Hey, everybody. Without any further delay, I would like to get started. This is the final panel of our conference this year. Thank you all for being here. This has been a great conference. Barcelona's treated us well. This panel is going to ask the question, are rare earths the ultimate strategic metal? Perhaps we have some answers with these two gentlemen here. To introduce them from left to right, we have Ryan Corbett, who's the Chief Financial Officer of MP Materials, so U.S.based producer of rare earths, the only producer of rare earths in the Western Hemisphere. Next to him is Ryan Castilloux, the second Ryan, who is Founder, principal, and basically the leader of Adamas Intelligence. Adamas Intelligence is a third-party independent observer of the rare earths market and critical minerals market in general, really, and very much a thought leader in the space.
And then finally, my colleague, Chen Jiang, who's based in Australia, who covers Lynas for Bank of America and who works with me and my team very closely on developing the rare earth price and actually leads our effort, particularly as it comes to China. For those who don't know me, I'm Lawson Winder. I'm the head of North American Metals and Mining for Bank of America on the research side. How I'd like to start is I'd like to have Ryan Castillo, Adamas Intelligence, provide a bit of an overview of the market for us, a bit of a high-level thing, touch on a few of the key aspects of how the market works. Then Ryan Corbett's going to discuss MP and a lot of the really exciting, interesting, politically relevant developments at his company. Ryan Castilloux, please take the podium. The floor is yours. We look forward to.
Thank you.
Thanks for being here.
Thank you. How's everyone doing? Is it fair to say we've saved the best for last, or should I wait until the end and then we can revisit that question? Yeah. How many people feeling jet lagged today? Can we switch the presentation to the alternative?
The other one.
I can give it a go. I can give it a go for you. This is what happens when you have two Ryan Cs on the same panel. Things are just bound to get confusing. Absolutely. Throw in some jet lag, throw in the end of day two, and perfect. It is a pleasure to be here speaking with you today. Thank you sincerely to Lawson and to Bank of America for inviting me to speak with you. Having lived in Europe for a number of years in the previous decade, it is always a joy to get back, and especially coming out of this cold Canadian winter that I have just endured. It is beautiful to be in this Barcelona sun. As mentioned, my name is Ryan Castilloux. I am the founder and managing director of Adamas Intelligence. Today I will be speaking to you about the global rare earth market.
Specifically, I'm going to touch on the outlook for some topical themes for electric vehicles, for robotics, for advanced air mobility, and others. Before I do, however, a quick intro to Adamas Intelligence for anyone in the room that we haven't yet touched base with. We're an independent market research and advisory firm focused on mine through to application supply chains for so-called strategic or critical metals, minerals, and materials, namely rare earth elements, but also this ever-growing bouquet of different battery metals and materials. Founded in 2012, we count clients on six continents, including exploration and mining companies, institutional investors, technology and materials developers, government agencies, as well as other advisory firms. Lastly, before I jump in, please note that my presentation today will contain forward-looking statements related to future events that are not necessarily certain, although we like to think they may be.
Please do keep that in mind. Let's get started with a quick intro to the rare earth elements. On the periodic table of elements, rare earth elements include the lanthanide series plus scandium and yttrium. As we can see on this image, rare earths are arbitrarily subcategorized as either light rare earth elements or oxides or heavy rare earth elements or oxides based on their electron configurations. By virtue of being much more abundant in the earth's crust, light rare earths tend to make up over 90% of the typical rare earth content in an average rare earth deposit and thereby also make up the vast majority of total rare earth oxide production each year.
Heavy rare earth elements, on the other hand, are present in the earth's crust in substantially lower concentrations than lights and, as such, make up a relatively small portion of global production each year. Despite the misleading moniker, rare earth elements are not remarkably rare in nature, but rather are rarely concentrated into economically significant amounts for extraction and processing, owing to certain physical and chemical properties that promote their broad dissipation throughout most rock types. In fact, as we can see on this chart, the rare earth element cerium is more abundant in the earth's crust than copper. Neodymium, lanthanum, and yttrium are more abundant than lead, and praseodymium, samarium, and gadolinium are more abundant than tin.
Despite this fact, there were just around 390,000 tons of all 17 rare earth elements combined produced globally last year in the form of oxides versus 23 million tons of copper, 4.3 million tons of lead, and 300,000 tons of tin in that same year. Rare earths are used in hundreds of unique end uses and applications that collectively fall into one of eight end use categories. We have battery alloys, ceramics, catalysts, ceramics, pigments and glazes, glass polishing powders and additives, metallurgy and alloys, permanent magnets, phosphorus, and other end uses and applications. Despite all of this noise, just two categories, catalysts and permanent magnets, were collectively responsible for 71% of total global rare earth oxide consumption last year. However, by value, permanent magnets alone were responsible for over 95% of the total value of global rare earth oxide consumption last year.
This share continues to grow as demand for and prices of the so-called magnet rare earths, neodymium, praseodymium, dysprosium, and terbium, continue to outperform. Not only does demand for these four magnet rare earths make up the majority of global value today, but in the years ahead, demand for these four elements is going to grow faster than demand for all other rare earth elements, challenging the ability of the supply side to keep up. Let's spend a bit of time now talking about magnets, and specifically Neodymium Iron Boron Magnets, often referred to simply as Neomagnets. Neodymium iron boron, the bread and butter of the rare earth industry, is a permanent magnet alloy that was developed and commercialized in the 1980s as an alternative to costly Samarium Cobalt alloy that was developed three decades earlier.
As the name suggests, it is comprised primarily of neodymium, iron, and boron, but also contains minor concentrations of praseodymium, dysprosium, terbium, cerium, gadolinium, holmium, copper, cobalt, gallium, niobium, and many other metals that collectively make up a word solid that ultimately optimize the alloy's properties for certain applications. Neodymium iron boron is the strongest type of magnetic material commercially available today. It has largely supplanted Samarium Cobalt, Alnico, and Ferrite Magnets in many size and weight-sensitive applications since the 1980s, while simultaneously enabling the conception and miniaturization of an array of ubiquitous gadgets and electronics that have pervaded modern society. Neodymium iron boron is used in hundreds of different end uses and applications, many of which we interact with daily, whether we realize it or not.
From mobile phone loudspeakers and vibration motors to hard disk drives, optical disk drives, electric vehicle traction motors, automotive micro motors and sensors, wind power generators, and beyond, Neomagnets are literally all around us. It would actually be an interesting bet to see what the quantum of magnets is in this room, but surely it is kilogram scale and possibly beyond with these speakers. Electric vehicles, wind powered—excuse me. There we go. Neodymium iron boron alloy, which is the bulk precursor, the cookie dough from which final sintered magnets are machined, is available in over 50 different grades, each defined by its maximum energy product, as is increasing along the y-axis of this chart, and its intrinsic coercivity or its resistance to demagnetization at temperature, which is increasing along the x-axis.
Different grades of neoalloys often have slightly different chemical compositions, as I mentioned, due to the addition of other metals or alloys to optimize the magnets' properties for certain applications. EVs, wind power generators, robotics, and advanced air mobility often use high-temperature performance grades of Neomagnets like the SH, and I'm not sure if you can see them, the columns most to the right. Those magnets are notable because they often contain appreciable concentrations of the heavy rare earth elements, dysprosium and terbium, which protect the magnet strength at temperature. Those are two heavy rare earth elements that China has recently restricted exports of. With this basic understanding in tow, let's take a look at what the future holds for neomagnet demand and demand for the rare earths that are used in those magnets.
After increasing at a compound annual growth rate of just over 9% since 2015, we forecast that demand will increase at a comparable growth rate of just under 9% through 2040, topping 600,000 tons of demand by 2035 and 880,000 tons by 2040 for an increase of nearly four times over the forecast period. Very few metals, I think, can claim such a robust outlook. It is frankly a demand story that continues to write itself year after year with new applications coming into the market. This growth, as we see it today, will be largely driven by double-digit demand growth from electric vehicles, from robotics, and advanced air mobility, which we project will increase at compound annual growth rates of 10%, 24%, and 17%, respectively.
Of these three avenues of demand growth, and I should mention that there are many others, which I think will come out in the panel to follow, passenger EVs are currently the furthest along, following an acceleration of growth around the 2020s. As we look forward, despite our expectation that a growing share of automakers will use rare earth-free motors in the years ahead, we're still anticipating strong demand growth from passenger EVs. That growth will begin to taper in the middle of the next decade as we reach greater levels of EV saturation. Next up is advanced air mobility, which is a category that we're very excited about over the medium to long term. To date, demand for this category has been largely driven by recreational and commercial drones.
As we look out to the medium and long term, we expect that larger EVTOL, electric vertical takeoff and landing aircraft, will become a more material part of this market. Those are the types of aircraft that are being proposed for flying taxis, for cargo deliveries, and the like as we speak. Last but not least is robotics, which is what we refer to as the new frontier of rare earth demand over the medium to long term. To date, neomagnet demand for robotics has been largely driven by industrial robots, commonly seen on assembly lines. In the next decade, we expect that humanoid robot production is going to explode globally, leading robotics to surpass passenger EVs as the single largest neomagnet demand driver by 2040.
Challenging the outlook for all of these applications and others is potential, we believe, for magnet supply shortages post-2030, constrained by upstream availability of neodymium, praseodymium, dysprosium, and terbium. Here we can see our base case production demand balance for NDPR oxide, also known as Didymium Oxide, the main rare earth input for production of Neomagnets as we see it today. Shown in dark blue at the bottom of the chart is the current base of existing production. On top in bright blue are the likely and expected expansions of those producers. Above those expansions is expected supply from recycling, the majority of which we expect will come from magnet production swarf, but also increasingly from recycling end-of-life devices starting later this decade.
On top of recycling are the highly probable, probable, and possible producers that we expect to come online in the years ahead, collectively 18 new producers despite looking relatively minute on the chart. Lastly, shown by the blue line on this chart is expected demand over the same period. As per this forecast, we expect the market to be relatively balanced through 2030 as new producers and existing producers ramp up output, albeit progressively undersupplied as we can see. Post-2030, with demand growth underpinned by a handful of fast-growing global macro trends—electrification, renewables, robotics, automation, advanced air mobility—we expect supply will increasingly struggle to keep up.
The situation is very similar for dysprosium, which is the heavy rare earth element that is often added to high-temperature performance grades of magnets to protect those magnets from demagnetizing under the stress they would experience in an EV motor, in a wind power generator, in a robot motor, and so on. Shown here is the base case scenario that we anticipate as of today for dysprosium oxide. Again, shown in dark blue, the current base of existing operations. Shown in bright blue, atop that base are the expected expansions of today's existing operators, which we can see is extremely minimal owing to heavy rare earth resource depletion in China. Atop the bright blue is the expected supply from recycling, the majority of which will come from magnet production swarf.
If you're not familiar with swarf, but you're familiar with cookie making, you can think of all of that material that gets stamped out when you punch a cookie with a cookie cutter. That becomes swarf. Depending on the shape of magnet one is producing, it can become a very material portion of input. Recycling is absolutely paramount in this industry, and we can see just how large that share is. Atop recycling, the three gray bands that you see are those highly probable, probable, and possible producers that we anticipate coming online. Again, 18 new producers. Above that, shown by the blue line, is anticipated dysprosium oxide demand over the forecast period.
As per this forecast, we can see the market is expected to be relatively undersupplied in the near term over the next few years, moving towards a more balanced state by 2030 as these new producers come online and ramp up output. Thereafter, post-2030, supply will increasingly struggle to keep up, as we can see, requiring an additional 40,000-80,000 tons of heavy rare earth oxide-rich production capacity to be brought online over and above those 18 projects in order to fill that gap. An important final consideration before I wrap up here and turn over to the better Ryan that is on the stage. It's worth bearing in mind that China is not only the largest producer of rare earths and the largest producer of rare earth magnets, it is also the largest consumer.
If rare earth supply fails to keep up with demand in the years ahead, as is expected, those limited flows of supply will conceivably reach Chinese magnet makers first, leaving the rest of the world, leaving those end users that do not proactively secure supplies today to bear the brunt of the market imbalance. Thank you sincerely for your time and attention, and I am looking forward to speaking with you further on the panel, taking any questions that you may have either on stage or offline. Thank you very much.
Thank you. Thanks. Thanks everyone for having me. Thank you, Lawson, for hosting. Picked a pretty good location, so appreciate that. Thanks, Ryan, very much for your comments. Obviously, it is a bit of a niche space, the rare earth industry. Having great sell-side coverage and independent coverage of the space is super important for education.
I think that TEAP really was perfect for sort of where we sit in the supply chain. I'll give a bit of an overview of what MP Materials is and the role we play in this market that I think was laid out well. I also will make forward-looking statements. You can read ample risk factors in our 10-Ks and 10-Qs. MP Materials, listed on the New York Stock Exchange, owns and operates the Mountain Pass Rare Earth Mine and Refining Facility in Mountain Pass, California, which is one of the world's largest producers of global rare earth content. If you haven't heard about rare earths in the news lately, you've probably been under a rock.
There is quite a bit of discussion about our space now. There's often a lot of misunderstanding about how the U.S. is positioned in this industry. We actually have, as I mentioned, one of the world's largest rare earth resources. We are exporting a tremendous amount of rare earth content globally. We stand at the precipice of beginning to solve what I believe is the bigger problem in the industry as we sit today, which is creating a fully vertically integrated supply chain to produce the end-use products that are required for the electric vehicles, robotics, and things like that that Ryan laid out.
T o that end, MP has invested in a three-stage strategy since its founding in 2017, focused on perfecting the all-the-way upstream process of concentrate production, where we are the world's second-largest producer of rare earth concentrate today. Our second stage of the business model, the midstream refining of rare earth oxides, is in the process of being ramped up as we speak today. We're consuming about 50% of our concentrate production into our refining facility on its way to eventually producing about 6,000 tons of NDPR oxide. On the downstream side of the business, our magnetics division, we've invested in the world's first fully integrated magnet manufacturing plant that goes from oxide all the way through to finished magnet in one facility. Metal, alloy, magnet block, and finished magnet production.
I think this was pretty well covered. The only point that I would make here that has become very acute in terms of the awareness both by U.S. manufacturers, global manufacturers ex-China, and governments in the last several weeks is, along with the heavy rare earth export quotas that were put on by China recently, that included magnets that contain any amount of heavy rare earths. I think it was 0.1%.
All of those magnets were caught up in the export quotas. What that means is all of these use cases that you see, in addition to critical defense technologies, missiles, drones, the future of defense technologies, all are effectively, other than what we are building at our Independence facility in Texas, generally reliant on Chinese rare earth Permanent Magnets. What we have seen over the last several weeks with all of those exports effectively halted is how acute this issue is. I think the very encouraging thing that we see from our seat is now a renewed recognition of how important it is that we solve this problem. I think, importantly, the role that MP plays in solving this problem. Again, well covered. It is important to see how dominant the Chinese are the further down the supply chain that you go.
Obviously, we mentioned we're a significant producer of rare earth concentrate product that's refined in the Chinese market, which is a significant contributor to their smaller share on the mining side. As you go further down the supply chain into finished products, that dominance continues. What that means is in order for us to have a true solution and not just make products that end up getting shipped back to China to make into magnets, we need to address all pieces of the supply chain. We have a fantastic base beneath us at MP with one of the world's highest quality rare earth resources. We are building on that to create incremental value for our customers, our partners, and our shareholders in being able to deliver the end-use magnets for these pretty important use cases.
If we rewound, frankly, almost six months, I probably would not be able to show all of these boxes with U.S.-made, MP-produced product at each of these stages. Just to give a sense of what it looks like to make all of the products that we're discussing here, the Bastnäsite ore that's mined at Mountain Pass on the top left, the refined product, the NDPR oxide that Ryan covered a moment ago, NDPR metal produced in our electrowinning facility in Independence, and then magnet block produced as well on our new product introduction line at Independence from our material. What does this mean putting these things in? I like to think of things in Independence facilities and Mountain Passes. It's a new unit of measure that I like to use in the rare earth space.
Mountain Pass has a pretty rich history and led the world in global rare earth production, still is a very significant leader. If you put the numbers that Ryan shared in context, primary NDPR requirements imply 33 more Mountain Passes coming online between now and 2040. In reality, I do not know how reasonable that is. I think what we will likely see is improvements in technology of end-of-use recycling, post-consumer, post-industrial, which we can talk about. We also think maybe I will call that stage four for MP Materials. We think we will also be able to lead in that space for a variety of reasons. The supply-demand dynamics here are very stark and something that require immediate attention and investment. To give you a sense of what it would mean to have 33 more Mountain Passes, this is Mountain Pass.
I think particularly beautiful photo, but gives a sense of scale of the resource as well as in the background there, the separation facilities required to make the refined product. Today, just a quick overview of sort of where we're at, and we can leave plenty of time for questions. As I mentioned, Mountain Pass has a very long and rich history. It was discovered in 1949, has been in production in some way, shape, or form for 70 years. We have over a 30-year remaining mine life and are producing north of 40,000 tons of contained rare earth oxides and concentrate every year for the last four years.
We have been investing in a strategy to expand that business with very low incremental capital to get to 60,000 tons of run-rate production of rare earth concentrate, which would probably make us the largest producer of rare earth concentrate in the world. We are also the only scaled NDPR refiner in the West. As I mentioned, we are in the process of ramping that facility. Our targeted throughput is about 1,500 tons a quarter. For context, in our most recently reported quarter of Q1, we produced about 563 tons. We have pretty significant runway to continue to grow that business. As we do so, continue to come down the cost curve for refined products. I think an important thing as well, being a producer in the West is understanding the dynamics of this industry vis-à-vis environmental concerns.
We have a tremendous advantage geologically at Mountain Pass being a Bastnäsite ore body, which affords us very low levels of contained thorium and uranium and does not require any specialized storage or handling of radioactive waste, which tends to be an issue in this space given the types of host rock that typically are hosting rare earth mineralization. On top of that, we recycle north of 95% of the water that's used in our beneficiation circuit. We have one of the world's only dry stack tailings processes, I think the only in the rare earth business and one of the few writ large in mining, which allows us to avoid any of the pitfalls of tailings ponds and impoundments. Where does all this product go? In the initial stages, our materials division is many multiples the scale of our magnetics division.
We'll be producing 6,000 tons of NDPR oxide at run rate. We'll consume in our initial stage of our magnetics facility about 500 tons with significant room for expansion. To sort of lay out exactly what this is, amazingly, this business was an idea on a piece of paper in 2020. We made our first hire in 2021, an exceptional power metallurgist who has built a business that is about 120 people today, 40 engineers, 14 PhDs. We've built the technical know-how and capability to do this effectively from scratch. We get questions a lot given the dominance of the Chinese in this space. How are you able to build up the know-how to do this in the Western world? The reality is a lot of these processes are done in other spaces.
Electrowinning, you see the small pictures on the top left are NDPR electrowinning cells. Electrowinning is a process that's done in aluminum and other material spaces. Strip cast alloying, producing our alloy flake product, is to the right. These are processes that are done in the West, just not done with rare earths. Combining the know-how that we've been able to glean from our rare earth expertise that's been built up over decades, given Mountain Pass's rich history and the transferability of some of those other skill sets, powder metallurgy, etc., we've built what we believe is a world-class team. Today, we are producing automotive-grade magnets, which, as we saw on that grade curve chart, tend to be some of the hardest to produce and also require a pretty significant amount of quality control and quality processes.
Our view was starting with the hardest type of magnet is much easier. Giving ourselves the proper amount of time to be able to sell into that market, it opens up opportunities where once we have that skill set beneath us, that commitment to quality, we can grow our applications over time. We are targeting being in production at Independence on our commercial equipment at the end of this year. We are completing the installation of certain of the critical production equipment in the site. We expect that to be completed to ramp more aggressively in 2026. With that, turn to questions.
That's fantastic. I just wanted to mention to all of you here, if you do have a question, please put up your hand. We'll get a microphone to you. We're going to start off with a couple, but we want to keep this interactive. Okay, to start off, Ryan, pass to you. We'd like to get an idea for everybody how large the U.S. market is in terms of magnet consumption. What the threat is if China ultimately cuts off the U.S. market. How does the U.S. inventory picture look? What ability does the U.S. have to withstand that sort of?
Great questions. In terms of magnet consumption in the U.S., the U.S. currently imports around 7,500 tons of the Neomagnets that we discussed, but also a more niche variety, Samarium Cobalt, annually. We expect that volume, that level of consumption within the U.S. will double by 2030 as robotics, advanced air mobility stand up on their own legs and as the U.S. begins to reshore some manufacturing capacity, namely around drones and other dual-use industries. On the stockpile side, U.S.
Stockpiles are generally held in two silos we can think of. There are the known stockpiles that are disclosed to the public. Presumably, there are other stockpiles that are held for defense-related purposes, strategic needs that are not disclosed. In both cases, we believe, we know in one case the quantum of known stockpiles is very, very low. It is often on kilogram scale for a variety of rare earths. Similarly, with defense-related stockpiles, we would expect that they are also relatively low. The challenge with stockpiling rare earths is that maybe it has come across in the presentation and in Ryan's. They are the furthest things from commodities that one could imagine at a conference like this.
Consuming neodymium for magnets versus neodymium for laser crystals comes with very different specifications that are required, making it challenging to stockpile the material one needs for all of these disparate end uses. The story is that level of nuance is even more pronounced when it comes to magnets. We saw all the different grades of magnets that are available. They come with different specifications. They get machined into different form factors. They get different coatings applied to them. To conceivably build a stockpile of magnets that would be needed for defense, needed for commercial applications, you would need all permutations of magnets available. You would generally need a crystal ball that works really accurately to not do it wrongly. I think I'll leave it at that and.
I think it brings up a really important point, which is the import dependence and the requirement that we actually have a scaled industry in the U.S. We've tried to suss out exactly what we think sort of the underlying demand for magnets is with assemblies that are imported into the U.S. with magnets in them, for example. I agree with the 7,500 tons. I get most of my data from you anyway. I think we think about 25,000 tons are sort of the underlying demand of imported EV traction motors and things like that.
I do not want to be alarmist, but I think it is really important for those that are new to this space to understand what has transpired over the last four weeks, which is I think we sort of mentioned it and glossed over it a little bit, but we effectively saw what we as MP have been warning about in terms of the reason for our existence for the last five-plus years, which is to create a real scaled producer outside of China because having a single point of failure, frankly, in any country, but particularly with China, exposes the United States and the Western world to an untenable amount of risk. I think that this risk had always been theoretical. The risk is no longer theoretical. Magnets have not been shipped from Chinese shores to the United States since the beginning of April.
What we have heard from a variety of customers is that stock that you mentioned probably runs out in July or August for a lot of major, major manufacturers. I think this issue is much more acute than the market truly appreciates. I think in the short term, that is concerning. I think in the medium to long term, it is hugely beneficial to MP. I think we are in a very unique position to be a solution provider, both in the near term and in the medium and long term, to customers that are looking to control for this risk that just became real.
I wanted to get your thoughts on accelerating this whole supply chain build-out in the United States. You talked about it on your Q1 call that there are active engagements with interested commercial and other governmental stakeholders that recognize that there is an urgency here. What form does that urgency take? Asked another way, and assuming what form that might take, with sufficient capital resource, how quickly can MP ramp up to meet the need?
Sure. Yeah, look, I think if we step back for a minute and think about the sort of base that we have put in place, since we went public in 2020, we have invested nearly $1 billion into the supply chain to bring light rare separation at scale. We will bring heavy rare separation at scale next year. We have formed the foundation of a magnetics business that will start at 1,000 tons.
I often think about 1,000 tons in context of 7,500 or 25,000 of U.S. d emand, and then in context of 250,000 or more tons of overall demand and production. That 1,000 tons is relatively small. I think it's extremely small. It's an absolutely strategic and critical beachhead because we are years and billions of dollars ahead of anybody to get this built up at scale. Does new capacity come online tomorrow? No. Obviously, we are very, very engaged now given what we've talked about and given the market environment. I want to say that we are not in a position as a business where we have to do anything, right?
We're actually coming out of, interestingly, before this sort of crisis erupted, we were transitioning into effectively a harvest mode of all of those investments that we had made over the last five years where we were seeing the light rare earth refinery ramp up. We're seeing the heavy rare earth refinery come online. We're seeing Independence start to ramp into commercial production. We were preparing for a pretty significant inflection in free cash flow. I think that we feel pretty strongly that as customer engagement and government engagement increases here, we have a ton of optionality in what we build and how quickly we build it. We will just only do deals that are rewarding for our shareholders and recognize the nearly $1 billion that we've already put into the ground. From that perspective, it's hard to say how quickly could it go. It depends on what you want to pay. You can always do night shift in construction. You can always pay to go to the front of the line. It really depends.
I'm not trying to be evasive on the answer, but it really is true. It depends. I think the important thing, though, is as it relates to Independence, we've been clear that we've sort of invested ahead where we laid out that that facility is roughly a $350 million investment. We've invested over $250 million of that. We're at the tail end of the investment cycle for that business. Incremental capacity into Independence is significantly more capital efficient and significantly quicker, of course, than the first 1,000 tons. From that perspective, the potential engagements that we're looking at, I think, get us to a place where we can start to benefit from the growth in the industry and the recognition from both government and industry of the importance of the domestic supply chain relatively rapidly, at least compared to the historical investments we've made.
Heavy rare earths have been particularly in focus because that is what China banned from the export point of view. Yet your deposit has relatively low quantities of heavy rare earths. Is there sufficient quantities here, particularly given that most of it is mined in Myanmar, which is closer to China, and then produced in China?
Yep. I think the important use of words there is relatively low as opposed to a lot of people just hear low. On a relative basis, given we are one of the world's largest producers of rare earth content, in any hard rock rare earth ore body, you are always going to find significantly more light rare earths. What we always say is, in this space in particular, there are a lot of junior miners who are still around from the first 2012 rare earth panic cycle.
They like to use this line of discussion of, "Oh, we have 4%, 5%. Would you rather have 5% of this cup, or would you rather have 1.7% of the mine that I just showed you a minute ago that makes 45,000 tons of REO per year?" I would take ours. From that perspective, we have a significant quantity of heavy rare earth production that will be coming online as separated heavy rare earths next year. Right now, we're making an SEG plus concentrate. Some people call part of that mediums, some lights, some heavies, but generally a heavy rare earth concentrate that will be separated into dysprosium and terbium that will be used at Independence.
I think an important element to keep in mind is for our magnetics business, not only do we feel that we have sufficient quantities of heavy rare earths in our own ore that will go through separation to satisfy our customer commitments at Independence, but we also are creating a refining capacity that will accept third-party feedstock. Given all of the growth that we talked about in this market, you would think, "Okay, there's got to be incremental capacity coming online and coming into the market." The reality, though, is the incentive price outside of China is many multiples of today's market price. That presents a whole host of challenges. One way that you can start to counter that is particularly with ionic clays and other types of mineralogy and host rock.
You often are able to get a product that is semi-processed, a mixed rare earth carbonate, a mixed rare earth concentrate, something of that sort that needs to be further refined. The refinery that we are building that accepts, of course, our pretty significant light rare earth circuit with the heavies as an add-on, is set up to take third-party feedstock. We can play a very important enabling role for many of these other projects out there to get them online to be able to create sustainable economics for them and to further be able to grow our magnetics business. From that perspective, we feel quite good about our ability to grow magnetics.
I think both Ryan covered the rare earth demand very well from EV wind turbines, robots, especially humanoid robots are a new demand driver. No doubt, the demand for rare earth over the next 10 to 20 years is going to be great. However, let's talk about supply in China. On the rare earth supply chain, rare earth oxide, refined rare earth, light rare earth, and NDPR, as your chart showed, 90% from China, produced from China. The heavies, the DY and TB, probably close to 100% from China, right? On the Ryan, your scenario and analysis, if all those projects go ahead, when are we going to see that the West relying on 90% of China and NDPR? When are we going to see that 50%, let's say, drop to 90%, drop to 50%?
For China's overall share.
Yeah, for the overall share. For the global and rare earth oxide, that's the first question. Secondly, do you have a view on how China is going to increase or decrease their rare earth oxide over the next 10 to 20 years? A question for both.
Great question. I do not think of myself as being that old, but I am not sure that I will see China's share fall to 50% in my life, to be honest. It is so far ahead. Its capacity is currently so large. Its production is so large. Its share of global consumption is between two-thirds and 70% of overall demand. For its share to fall to 50% of refined outputs, China would then become a major importer from the rest of the world. The script would be dramatically flipped.
I think more realistically, as we look out to the next decade, we think China's share of refined output will fall from 90% to maybe the 80% range that recognizes new production coming online. It recognizes the ramp-up that MP is well into at this moment. That is likely not as dire as it sounds. China will continue to be the leader in the future because China consumes the most rare earths. The key in this moment, I think, is to build out diverse alternative supply chains that are more transparent, that are more robust, that are not as inherently volatile. That is the demand of the moment. To your second question, do you want to direct it to Ryan?
Yeah, sure.
I mean, I'd agree completely with those comments. I mean, China is the largest consumer. I don't expect their dominance to necessarily change. I think the thing that is underappreciated and is important is we have the resource to allow the West to become self-sufficient. There is always this push for, particularly if you are not steeped in the industry, we must have 10 more mines. We need to focus on permitting reform. Not relevant in the rare earth space. The quickest, highest return, lowest risk way to add capacity to the Western market is for the existing leading Western producers to expand.
That is imminently possible and imminently doable. Frankly, if demand looks anything like we are projecting here as the most likely case, what really needs to happen is we need a robust downstream. I think we have sufficiently addressed the issue from an upstream and midstream perspective. I think we are doing our part at MP to seed the downstream industry. I think that finally, there's a real recognition across consumers of magnet and magnetic products, as well as Western governments, of what the issue actually is, which is creating that supply chain. Frankly, when you do that, it's not just about making magnets.
It's about having a size of magnet industry that enables all of the industries around it that support it to be able to thrive. Think about the consumables and electrolining, the machinery that's required for powder production. All of these things need to create themselves in the Western world. The vast majority of the equipment in our Independence facility, United States produced, Japan, Germany, Italy. It exists. The ability to manufacture it exists. We just need more scale. I think that that is the imperative of the moment. Frankly, it's a positive feedback loop. The larger scale we have as well, the more competitive we become on pricing.
I think the sea change that we've seen recently is it's very tough when you have a commodity product, right? When you're selling a commodity into a global market, a global market that is massively dominated by China, it's hard for you to sit there and say, "Hey, magnet producer, buy my product from the United States and pay me 2x what you could get getting it out of China." Certainly, with these export bans, maybe that changes. I think the better way to approach the problem is to lay out for customers, maybe that magnet price that you're getting in China is not the price for magnets. It's a price for magnets. It is a price because the Chinese have decided that that's the price and they've decided that they want to dominate this market.
It's not a real market price. I think that that is dawning on consumers of magnetic products that I need to think about this, not just Western prices are here and Chinese prices are here. Why aren't Western prices Chinese prices? It's just the China price is a price and the Western price is a different price. Every customer is going to have a different risk tolerance.
Yeah, if I could quickly add to that, I think in China, they view industry, they obviously view industries dramatically different than we do in the West. They're not bound by quarter-to-quarter reporting or profit needs. Frankly, look at their industries as a single entity. What is produced upstream is designed to feed the downstream, the automakers, the wind turbine makers with cheap inputs so that they can make massive profits that would overshadow the upside of increasing prices 15%, 25%, 50% upstream. In the West, every company is individual. Every company has its own balance sheet that it's looking to satisfy.
That speaks to why the prices we see in China are not market prices. They are strategically designed prices to fend off competition and to feed their downstream champions with cheap inputs. I have a question over there. Yeah, please. I wanted to follow up on your question, actually. Maybe you know the answer, but anybody who does. Just on the supply side and putting geopolitics to one side, Northern Rare Earths in Bayan Obo has been increasing production every year for the last decade, I think.
It's just going through an investment cycle. It's now half of the global production of rare earths. Does anyone know what is going to happen there over the next so many years? It's a very open question in my mind. Thank you. Yeah, within China, it is the engine. It is where the growth has been, as you stated, and where the growth will continue to come from. It is also where north of 80% of China's rare earth reserves sit in a single deposit in Bayan Obo. We do expect that production will continue to increase, possibly upwards of 10% in some years going forward. Just a few years ago, we've had increases of 20-25% in a single year. The gap today that Bayan Obo needs to fill is a massive one. In April, MP Materials announced they were no longer exporting mineral concentrate to China.
The world's second most productive mine feeding into Chinese processors is not showing up going forward. At the same time, Myanmar, which has become a major supplier of concentrate into China, its supplies are down 80%. If China were to announce this year a 30% increase in production, that would likely fill the gap. That's not going to be enough. With demand chugging along, they're going to have to increase more and more going forward. We think they will chase demand going forward, but China this year announced that they're no longer concerned about global demand. They're no longer structuring their production quotas to meet global demand. They're structuring them to meet strategic imperatives internally. I think that is writing on the wall that we should all take heed of.
It's speaking to China, looking out for its industries first, and letting the rest of the world figure out.
I can put that on top of it. From China perspective, are you all right? Resources and reserves. China probably has 35% of resources and reserves. Where the strength is, is the downstream, right? The refining. That's what China has been building in the last 20 to 30 years. They do have spare capacity. The market, especially whoever focused on China, the view is that they are going to expand the capacity to meet the demand. I guess the debate here is we are going to have an ex-China market versus China market.
That's the biggest debate in the rare earth market. We are talking about the verification of rare earth price, which means you have your China and DPR or heavy rare earth price, or you have the ex-China, such as MP and the junior rare earth companies, when they accelerate their rare earth supply chain. Especially under the scenario that China, from April this year, they kind of implemented the heavies, you require export license, et cetera, to control the heavy rare earth, right? That should, back to Rosen's point, should accelerate the ex-China rare earth supply chain. You have two prices. It comes down to the debate, what is the incentive price for rare earth and what is the exchange price, I think. Not today, but eventually.
I think the first time we saw it was last week with basically a European delivered price for heavies. I don't know how real that is, but that was the first time we've actually seen it. I think one important nuance that I would layer on is there is a lot of discussion now of bifurcation. I think from our perspective, what we think is important is where do you sit on the cost curve vis-à-vis the global price, even if there is not necessarily a bifurcation in price. To the extent Northern continues to increase production, not all production is created equal necessarily, right? I do think that there is continued pressure on the cost curve in China upwards. From our perspective, I think China has been very clear that their goal is to satisfy their own demand, which is growing really rapidly.
If that is the case, they need to continue to invest. They need to continue to increase quota. As they do that and as they chase more resource, that is going to put upward pressure on the cost curve. Even if we do not see a bifurcation, from our perspective, we think that is generally a slight positive. Of course, the bifurcation is a totally different ballgame. Go ahead.
Maybe a question talking about price. Everything comes down to the price. Especially the West going to develop its own rare earth supply chain. It is not cheap. By looking at CapEx per ton or per kilogram, CapEx per kilogram for NDPR, looking at the NDPR projects, probably around between $100-$250, roughly speaking, January per kilogram. In your view, what is the incentive price ex-China to develop the rare supply chain from mine to rare earth oxide or from mine to permanent magnets and comparing that with China? Because from what I heard, China is probably 30% of the CapEx required versus the West. Yeah. What is your view on the incentive price to develop?
I think exactly your point on sort of capital cost to bring capacity online in the U.S. versus China is sort of the issue because that is where the subsidies come in, right? I think that certainly from a conversion perspective, we can be competitive with the Chinese. It is really about the cost of capital and capital subsidies. It is hard to put a pinpoint number. It sort of depends on where you are drawing that line of supply meeting demand and which projects we are talking about.
I think the easy answer to sort of skate out of this one unscathed is many, many multiples of the current market price, I think, is the incentive price ex-China. I think we were sort of reviewing some of your numbers and looking at CapEx per kilogram, CapEx per ton for Mountain Pass. If you think about what Mountain Pass is, we aggregated billions of dollars of assets, but that was not capital off of our balance sheet. We invested another $1 billion building out the supply chain. If you wanted to recreate Mountain Pass from scratch in the state of California, it could be $5 billion. That gives you a sense of the requirement for major supply growth ex-China.
I wanted to also touch on the cost curve before we wrap things up here. There are a lot of moving parts. The two biggest cost inputs, hydrochloric acid and caustic soda. The U.S. has a huge disadvantage there versus China, which has extremely cheap chemical inputs. Is there a scope to bring that down in the U.S. and then to just kind of close things off? Where is the 90th percentile on the cost curve today?
It's a great question. It's not necessarily the exact same commodity reagents for every rare earth producer, right? Some have different media, some use sulfuric acid and things like that. For us, the biggest variable costs are hydrochloric acid and caustic soda. What we've seen since we went public in 2020, the prices for those commodities are up almost 80%.
I think an important thing is we gave some forward look on where we think our cost structure will be once we're fully ramped and sort of putting that in context of what we thought in 2020. A lot of things have changed, but they all sort of come out to a wash, except for we can't control the price of third-party chemical reagents, except for one potential avenue, which is part of the assets that we acquired at Mountain Pass included a chlor-alkali plant. The way that Mountain Pass was originally designed under the prior operator was to have a completely closed loop. All of the waste brine that comes off of the separation process is fed back into a chlor-alkali facility, which then creates hydrochloric acid and caustic soda that's then used in the separation process. A perfect closed loop.
We sort of would joke that if you look back at the issues that they struggled with, they often talked about chloroxide more often than they talked about rare earths. It was a real issue for them. Our plan of operation was pull that out, reopen the loop, bring in third-party reagents, and invest in the ability and capacity to discharge waste a different way. The way we do that is with a salt crystallizer where we basically produce the brine as salty water. We take the salt out, and we have salt that we dispose of, and we evaporate the water in the middle of the Mojave. That has been what we've done to date. We are currently investing in the capacity to go back and close that loop.
We feel that our ability to produce at least some portion of our hydrochloric acid and caustic soda inputs could bring those overall costs down pretty dramatically over the next several years. Importantly, we will maintain flexibility to be able to do both and certainly to be able to bring more capacity on or less, depending on the market environment for those commodity reagents. That is a very unique thing. In fact, part of our acquisition of Mountain Pass included the IP of combining a chlor-alkali plant with a rare earth plant. It's actually patented. Not that anyone would be crazy enough to go build that right now, given the scale that we're operating at is pretty different than what some of these other plants would need.
I think that that is something that's very interesting to us and is a real opportunity from a cost structure perspective going forward.
Yeah, that's really helpful. Ryan, cast to you. Maybe you're the right person to answer this question, but where is the 90th percentile on the cost curve today?
Today, if we're talking on an NDPR basis, it is probably around $75-$80. And it would be companies, surprisingly, in China that are importing concentrate and refining that. So a cost curve on an NDPR basis instead of a total rare earth oxide basis is there's a bit of nuance that needs to be appreciated because your other rare earths ultimately end up serving as credits, in particular your DYTB. Right now, the price of dysprosium, especially, is suppressed. Terbium is doing a little bit better.
That is what ultimately pushes up the NDPR cost for those importers and puts them in the 90th percentile or so. It is sub-60. We are well into the cost curve at this point. Yes. Frankly, I think it is part of the broader strategy. China, we follow its profits, its reported profits quarter after quarter. Most majors in China basically operate at cost. Their cost is already highly subsidized. They are choosing, for whatever reason, not to seize large margins, likely to maintain market share, to capture more market share, and as part of a broader strategy to feed downstream industries with cheap inputs. The cost curve from a Western capitalist standpoint makes absolutely no sense.
This is a good place to end it. Gentlemen, thank you for being here. This has been a lot of fun. Thank you, everybody, for being here to help us in this interesting discussion.
Thank you.
Thanks.