Pentagon to stockpile rare earth magnets for missiles, fighter jets

Texas Mineral Resources

20/12/2019 12:00

(Repeats EXCLUSIVE published earlier on Dec 20, no changes)
    By Ernest Scheyder
    Dec 20 (Reuters) - The U.S. military plans to stockpile rare
earth magnets used in Javelin missiles and F-35 fighter jets,
according to a government document seen by Reuters, a step that
critics say does little to help create a domestic industry to
build specialized magnets now made almost exclusively in Asia.
    The Pentagon is seeking proposals to cache a rotating
six-month supply of neodymium iron boron (NdFeB) magnets, a type
of rare earth magnet essential to weapons manufacturing,
according to the document, detailing the latest attempt to
weaken China's control over the rare earths sector. 
    Beijing has been using that prowess for leverage in its
trade war with Washington.  urn:newsml:reuters.com:*:nL1N28F2AS
    The request effectively seeks someone to warehouse a
six-month supply of the specialized magnets and maintain it for
at least 30 months. It does not offer financial support for
NdFeB magnet manufacturing, which industry analysts and
executives say is a short-sighted misstep by the Pentagon. 
    "This is definitely a curve ball," said Peter Afiuny of
Urban Mining Co, a privately held company building a rare earth
magnet facility near Austin, Texas. "We expected the call would
be strategically aimed at actually doing something to spur
domestic production capacity."
    China and Japan are the world's largest NdFeB magnet
producers. None of the specialized magnets are made in the
United States, though a U.S. Naval Research Laboratory scientist
invented them https://www.nrl.navy.mil/content_images/horizon.pdf
 in the early 1980s. 
    Reuters reported last week that the Pentagon is funding
construction of rare earths processing facilities. But after
rare earths are processed, they must be turned into magnets,
otherwise they are of little value to electronics and weapons
manufacturers. urn:newsml:reuters.com:*:nL1N28F2AS
    The Pentagon did not respond to requests for comment.
    President Donald Trump this year ordered the military to
update its supply chain for the niche materials, warning that
reliance on other nations could hamper U.S.
defenses. urn:newsml:reuters.com:*:nL2N24N1LH
    Responses to this latest Pentagon request are due by Jan.
22, 2020, according to the document. 
    The Pentagon plans to spend $10 million on the program, with
recipients funding another $10 million in total. Each recipient
will receive a maximum of $3 million, according to the document.
    It was not immediately clear why the Pentagon only wants an
available supply for 30 months nor was it clear the volume or
grade of magnet being sought or the timeline of when winners
could be picked.
    "Our government usually moves slowly unless there's a severe
crisis, at which time extraordinary action is needed to mitigate
the problem," said Steve Constantinides, a U.S.-based rare
earths industry consultant.
    Because Hitachi Metals Ltd  5486.T  controls the processing
patent for NdFeB magnets, the request is likely to be a boon for
the Japanese company. Urban Mining, the Texas startup, says its
NdFeB manufacturing process involves recycling of older magnets.
    Hitachi licenses its technology to manufacturers in China
and elsewhere, but none in the United States. Chinese producers
remain by far the world's cheapest producers of magnets.
    Hitachi Metals did not respond to a request for comment.
    The Pentagon's request acknowledges that if no domestic rare
earth sources are available to build the stockpile, foreign
suppliers may be used. But the U.S. Congress this year approved
legislation that forbids the Pentagon from using magnets made in
China, North Korea or Russia, further complicating the supply
chain.   
    Hitachi Metals itself expanded an NdFeB magnet plant in
China Grove, North Carolina, in 2011 before shuttering the NdFeB
magnet operations around 2015 due to challenging economics. The
equipment is being auctioned off now.
    That, critics say, points to the need for direct U.S.
government involvement.
    "Government support is an insurance policy for domestic
manufacturing," said Ed Richardson of the U.S. Magnetic
Materials Association, an industry trade group. 
    Richardson estimates the Pentagon would need to spend about
$50 million to build a U.S. rare earth magnet facility. "It's a
small amount of money to pay so if we go to war with China,
we're not calling them up asking for supply" of rare earth
magnets.

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Rare Earth Production    https://tmsnrt.rs/2I9MfL5
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 (Reporting by Ernest Scheyder; Additional reporting by Yuka
Obayashi in Tokyo; Editing by Amran Abocar and David Gregorio)
 ((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder;
+1-713-210-8512; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))