A quarter of all the world’s known deposits of rare earths are found in the country
Photograph: AP
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A PINK WAREHOUSE in Brazil’s north-east may help the world out of a tight geopolitical bind. Hidden inside a research park in the state of Bahia, the facility is run by Brazilian Rare Earths (BRE), a mining firm. It is building one of Latin America’s first separation plants for the eponymous minerals, a cluster of 17 elements needed for manufacturing everything from missiles to microwaves. Western countries anxiously await new supply, eager to reduce reliance on China, which controls 70% of mining and 90% of processing.
Donald Trump is particularly keen. The United States was hard hit last year when China imposed a series of export restrictions on metals, machine parts and engineers. By the time a one-year truce was declared in November many American and European factories had been forced to curb operations. Automobile, green-tech and arms manufacturers were particularly affected by a shortage of supermagnets. Few trust the truce will hold. Corporations are racing to find alternative suppliers, says Bernardo da Veiga, BRE ’s boss.
Chart: The Economist
Brazil holds nearly a quarter of the world’s known deposits of rare earths, second only to China (see chart). Besides prime geology, the country boasts a sturdy extractive industry. Cheap electricity, experience in mineral exports and veteran engineers are big advantages, says José Augusto Palma of Aclara Resources, a Chilean miner. Brazil has been there before. In the 1950s a Brazilian company, Orquima, was the world’s largest miner of rare earths, extracting metals from monazite sands. China came to dominate the industry after concerns about monazite’s radioactivity led Brazil to dramatically tighten regulation and nationalise Orquima.
Modern Brazil wants to reclaim this mantle. In January the government of President Luiz Inácio Lula da Silva (known as Lula) began preparing a national strategy for rare earths. That followed a decree in November that made acquiring them a national-security issue, unlocking special financing, public-procurement options and simplified import procedures.
Politicians have two motivations. The first is to spur innovation. Rare earths’ global market is worth a few billion dollars a year—a couple of months of Brazil’s iron exports—so the revenue up for grabs is paltry. The real value is as a feedstock for high-tech manufacturing, says André Pimenta of CIT Senai ITR, a rare-earth-magnet manufacturer in the state of Minas Gerais, the first of its kind in South America.
The second draw is diplomatic. Most major economies are facing deficits of critical minerals, from humdrum copper and nickel to esoteric scandium and yttrium. The United States is the most enthusiastic. In July Donald Trump slapped 50% tariffs on most imports from Brazil in an effort to influence the trial of Jair Bolsonaro, a former president, for plotting a coup. Yet that same month the American ambassador to Brazil privately met mining companies to express an interest in buying their future output. After initially declaring Brazil’s minerals were not for sale, Lula has dangled the possibility of a rare-earths accord in exchange for a reduction in tariffs. If the United States is not interested, the EU, Japan or South Korea may well be.
There are challenges ahead. Brazil has one functional mine, opened in 2024 by a private outfit named Serra Verde. The company plans to double the amount of non-Chinese supply of more valuable, “heavy” rare earths in the market, yet has experienced production problems. Its ionic clay deposits have been trickier to work with. A nearly $500m loan from an American aid agency should smooth the process. Yet dozens of other miners are still waiting for licences. None will start producing until 2028 at the earliest. Few are keen to do the processing in Brazil.
More worrying is Lula’s protectionist bent. “Either we take advantage of these riches that God has given us and make them a wealth for our people, or we will see the same old countries digging holes in our country, taking our minerals,” he said in a recent speech. This is the wrong attitude, says Julio Nery of Ibram, Brazil’s mining association. Moving up the value chain is important for Brazil, which still imports Chinese steel made from Brazilian iron. But rare earths have limited prospects.
Most miners are foreign-owned because the business is more capital-intensive than Brazilian markets can easily sustain, says Rafael Moreno of Viridis, an Australian miner. That is a big reason why most miners decline to process iron ore into oxide in Brazil, as well as lack of expertise. With time and money, these problems can be fixed. And money is coming.
For those about to rock
China long used predatory pricing to deter competition, recouping losses through magnet and electric-vehicle sales. Mr Trump challenged that in July when he signed an agreement with California-based MP Materials. The deal guarantees them a floor price of $110 per kilogram for neodymium-praseodymium oxide, roughly double China’s rate. Such price differences will become the norm, attracting new players into the market, says John Prineas of St George Mining, another Australian firm. Many of them will fall in the inevitable consolidation. The country that hosts the resources has hit pay dirt. ■
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