Brazil is emerging as the latest frontier in global rare earths competition. While markets have traditionally kept a close eye on Africa-linked supply chains, Brazil — which holds the world’s second-largest rare earths deposits — is now at the center of a high-stakes bidding war involving the US, EU, and China, the Financial Times (FT) reported.

The state of play: Washington has plowed USD 500 mn into the Serra Verde mine, and the EU is countering with a joint investment pact targeting the sector. Meanwhile, Chinese carmakers are quietly making direct plays for high-temperature magnet materials.

The competition could be good news for Brazil — but it could get ugly: Brazil is refusing to choose sides — instead leveraging its 21 mn tons of reserves to force technology transfers and the development of a domestic refining industry. However, with a volatile US trade policy, rising Chinese influence over its rare earths supplies could trigger the tariff wrath of US President Donald Trump.

It’s looking like a Mexican standoff

The US and EU exchange friendly fire over supply. Both sides are aligned on their goal of de-risking China, yet they are also competing to secure a piece of the action.

China has a lot of skin in the game. China’s interest in Brazil is laser-focused on heavy rare earths — dysprosium and terbium — which are critical ingredients for high-temperature magnets used in EVs and wind turbines. As Beijing tightens export controls, Brazil’s deposits are a viable alternative for the green energy transition in the West.

What’s next?

Brazil is doubling down on securing its supply chains: Brazil’s government is pushing for a National Policy on Critical Minerals to ensure it doesn’t just export raw ore. If Brazil succeeds in building refining capacity, it would break China’s 90% chokehold on processing — possibly lowering the risk, and likely the cost, for global manufacturers.

Okay, interesting — but what’s in it for our region? Saudi Arabia and the UAE have already secured long-term supplies of rare earths from Brazil via investments made in the early 2020s. However, both Gulf heavyweights are looking to transition from providers of capital for exploration to industrial hubs. If Brazil locks in homegrown industrial capacity, this would mean the rise of a serious contender in the race to industrialize rare earths processing.

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