000 tonnes per annum, with plans to scale up to 2,000 to 3,000 tonnes per year. According to Matt Sloustcher, MP Materials’ spokesman, the facility will supply magnets to General Motors and other U.S. manufacturers.
MP Materials’ unique advantage lies in its mine-to-manufacturing strategy. The company mines rare earth ore and refines it into rare earth oxides, reducing the oxides to metals, and then using the metals to make magnets – a vertically integrated approach that few companies, even in China, can match. This strategy provides MP Materials with real-time insights into market demand, enabling better timing for expansion plans.
Competition Heats Up
MP Materials is not alone in the race. Vacuumschmelze GmbH, a German magnet maker, has begun constructing a $500 million plant in South Carolina through its subsidiary, e-VAC Magnetics. The project has secured $335 million in outside funds, including at least $100 million from the U.S. government. Additionally, Noveon Magnetics in San Marcos, Texas, is producing NdFeB magnets through a unique process that recycles materials from discarded magnets.
However, the collective output of these U.S. projects will barely make a dent in China’s dominance. According to Steve Constantinides, an IEEE member and magnet industry consultant, China produced 85 percent of the total 220,000 to 240,000 tonnes of neodymium magnets globally in 2024. The largest Chinese manufacturer, JL MAG Rare-Earth Co. Ltd, alone produced at least 25,000 tonnes last year – comparable to the combined output of all non-Chinese rare earth magnet makers.
Challenges and Uncertainties
Despite the U.S. government’s support and the potential to supplant a significant percentage of domestic magnet imports, the path to success is fraught with challenges. China’s rare earth magnet makers benefit from various subsidies and are currently operating at only 60 percent of their production capacity, creating downward price pressure on magnets in the near future.
Furthermore, the U.S. Department of Defense requires rare earth magnets for its systems to be produced entirely in “friendly” countries, necessitating a premium price to establish a price floor for domestic producers. Whether the cost-conscious automotive industry, a significant consumer of rare earth magnets, will be willing to pay this premium remains uncertain.
“The application of tariffs to magnets in an attempt to ‘level the playing field’ incentivizes companies to find work-arounds, such as exporting magnets from China to Malaysia or Mexico, then re-exporting from there to the USA. This is not theoretical, these work-arounds have been used for decades to avoid even the past or existing low tariff rates of about 3.5 percent,” warns Constantinides.
As the U.S. rare earth magnet industry begins to take shape, it remains to be seen whether it can overcome the formidable challenges posed by China’s dominance and the inherent cost pressures of the market.
Source: IEEE Spectrum