US rare earths miner to bypass China in supply deal with Sumitomo

U.S. rare earths producer MP Materials (NYSE: MP) has inked a deal with Sumitomo Corp. to supply the Japanese giant with some key elements, such as neodymium and praseodymium, helping the trading house bypass China in 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, output from Mountain Pass has been sent to China for processing, with Japanese companies purchasing from there.

Under the deal, MP Materials — the only rare earths producer in the U.S. — will handle not only mining, but also smelting of ores and separating various elements from them. 

Such output will be further refined by companies in Vietnam and the Philippines, before being shipped to Japanese magnet makers for use in final products.

The new supply chain arrangement, set to start operating in July, backs up the U.S. and its allies’ plans to cut China’s role in their critical supply chains.

Sumitomo anticipates it will supply 3,000 tonnes of neodymium and praseodymium a year to Japanese magnet makers, equivalent to about 30% of their annual consumption.

President Joe Biden has boosted efforts to help critical minerals company speed up plans to produce locally. Last year, his administration gave MP Materials a US$35-million Pentagon grant to help it acquire further equipment to process rare earth minerals in California.

Its open-pit Mountain Pass mine accounted for about 15% of the world’s mined rare earths supply in 2021, the company says.

The agreement will “stabilize, diversify, and strengthen a supply chain of critical importance to Japan’s manufacturing sector,” the U.S. and Japanese companies said in a joint statement. 

As of last year, China accounted for about 90% of smelting and about 70% of rare earth production, data from the U.S. Geological Survey shows. 

The U.S. has long been pushing to secure supply chains of critical minerals through partnerships that include Canada, the European Union, the UK, Japan, Australia and South Korea.