Brazil Joins Effort to Reduce China’s Dominance in Rare Earths Industry, According to Reuters

By Melanie Burton and Fabio Teixeira

MELBOURNE/RIO DE JANEIRO – Brazil is making significant strides to establish a rare earths industry as Western economies seek to secure essential metals for green energy technologies and defense applications, aiming to reduce reliance on China’s supply chain dominance.

Brazil’s advantages include low labor costs, access to clean energy, established regulations, and proximity to key markets, notably Latin America’s inaugural magnet plant that will serve as a direct buyer for these metals.

However, challenges such as declining rare earth prices, technical hurdles, and cautious lenders complicate the nation’s ambitions to rank among the top five rare earth producers globally.

The timeline for developing Brazil’s rare earth projects will serve as a critical test of how well Western nations can create an advanced industry almost from the ground up to diminish China’s influence.

Holding the world’s third-largest rare earth reserves, Brazil’s first mine, Serra Verde, has commenced commercial production this year.

Analysts, mining executives, and investors anticipate an increase in output, buoyed by incentives from Western governments that are also fostering the growth of a global rare earths refining and processing sector.

"Brazil’s potential as a source of rare earths is very promising, especially considering the significant discoveries made recently," said Daniel Morgan of Barrenjoey investment bank.

He added, "Outside of China, Brazil’s projects appear to be the most economically viable new ventures."

The U.S. and its allies, who are heavily reliant on China for rare earth metals and magnets, are working towards establishing a separate supply chain by 2027, especially after disruptions during the early phases of the COVID-19 pandemic.

Last year, China produced 240,000 metric tons of rare earths, vastly outpacing the United States, the next largest producer. China processes about 90% of the global supply into permanent magnets that are crucial for technologies ranging from wind turbines to electric vehicles and missiles.

For Brazil, Australia, and Vietnam, making rapid advancements has proven challenging. The Serra Verde project took 15 years to reach production and is expected to yield 5,000 tons annually, with the potential to double its output by 2030, according to its CEO.

"Serra Verde and Brazil possess significant competitive advantages that could support the development of a globally relevant rare earths industry in the long term," noted Thras Moraitis, CEO of Serra Verde.

Key advantages include favorable geological conditions, access to hydropower, established regulations, and a skilled labor pool. However, Moraitis warned that the sector is still emerging and will require ongoing support to thrive in a competitive landscape, especially since critical processing technologies are controlled by a limited number of entities.

By 2030, Brazil could see the addition of two or three more rare earth mines, potentially surpassing Australia’s current annual production levels, as suggested by Reg Spencer, an analyst at Canaccord.

A significant challenge Brazil faces is the 70% drop in rare earth prices over the past two years, which has hindered fundraising efforts for new mines and processing facilities.

"Securing funding right now is quite difficult," stated Nick Holthouse, CEO of developer Meteoric Resources.

Meteoric plans to reach an investment decision by late 2025 for its Caldeira project in Minas Gerais, which is expected to produce both light and heavy rare earths.

Earlier this year, the U.S. Export-Import Bank indicated potential interest in financing Meteoric’s project with up to $250 million. The company is also in preliminary negotiations to supply rare earth oxides to a separation facility in Estonia.

Brazilian Rare Earths is also in the early stages of advancing a large deposit in northeast Brazil, supported by Gina Rinehart, Australia’s wealthiest individual.

His CEO, Bernardo Da Veiga, emphasized Brazil’s low operating costs as a competitive edge over nations like Australia, where an iron ore truck driver can earn up to A$200,000 annually, plus benefits. In contrast, a similar driver in Brazil might earn $15,000 a year, often using a bicycle for transport and bringing their own lunch.

Despite lower labor costs, developers must navigate technical complexities. Many Western firms are still refining the intricate processes needed for rare earth metal production, a daunting task that has delayed projects for years.

To encourage development, the Brazilian government launched a fund amounting to 1 billion reais to support strategic minerals projects, including those focused on rare earths.

Additionally, the government is keen on creating an industry for refining these minerals into alloys for applications such as batteries, wind turbines, and electric motors.

One of the main goals is to stimulate production and foster partnerships for element separation technologies and overall supply chain development, including investigations into rare earth recycling.

Among those engaged with the government on recycling technologies is Ionic Rare Earths, which operates a pilot recycling facility and has partnered with Brazilian developer Viridis Mining and Minerals.

Brazil is also in the process of establishing a magnet factory slated to open later this year, demonstrating a commitment to this sector, according to Flavio Roscoe, president of the Minas Gerais Federation of Industries.

"Our goal is to be a developer and multiplier of this technology," Roscoe stated, adding that "Brazil stands poised to offer a viable alternative to China."