What's Happening?
Serra Verde, a Brazilian rare earths miner, has renegotiated its contracts with Chinese companies, reducing the duration of its offtake deals. This strategic move allows Serra Verde to potentially supply
Western companies as their processing capabilities develop. The company, which is rich in heavy rare earths, initially agreed to 10-year deals with Chinese firms due to limited processing options elsewhere. However, with Western plants now gearing up to process these materials, Serra Verde is positioned to diversify its customer base. The company has been approached by several countries, including the U.S., Japan, and Canada, due to its unique supply of heavy rare earths. Serra Verde's production is expected to reach full output of 6,500 metric tons of rare earth oxides annually by 2027.
Why It's Important?
The renegotiation of Serra Verde's contracts is significant as it aligns with the West's efforts to reduce dependency on China for rare earths, which are crucial for defense, electronics, and renewable energy technologies. China currently controls 90% of the processed global supply, making diversification essential for strategic autonomy. The U.S. has already provided a guaranteed minimum price to MP Materials, indicating a broader strategy to support domestic rare earth production. Serra Verde's move could help alleviate forecasted shortages of heavy rare earths like dysprosium and terbium, which are vital for creating domestic supply chains of rare earths and permanent magnets.
What's Next?
As Serra Verde's Chinese deals conclude next year, the company will have multiple options to diversify its customer base. Western countries are likely to continue their approach to Serra Verde, seeking to secure a stable supply of heavy rare earths. The U.S. Development Finance Corporation's $465 million loan to Serra Verde underscores the strategic importance of this sector. Additionally, the Group of Seven and the European Union are considering implementing price floors to promote rare earth production, which could further support Serra Verde's expansion into Western markets.
