Washington Backs Price Floor To Boost Domestic Supply
The United States has launched a strategic pricing initiative to reduce China’s grip on the global rare earths market. The Department of Defense (DoD) has agreed to set a guaranteed minimum price for two critical metals, offering rare earth producers in the West a long-awaited support mechanism.
Under the new deal, MP Materials will receive at least US$110 per kilogram for neodymium and praseodymium, known collectively as NdPr. These are essential inputs in magnets used in electric vehicles, wind turbines, drones, and fighter jets. The price is nearly double the current China-set market rate of around US$63 per kilogram.
A view of the MP Materials rare earth open-pit mine in Mountain Pass
Global Implications For Critical Minerals
The pricing system took effect immediately, with analysts predicting widespread implications across the supply chain. Ryan Castilloux, managing director at Adamas Intelligence, said the benchmark would shift global pricing dynamics. “This benchmark is now a new centre of gravity in the industry that will pull prices up,” he said.
The DoD will pay MP the difference between the market price and the guaranteed floor. If prices exceed US$110, the department will collect 30 percent of additional profits.
Rare Earth Producers Welcome New Direction
Western producers and developers have responded positively. Aclara Resources, developing projects in Brazil and Chile, called the deal a strategic turning point. Alvaro Castellon, the firm’s strategy and development manager, said it introduced “new strategic paths” for their operations.
Solvay, a Belgian chemicals group, is seen as another potential beneficiary. The company launched a major expansion in April. While Solvay declined to comment, Castilloux said the system “will give them a floor to stand on.”
Pilot plant at Aclara’s rare earths project in Chile
MP Materials Expands US Capacity
MP Materials, based in Las Vegas, currently operates the only large-scale rare earth mine and processor in the US. The company reported a net loss of US$65.4 million last year due to low global prices. The new pricing model aims to reverse that trend.
MP plans to launch commercial magnet production at its Texas facility by year’s end. Initial output will reach 1,000 tonnes annually and later increase to 3,000 tonnes. Under the agreement, MP will also construct a second plant to produce an additional 7,000 tonnes annually.
The combined output of 10,000 tonnes would match US magnet consumption in 2024. However, this figure excludes the 30,000 tonnes embedded in imported finished goods, according to Adamas Intelligence.
MP Materials’ headquarters for rare earth magnet production in Fort Worth, Texas.
Rising Demand And Strategic Urgency
Adamas forecasts that global demand for rare earth magnets will more than double by 2034, reaching 607,000 tonnes. The US is expected to post the fastest annual growth rate at 17 percent. This demand surge, coupled with geopolitical tensions, has intensified efforts to diversify supply chains.
Recent Chinese export restrictions have sharpened US focus on domestic sourcing. The Biden administration continues to invest in reshoring critical mineral production to limit strategic vulnerabilities.
New System Tackles Years Of Underinvestment
Western miners have long pushed for alternative pricing mechanisms. Low prices dictated by China eroded profit margins and halted investment in domestic supply. Previous efforts to impose premiums on magnets were fragmented and ineffective.
The DoD intervention now offers a structured, scalable model. Castilloux said the policy would encourage both upstream and downstream investment. “It gives confidence to miners, refiners, and magnet manufacturers that a viable market exists,” he said.
Mixed Views On Impact For Consumers
Analysts warn that higher rare earth prices could increase costs for automakers and, eventually, consumers. David Merriman of Project Blue noted that not all buyers would adopt the DoD-backed pricing model. “Major non-government backed consumers are less likely to follow this same investment pattern,” he said.
Volkswagen, approached for comment, did not address pricing. A spokesperson said, “We welcome all efforts to strengthen long-term stability and diversification in global supply chains for critical materials.”
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Policy Roots Go Back To The Trump Era
Former UK foreign secretary Dominic Raab said the groundwork for the pricing system began under the Trump administration. “I’m not surprised the Trump administration had concluded that tax breaks alone would not create the level of investment required,” Raab said. He added, “The next step is, can they scale it up?”
Raab now heads global affairs at Appian Capital Advisory, a private equity firm investing in mining ventures.
Industry Seeks To Match Policy With Production
Project Blue estimates that rare earth production would need prices between US$75 and US$105 per kilogram to meet growing demand sustainably. The US$110 floor slightly exceeds that range and aims to support further domestic development.
The US rare earth market remains a fraction of China’s, which still supplies over 90 percent of the global market. However, the new pricing policy is seen as a meaningful first move to level the playing field and attract long-term capital into the US sector.
Strategic Pricing Could Reshape Global Supply Chains
With the Department of Defense now holding a 15 percent stake in MP Materials, the US government has embedded itself deeper in the supply chain. As production ramps up and new entrants emerge, industry observers will closely track the pricing model’s ripple effects across international markets.
The outcome may reshape rare earth supply, magnet manufacturing, and end-user costs for years to come.
