In Saskatchewan, Canada, the Saskatchewan Research Council (SRC) has inaugurated a $74 million rare earth minerals processing plant, marking the first commercial-scale facility of its kind in North America. This summer, the plant began operations, with a monthly production capacity of 10 tonnes of neodymium-praseodymium (NdPr) metals, essential for manufacturing high-power magnets. By the end of December 2024, the facility aims to ramp up production to 40 tonnes per month, ultimately producing 400 tonnes annually—sufficient for 500,000 electric vehicles each year.
The SRC’s initiative aims to reduce reliance on Chinese refineries, which dominate the global market, controlling 85% of rare earth processing capacity. China’s export controls on rare earth technologies have raised concerns about potential further restrictions, which could disadvantage American defense and technology sectors. The facility’s design allows for replication across North America, potentially increasing rare earth production as demand is expected to rise three to seven times by 2040.
This project has garnered support from the U.S. Defense Department under the Defense Production Act, which facilitates incentives for securing critical supply chains. The Biden administration has provided substantial subsidies for various rare earth initiatives, including $45 million to MP Materials in California and over $288 million to Lynas USA in Texas. The U.S. recognizes Australia, the U.K., and Canada as domestic sources for critical minerals, enhancing international cooperation to meet the goal of a sustainable supply chain by 2027.
Challenges to U.S. rare earth production
Despite the promising developments, U.S. rare earth production faces significant obstacles. Chinese industrial policies and stringent American regulations have hampered domestic growth, compelling reliance on subsidies to rebuild production capabilities. Although demand for rare earths is projected to increase, prices have been falling since 2022, with NdPr prices dropping by 20% from January to July 2024 due to rising production quotas in China.
China’s low labor costs and relaxed environmental standards have bolstered its rare earth production, aided by strategic policies that have effectively shut out foreign companies from its market. As a result, the surplus of Chinese-produced rare earths makes it challenging for U.S. producers to compete, particularly when prices are low.
American regulatory hurdles further complicate the situation. The Nuclear Regulatory Commission’s classification of rare earth mining alongside thorium mining has increased operational costs, while strict reporting requirements under the Securities and Exchange Commission discourage investment in U.S. mines. Permitting delays can take seven to ten years, compared to two years in Australia and Canada, significantly impacting the viability of new projects.
Conclusion
The SRC’s new facility represents a crucial effort to shift rare earth production away from China, yet substantial domestic production is essential to meet the Biden administration’s green energy objectives without further dependence on Chinese suppliers. To enhance U.S. competitiveness, policymakers must focus on reducing the regulatory burdens that currently inhibit rare earth production, rather than solely relying on federal subsidies to support domestic mines and refineries.
