Rare earth materials produced by US companies backed by Washington are increasingly being exported to Japan and South Korea, highlighting the gap between America's efforts to build a domestic critical minerals supply chain and the pace of demand growth at home.

Products manufactured by MP Materials, Energy Fuels, and Phoenix Tailings—companies that have collectively secured billions of dollars in US government support—are being sold to Asian customers, where large-scale magnet manufacturing remains far more established than in the United States, Financial Times reports.

The push comes as China's dominance of global rare earths and critical minerals has emerged as a strategic concern for Washington and its allies after Beijing tightened export restrictions. Rare earth elements are essential for advanced technologies, including weapons guidance systems, electric vehicles, semiconductors, and energy storage.

Nick Myers, chief executive of Phoenix Tailings, said demand from Asia has surged following China's export curbs.

"Japanese customers were 'clamouring' for the rare earth metals it produces," Myers said, adding that the company's customers were "primarily in Korea and Japan."

He warned that unless US defense contractors accelerate purchases, overseas buyers will continue to dominate.

"Unless the [U.S. defence] primes move quickly, I will sell out... other companies are paying top dollar faster," Myers said.

Industry experts say the United States is still years away from establishing a fully integrated rare earth magnet supply chain.

"Today, there are two countries where [neodymium iron boron] magnets are produced at scale. One is Japan, the originator, and one is China," said Thomas Kruemmer, author of the Rare Earth Observer blog.

MP Materials, the largest US rare earth producer, said most of its neodymium-praseodymium (NdPr) oxide and metal sales are currently supplied to Japanese customers through Sumitomo Corporation of Americas, while a smaller portion is sold to an unnamed US technology and industrial company. The company has ended sales to China's Shenghe Resources under its agreement with the US government and plans to use more of its production domestically as it ramps up magnet manufacturing. MP has signed supply agreements with General Motors and Apple and expects to begin shipping finished magnets to GM this year.

Meanwhile, Energy Fuels, which secured $725 million in conditional government funding in June, is preparing to expand exports to South Korea.

"We will be sending oxides in the near-term to Korea," chief executive Ross Bhappu said.

The company is acquiring Australian Strategic Materials, which operates a rare earth metals plant in South Korea, and recently announced a $1.9 billion deal to purchase German magnet manufacturer Vacuumschmelze (VAC), a move expected to channel more U.S.-produced rare earth materials into VAC's American operations.

Despite substantial government backing—including a conditional $500 million award for Phoenix Tailings—industry leaders say expanding US production capacity will take time, leaving Asian manufacturers as the primary destination for American rare earth exports in the near term.

By Vafa Guliyeva

Source: caliber.az