Rare earth: MP Materials bypasses China in supply agreement with Sumitomo

US rare earth producer MP Materials has signed an agreement with Sumitomo Corp. to supply the Japanese giant with key elements such as neodymium and praseodymium, helping the trading house bypass China in its EV rare earth supply chains.

MP Materials, owner of the Mountain Pass mine in California, will sell material from its separation plant to Sumitomo for distribution in Japan.

Until now, Mountain Pass production has been sent to China for processing, where the Japanese companies purchased the material.

Under the agreement, MP Materials, the only producer of rare earths in the US, will not only be responsible for mining, but also for smelting the ores and separating the various elements.

The production will be further refined by companies in Vietnam and the Philippines, before being shipped to Japanese magnet manufacturers for use in final products.

The new supply chain agreement, which goes into effect in July, supports plans by the US and its allies to reduce China’s role in their critical supply chains.

Sumitomo plans to supply 3,000 tonnes of neodymium and praseodymium per year to Japanese magnet manufacturers, equivalent to about 30% of their annual consumption.

President Joe Biden has stepped up efforts to help critical minerals companies accelerate local production plans. Last year, his administration awarded MP Materials a $35 million Pentagon grant to help it acquire additional equipment for processing rare earth minerals in California.

According to the company, its Mountain Pass open-pit mine accounted for about 15 per cent of the world’s supply of mined rare earths in 2021.

The agreement will ‘stabilise, diversify and strengthen a crucial supply chain for Japan’s manufacturing sector. Last year, China accounted for about 90 per cent of smelting and about 70 per cent of rare earth production, according to data from the US Geological Survey.

The United States has long pushed to secure critical minerals supply chains through partnerships that include Canada, the European Union, the United Kingdom, Japan, Australia, and South Korea.

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