How US plans to reduce rare earth reliance on China
What's the story
The US government has announced a major investment of $1.6 billion in USA Rare Earth, a significant player in the rare earth minerals sector. The funding will be used to develop a mine in Texas and set up a magnet manufacturing facility in Oklahoma. The move is part of Washington's strategy to reduce dependence on China for critical minerals needed for high-tech products and national security purposes.
Investment
Commerce Department's stake in USA Rare Earth
The investment from the US Commerce Department includes $277 million in federal funding, and a $1.3 billion senior secured loan. In return, the Commerce Department will get 16.1 million shares of common stock and rights to purchase an additional 17.6 million shares in USA Rare Earth, further strengthening its position in this critical sector.
Strategic move
Investment aims to ensure supply chain resilience
The investment from the Commerce Department is seen as a major step toward ensuring the resilience of US supply chains. "USA Rare Earth's heavy critical minerals project is essential to restoring US critical mineral independence," said Secretary of Commerce Howard Lutnick. He added, "This investment ensures our supply chains are resilient and no longer reliant on foreign nations," highlighting its strategic importance.
National security concern
US's dependence on China for critical minerals
The US's dependence on China for critical minerals, a list of 50 minerals including 17 rare-earth elements, has long been considered a national security vulnerability. This investment in USA Rare Earth is part of the Donald Trump administration's broader efforts to bolster the domestic critical mineral industry and break China's stranglehold on the global supply chain.
Past investments
Previous investments in rare earth sector
The Trump administration has also made other major investments in the rare earth sector. The Pentagon had invested $400 million in MP Materials, a rare-earth producer, and provided a $150 million loan to the US company last August. In November, a partnership with start-ups Vulcan Elements and ReElement Technologies was announced for $1.4 billion to boost US access to materials and technology crucial for high-tech goods and military equipment production.