US sources claim that the US has moved away from critical minerals price floors

Multiple sources have confirmed that the Trump administration has backed away from its plans to guarantee a price minimum for U.S. vital minerals projects. This is a tacit acknowledgement of a lack in congressional funding as well as the difficulty of setting market prices.

This shift comes at a time when a U.S. Senate Committee is reviewing a price floor granted to MP Materials in the past year. It represents a change from what was promised to industry. Washington could be at odds with G7 partners who are discussing joint price support measures or other related measures that would boost production of minerals critical to electric vehicles, semiconductors and consumer electronics.

Three attendees at a closed-door meeting hosted by a Washington Think Tank this month said that two senior Trump officials informed U.S. mineral executives their projects must prove their financial independence, without government price assistance.

Audrey Robertson, Assistant Secretary of the U.S. Department of Energy and Head of its Office of Critical Minerals and Energy Innovation told the executives that Audrey Robertson was not there to support them. "Don't expect that from us."

In premarket trading, shares of U.S. listed miners that produce critical minerals dropped between 3% to 8% on Thursday.

Trilogy Metals fell 3.3%, MP Materials dropped 4.7% and Critical Metals and NioCorp Developments both lost more than 5%. Ramaco Resources dropped 6.4%, and USA Rare Earth fell nearly 9%.

Rare Australian Earth Shares Slide

The government's investment package last July included a price floor for MP's, but this shift will not affect it.

Robertson was joined in his presentation by Joshua Kroon. He is the deputy assistant secretary for textiles and consumer goods as well as materials, metals, critical minerals, and other materials at the Department of Commerce’s International Trade Administration.

Sources claim that Kroon and Robertson said at the meeting Washington was no longer able to offer floor prices.

In a statement issued after publication, the Energy Department stated that the article contained "false information and relied on sources who are either misinformed of deliberately misleading." It did not specify what errors it found. The Energy Department did not respond immediately to a request for more information.

MP Materials didn't respond to an email request for comment. However, after the article was published on Twitter, it said that there had not been any changes to its contract and the government obligations surrounding it. It said that any implication the U.S. Government has retreated on its commitments with MP Materials was false.

I did not suggest any part of the MP's deal was in danger.

The report today is inaccurate, false, and contradictory with the facts. The company stated that the report follows a pattern where speculative, misleading reporting has been used to misrepresent government policy. This has caused confusion and unnecessary disruption in the market.

Kroon and Robertson have not responded to our requests for comment.

After the article was published, shares in Australian listed rare earths companies fell. At one point, Lynas, the largest company outside China and the world's largest, dropped more than 10%. Lynas' spokesperson stated that the company had benefited from the U.S. decision, which has boosted rare earths prices.

Price protection is important for producers who are currently in business, because it addresses the market's dysfunction immediately. She said that other policy instruments were available and had been used for early-stage projects.

Reg Spencer, an analyst at Canaccord in Sydney, believes that the steep fall for shares related to rare earths was exaggerated.

The comments were in line with his interpretation of White House policy, which is that the White House does not intend to support every rare earths project by using a floor price mechanism. Projects will be developed on their merits," said he.

The U.S. continues to support the development of a critical minerals supply chain in ex-China. He added that they may use different methods.

Change in Tack

The current administration stance contrasts with a closed door meeting held in late July where two officials told separate minerals executives that an MP Materials floor price extended days earlier was "not an isolated event" and that administration was working to support prices for other projects.

Since then, the administration took equity positions in Lithium Americas and other companies, including USA Rare Earth, Trilogy Metals and USA Rare Earth. There were no price floors offered, which raised questions about the government’s commitment to this financial tool.

U.S. mining companies and processing firms have sought price floors and government support to compete with China. Industry executives claim that China's state-backed manufacturers can cut prices to punish competitors, undermine projects and discourage private investment.

The White House refused to confirm whether it planned to set new price floors. However, it said that it would continue to pursue tax cuts, deregulation and targeted investments to high priority sectors "while remaining good stewards of taxpayer dollars."

Price floors are criticized by critics who warn that they expose U.S. tax payers to financial risk, forcing the government to subsidise minerals when prices drop. This could result in a long-term liability if prices continue to fall.

Legal experts warn that a guarantee of minimum prices may be challenged under U.S. procurement laws and trade laws. This is especially true if the support is perceived as a distortion of the market or if it lacks explicit congressional approval.

Stockpiling, equity investment and local content requirements are all possible ways to boost mineral projects and stabilize prices.

Australia and other countries have also considered price floor for critical minerals.

A DEAL BETWEEN MPS IS PUBLISHED IN THE SPOTLIGHT

Two additional sources said that the MP Materials investment caused concern among some administration officials and Congress members, who were concerned that Congress had not authorized funding for a floor price of at least $10 per kg for 2 types of rare Earths.

Since the MP investment, the economics of minerals markets have changed. USA Rare Earth announced this week that it plans to purchase the same types of rare Earths on the open markets for $125 per kilogram.

The MP investment included a guarantee purchase agreement. This caused confusion about whether Washington would guarantee price floors for others.

Sources said that as the Trump administration looked at other equity investments it could make after MP, they realized it didn't have the authority from Congress to fund a floor price.

According to two sources, this realization was partly fueled by a Senate Armed Services Committee inquiry, which last year asked Pentagon staff to meet and explain why MP Materials had received price-floor assistance, as well as the administration's investment strategy in the minerals sector.

The committee member confirmed the request for a meeting but declined to comment further.

(source: Reuters)