Lone U.S. Rare-Earth Miner Is a Target of China Tariffs, CEO Says

(Bloomberg) -- The only U.S. rare-earths miner is crying foul over China’s decision to raise tariffs on American shipments of the raw materials used in electric vehicles.

MP Materials -- once the world’s biggest producer of rare-earth materials -- exports 3,000 to 4,000 metric tons of concentrates to the Asian nation from its Mountain Pass mine in California. The elements MP exports include neodymium and praseodymium, used in the magnets for electric motors.

The higher levies will squeeze the margins of the California producer at a time when American consumers of rare earths are pushing the U.S. to challenge China’s dominance in the market for metals that go in electric vehicles. The Asian nation has become, by far, the leader in producing rare earth elements.

“It is accurate to call this a targeted, unilateral tariff on the only U.S. rare earths producer,” James Litinsky, chief executive officer of JHL Capital Group LLC, the majority owner of the project, said by phone on Monday. “We are in the process of becoming a self-sufficient, global rare earths producer, we just want a level playing field to compete as a low cost producer.”

China ships out about 80 percent of the rare-earth materials imported by the U.S., according to the U.S. Geological Survey. By hitting America’s only producer, China has sent a message to the Trump administration about its growing prominence in this key supply chain.

Meanwhile, China has grown to be the world’s largest producer of electric vehicles as well as the biggest market for them, according to Colin McKerracher, a London-based analyst at BloombergNEF.

The Asian nation’s control of rare earths has long been flagged as a risk for advanced manufacturers in developed nations. Countries, including the U.S., took China to the World Trade Organization earlier this decade to force the nation to ease export restrictions.

MP Materials ships semi-processed output in China, where the raw material is refined and used in car manufacturing. Meanwhile, Tesla Inc. is rushing to complete a multibillion-dollar factory on the outskirts of Shanghai to capitalize on growing demand in the world’s largest electric-car market. The facility could eventually rival production from its U.S. plant.

“Maybe the U.S. will begin to take steps on the other side of these tariffs, such as taking action on those critical minerals with an eye towards reducing the leverage China has on those elements at this time,” said Dan McGroarty, the founder of Carmot Strategic Group, a consulting firm that advises companies on rare-earths and critical minerals.

--With assistance from Martin Ritchie.

To contact the reporter on this story: Joe Deaux in New York at jdeaux@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Reg Gale

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