President Trump Formally Determines Rare-Earth Magnet Supply Chain is Essential to US National Defense

On July 22, 2019 U.S. President Donald Trump issued no fewer than five Presidential Determinations relating to the supply chain for rare-earth permanent magnets.

In memoranda addressed to the US Secretary of Defense, President Trump gave notice that pursuant to section 303(a)(5) of the Defense Production Act (DPA), as amended (50 U.S.C. 4533), he had determined that "domestic production capability" for key nodes in the rare-earth-element (REE) supply chain were "essential to the national defense" - specifically:

• Separation and processing of heavy REEs (HREEs);
• Separation and processing of light REEs (LREEs);
• Neodymium-iron-boron (Nd-Fe-B) REE sintered material and permanent magnets;
• Samarium-cobalt (Sm-Co) REE permanent magnets; and
• REE metals and alloys.

Each memorandum noted that without "Presidential action under section 303 of the Act, United States industry cannot reasonably be expected to provide the production capability" for each of the above activities and components, "adequately and in a timely manner". Most critically, the Presidential Determinations noted that "purchases, purchase commitments, or other action pursuant to section 303 of the Act are the most cost-effective, expedient, and practical alternative method for meeting the need for this critical capability".

The DPA requires that following President Determinations of a shortfall in the domestic industrial base, that the President provide written notice to the US Senate Committee on Banking, Housing and Urban Affairs, and to the US House of Representatives Committee on Financial Services, prior to taking action. Such notices were also issued yesterday.

Section 303(a)(1) of the DPA authorizes the US President to make provision to "create, maintain, protect, expand, or restore domestic industrial base capabilities essential for the national defense", including:

• Purchases of or commitments to purchase industrial resources or critical technology items, for Government use or resale;
• The encouragement of exploration, development, and mining of critical and strategic materials, and other materials;
• The development of production capabilities; and
• The increased use of emerging technologies in security program applications and the rapid transition of emerging technologies, from Government-sponsored research and development to commercial applications, as well as from commercial research and development to national-defense applications.

These formal Presidential Determinations follow on from significantly increased activity on REEs in the US Department of Defense (DoD) since the beginning of 2019. Various agencies with the DoD have issued Requests for Information (RFI) to industry and academia, as a means of determining the current status of the US REE supply chain.

While the deadline for the latest RFI does not expire until July 31, 2019, it is clear from the President's actions yesterday that there is a real impetus within Washington to finally 'get something done' with respect to the vulnerabilities faced by the US REE supply chain. Such vulnerabilities result from China's dominance of the global supply chain, and ongoing indications that China would consider using this dominance in the ongoing trade war between the USA and China.

The legislative branch of US government has not been idle either; on July 11, 2019, Senator Marco Rubio introduced the Rare Earth Cooperative 21st Century Manufacturing Act and on May 3, 2019 Senator Lisa Murkowski announced the American Mineral Security Act.

It remains to be seen how yesterday's announcements will translate into specific action, but given the momentum building in the US capital and the number of potential players in North America looking to participate in the US REE supply chain, the news from Washington will be welcome news indeed.

For further insights into the REE supply chain, take a look at the “Rare Earth Market and Pricing Outlook to 2030” report from Adamas Intelligence.