A Landmark Moment: U.S. Dept. of Defense Makes Bold Moves in Rare Earth Magnet Manufacturing


The world of rare earth permanent magnet manufacturing just received a jolt of excitement. A new announcement from the Department of Defense has revealed a significant investment in a domestic manufacturing plant, a move that holds implications not just for defense, but also for the wider commercial sphere.

For context, it’s worth noting that for years, the German company Vacuumschmelze (VAC) had a sales office in Kentucky via a company named E-VAC Magnetics, LLC (E-VAC). Primarily a marketing office, E-VAC was linked with home building projects but was also known for marketing VAC’s magnet products. And now, in a surprising twist, the Department of Defense has invested a whopping $94.1 million in E-VAC to bring to life a rare earth permanent magnet manufacturing plant right here in the U.S.

But there’s more to this story.

It’s customary for the Department of Defense’s grants to predominantly target American-owned and operated businesses. Enter Lynas Rare Earths Ltd. (ASX: LYC), an Australian company currently producing rare earths, which applied for a grant to build a heavy rare earths’ separation plant along with American company Blue Line Chemicals, a processor of rare earth products, in Texas. The dynamics of this partnership and grant allocation remain somewhat enigmatic. The essential detail here is that a non-manufacturing entity like E-VAC has secured this grant, and behind the curtain orchestrating the moves is VAC, a reputable manufacturer of these rare earth permanent magnets vital for automotive EVs.

A telling point is the recent order from General Motors (NYSE: GM) to VAC: a requirement for 1000 tons of magnets per year to be delivered beginning mid-2025. This order aligns intriguingly with the announcement that the new E-VAC manufacturing facility, bankrolled by the Department of Defense, is set to be operational by 2025. Given that the factory’s projected capacity is 1500 tons annually, it’s compelling to infer that General Motors might source its order from this very plant.

Still, there’s a broader implication to this move.

Defense doesn’t invest in consumer markets. Its core mandate is national security. The F-35 fighter jet, for instance, is believed to use substantial quantities of rare earth permanent magnets. This means the primary output from the E-VAC facility might be earmarked for defense purposes, with consumer needs taking second place. The scenario painted here is a deliberate strategy by the Department of Defense to ensure a domestic supply chain that meets both defense and commercial requirements.

However, a pressing question arises: where will the raw materials for these magnets come from? As of now, no U.S. entity manufactures these in quantities that a 1500-ton factory would demand. The primary Western supplier today is LCM of England, but its output is a mere fraction of this requirement.

This move by the Department of Defense is historic. It represents the first significant announcement of a large scale commercial rare earth permanent magnet factory in North America, since Magnequench was sold and moved to China nearly 25 years ago. But as this initiative takes shape, stakeholders will be keenly watching to determine the origins of the raw materials and the supply chain dynamics that this factory will engender.

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4 responses

  1. MH Avatar

    May I ask where the figure for the 1,500 tons of projected factory capacity comes from? I can’t seem to find that number.

    1. Jack Lifton Avatar
      Jack Lifton


      I have been told by a reputable source, who asked not to be named, that VAC’s plan is to build a 1500 ton per year production plant in Canada or the USA [now, apparently, decided to be in the USA] and upon its success build additional plants of that size as demand calls for them. It’s important to note that last year the German parent company, Vakuumschmeltz, produced less than 1000 tons of rare earth permanent magnets, and that I have been informed that none of these were for EV traction motor use. I don’t doubt that Vakuumschmeltz can make magnets for EV traction motors, but I do not see a domestic path for them to acquire the magnet alloys they will specify and need anytime soon. Bechtel built the Chinese magnet plant for Magnequench 25 years ago; that was the last operating magnet plant built by an American contractor. I understand that Bechtel is now building such a plant for MP in Fort Worth, but, even so, Bechtel cannot help MP obtain the critical heavy rare earths it will need to manufacture the types of magnets needed for EV traction motors. The problem for the USA is simply the large demand projected for rare earth permanent magnets by an EV transition seen in the light of the small efforts in building a domestic supply chain for them. In the near term the only answer is to continue to buy the magnets and the motors from China. The question is “how long will China continue to sell critical components to its competitors in the EV markets?”


  2. Maplelegion Avatar

    G’day Jack . Good Article and a good pick-up .
    Seems like this is US Dept of Defense “underwriting “the binding MOU announced by Vacuumschelmze and General Motors back in January this year , as per Reuters news item
    Whilst it remains to be seen , details of the factory costings –perhaps there will be more funding and co-operation between the Govts of USA and Germany ….and , perhaps it opens the door also for the USA Dept of Energy , to also participate /co-operate in the funding …on the basis that their are ” Defense AND Commercial ” needs for rare earth magnets . Both Defense and Energy Depts could form a trio of funding !!!
    But ..as you say , the “rare earths chain “..for refined alloys , just ratchetted more than a couple of notches !! 2025 is a big ask to get a factory built and operating ..and altho it will “import”the Vacuumschelmze factory expertize , it begs the question as to where Vacuumschelmze in going to source the refined rare earth oxides ???? Watch this space ??

  3. LOU PEARSON Avatar

    Jack wrote:
    “I don’t doubt that Vakuumschmeltz can make magnets for EV traction motors, but I do not see a domestic path for them to acquire the magnet alloys they will specify and need anytime soon.”

    Vacuumschmelze is certainly aware of its need for sufficient feedstock for its now funded to be built U.S. based rare earth magnet manufacturing plant. Since they already have a commercial relationship with Less Common Metals of England, it is tempting to think that they might be motivated to prod the U.S. Department of Defense to court Less Common Metals by making a funding offer they can’t refuse to build or license a rare earth magnet alloy plant in the States. One can hope.

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