Brazil demands rare earths be processed at home as US and China compete

Move comes as Washington locks US$565 million deal with Brazil’s only operating rare earth mine.

Brazil will require foreign partners to process rare earth minerals domestically as a condition for access to its reserves, a senior government official said this week, setting terms that could reshape how Chinese and Western firms compete for resources the country has long exported raw.

“Our doors of Brazil to foreign investment are open, but our position has matured,” Leonardo Durans, a senior official at Brazil’s industry ministry, said at a press conference with international media on Monday.

“The commitment we will demand from everyone is domestic technological development and job creation.

Asked whether the policy would force Brazil to pick sides in the US-China rivalry over critical minerals, Durans pushed back.

“We are open to the United States, the European Union and China. We will talk to everyone,” he said.

Brazil holds about 10 per cent of global critical mineral reserves, with the world’s second-largest reserves of rare earths and graphite, and third-largest of nickel.

The insistence on domestic processing, however, collides with a supply chain that China has spent decades locking down.

The country controls about 91 per cent of global rare earth separation and refining, according to the International Energy Agency, and its share of permanent magnet production has climbed from roughly 50 per cent two decades ago to 94 per cent today.

Beijing tightened that grip in October with export controls covering rare earth materials, processing equipment and technologies.

The rules broke new ground by asserting extraterritorial jurisdiction, requiring export licences for products made outside China if they contained Chinese-origin rare earths above a 0.1 per cent value threshold or were manufactured using Chinese know-how.

Those controls were suspended until November under a broader US-China trade deal, though Beijing can reinstate them without drafting new regulation. However, a separate licensing regime for seven rare earth elements imposed in April last year is still in place.

Together, the measures mean any processing facility built with Chinese equipment or know-how could require Beijing’s approval to export its output.

Brazil has tried to close that gap on its own with MagBras, a programme led by the government-backed research network SENAI, aiming to build the country’s first domestic permanent magnet supply chain.

It has been partnering with the private sector, including mining giant Vale and Dutch carmaker Stellantis.

The initiative produced magnets at pilot scale, but industrial production remains years away, and its budget of $73 million reais (US$12.6 million) is a fraction of what China spent building its processing dominance.

Julio Nery, director of mining affairs at the Brazilian Mining Institute, acknowledged the bind, saying the equipment needed for rare earth processing was produced “mostly by one country”, adding that delivery times were long.

Mauro Sousa, director general of Brazil’s National Mining Agency, was more direct. “We cannot replicate the leap of 10, 15, 30 years that China made in a short time,” he said.

Without domestic processing capacity, the raw material itself is becoming a prize and at Serra Verde, the only operating rare earth mine in Brazil, that competition has tipped towards Washington in recent months.

The company ended long-term supply contracts with Chinese buyers in December, walking away from deals originally expected to run about a decade.

Within two months, it also closed a US$565 million financing package with Washington’s overseas investment arm DFC that includes an option for the US government to acquire a minority equity stake.

That pivot has not stopped Chinese capital from flowing into the sector more broadly, though the nature of that investment has changed.

Mining accounted for 13 per cent of Chinese investment in Brazil in 2024, totalling US$556 million, according to the Brazil-China Business Council. But every deal that year was an acquisition of an existing operation rather than a greenfield project.

Sousa said the licensing process itself remained a drag on all foreign investment, not just Chinese.

He cited more than 3,500 pending applications to explore for rare earth deposits and described a system scattered across federal agencies responsible for environmental protection, indigenous land rights and cultural heritage, with no single window for investors.

“We have a very strong culture of robust judicial pushback. That raises the perception of risk for anyone who wants to invest,” he said.

“It is homework we need to face so we can offer a more predictable environment.”