Why Is This Rare Earth Metal 346 Times More Expensive In America Than in China?

Samarium, a rare earth metal, commands a price of up to 346 times more in North America compared to China. This price disparity is an indicator of what American industry would pay if Beijing were to cease exporting rare earth metals. Numerous American manufacturers, including those producing jet engines, industrial motors, EVs, wind turbines, and medical scanners, continue to procure these magnets from China due to cheaper pricing.

However, Chinese dysprosium costs five times more, and yttrium costs over 100 times more outside of China. Japan, recognizing the potential impact of Chinese supply slowdown, is requesting assistance from the US government before its yttrium runs out by the end of the year. REalloys, a company listed on NASDAQ under the ticker ALOY, aims to capitalize on the impending rare earth metal shortage in America.

The country is facing a severe shortage, and billions of dollars in investments in mining and magnet manufacturing will not suffice to mitigate the issue alone. The US government has already taken steps to address this problem by intervening to shield domestic production from the pricing pressure exerted by China. The Pentagon guarantees a minimum price of $110 per kilogram for NdPr to MP Materials, the US-based rare earth mining company, which compensates the difference when benchmark prices fall below this level.

However, the situation is rapidly changing as new investments in mines and magnet factories are accelerating. With China controlling over 90% of the world's rare earth metal capacity, REalloys is focusing its efforts on addressing the bottleneck in the supply chain. Metallization, the process of reducing rare earth oxides to metal, is a significant weakness in the Western supply chain, as more than 90% of the requisite capacity lies in China.

Currently, casters for the strip casting process take up to two years to deliver, and foreign buyers face export controls, making it impossible to acquire these essential components from China. Canaccord Genuity, an investment bank, projects that magnet plant capacity outside China will more than triple to approximately 70,000 tonnes by 2030.

Nonetheless, non-Chinese metal and alloy capacity is expected to reach merely 38,000 tonnes during the same period, representing half of what these new magnet plants will require. Consequently, every Western magnet line that rises without its own metal supply will have to purchase from China or compete with other Western plants for limited alternative supplies.

McKinsey's independent research predicts an annual growth rate of approximately 8.8% for dysprosium and terbium, essential heavy rare earths for high-performance magnets. By 2035, the world could potentially require 365,000 tonnes of rare earth magnets annually. The demand for magnets is projected to surge 7.3% annually, driven by the exponential growth of electric vehicles and drones, as well as the increasing demand for humanoid robots.

By 2035, global EV sales are expected to double from 23.5 million units to 52 million units, potentially prompting further revisions to the existing forecasts.