Electric vehicles, long-lasting batteries and artificial intelligence are bringing the world a great deal of innovation and opportunity. But though these developments are exciting, it has become clear that the resources needed for these advances–specifically, rare earth metals–are in high demand. And if the past is any guide, the rare earth metals supply chain has often proven inflexible. But new investments in rare earth metal mining operations may eventually change that. Driven by Western nations who would prefer to have alternatives to China as a main supplier, support for these new projects is growing.
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China is currently the market leader by far when it comes to the rare earth metals supply chain. However, several countries are trying to change that, including not only Australia and Vietnam, but also Brazil. Interestingly, Brazil is attractive for rare earth metal mining operations for a number of reasons, not the least of which is its proximity to the U.S. and Canada. Certainly, there are hurdles and obstacles to overcome to achieve these goals. But with perseverance and support, these efforts could completely disrupt the precious and rare earth metals landscape… and if realized, this could be of tremendous help in creating greater resiliency in the rare earth metals supply chain.
Brazil’s Opportunities and Advantages
Ultimately, Brazil has expressed a desire to be among the top five in rare earth metal mining operations in the years to come. Given this, it’s worth exploring if this is even feasible for the country. From many vantage points, it looks to be. For one, Brazil has low labor costs in its mining industries, which rivals Chinese labor rates. At the same time, Brazil also has a well-established mining regulatory environment that favors growth and stability. It also boasts the third largest reserves of rare earth metals in the world, which is definitely gives it an advantage. Finally, Brazil also is quite advanced in green energy use including extensive options for hydropower. Each of these characteristics of the country explains why Brazil could be key to the future rare earth metals supply chain.
While these key features provide a rationale for pursuing rare earth metal mining operations, others exist as well. Specifically, the U.S. and Canada would prefer to distance themselves from reliance on China. At the current time, China accounts for over 90% of the rear earth metals supply chain. Last year, China produced over 240,000 metric tons as part of its rare earth metal mining operations. This was five times more than the next high-producing country, which was the U.S. As such, the U.S. and other western nations are willing to provide financial incentives for supply chain alternatives. And given Brazil’s proximity, this represents a great opportunity in developing alternative supplies. Not only would this improve rare earth metals supply chain resiliency. But export costs and delays would be much reduced as well.
Obstacles to Overcome
Despite the advantages that Brazil may have in competing with China, there are several challenges as well. One of the most notable ones relates to the technical difficulties involving rare earth metal mining operations. China still leads the world in rare earth metal processing as far as volume and efficiency. Developing mines takes time, and perfecting the process is similarly difficult. For example, Brazil’s most notable rare earth metal mine only produced 5,000 metric tons last year. While this is expected to grow, estimates suggest it will likely only double by 2023 in production totals. Other mines may be developed during that time, but these too will take time to mature and improve. Thus, which good infrastructure exists, technicalities will remain.
In order to overcome technical barriers, funding will be needed. Western nation incentives will help in this regard. But as far as other lenders, Brazil may have trouble accessing needed financial supports. The persistently low prices of rare earth metals undermines access to capital. Prices for rare earth metals have been in a major slump for a while. And this naturally makes lenders nervous. It may therefore be challenging to expand and develop rare earth metal mining operations further without this support. If Brazil wishes to climb to the top tier of the rare earth metals supply chain, this will need to be addressed. Waiting for lenders to become less cautious is not likely to be the best option.
Supply Chain Change in Motion
Brazil isn’t the only country pursuing a better position in the rare earth metals supply chain. Australia and Vietnam are other countries investing heavily in rare earth metal mining operations. But they too have been slow to expand, facing many of the same challenges as Brazil. In addition, their remote geographic position from the U.S. doesn’t provide some of the same benefits as those of Brazil. In addition, Brazil has opportunities to also supply some local enterprises in Latin America. This includes the first magnet production plant in the region that relies on an efficient rare earth metals supply chain. It may therefore be that higher regional demand may give Brazil another advantage over other countries.
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The Brazilian government recognizes the country’s potential in becoming a top player in the rare earth metals supply chain. As a result, it has already invested $200 million in strategic mining projects in the country. The local government is also exploring supporting industries beyond rare earth metal mining operations. This includes investigating the possibility of rare earth metal recycling plants. It also wishes to develop other production facilities that use local rare earth metals for manufacturing. Specifically, factories that manufacture turbines, batteries, and electric engines would provide added demand as well. Based on this, it’s evident Brazil is focused on becoming a major supplier of rare earth metals sooner rather than later. And this could be a very good thing for the global rare earth metals supply chain.
