Brazil’s Serra Verde cuts Chinese contracts as West races for heavy rare earths

Brazilian miner Serra Verde has shortened its Chinese offtake contracts, opening the door to supply heavy rare earths like dysprosium and terbium to Western customers as new processing plants come online.

Brazilian rare earths producer Serra Verde has sharply reduced the duration of its offtake contracts with Chinese processors, creating an opening to supply Western companies once new separation capacity comes online in the next few years, its chief executive said.

The move comes as the United States, Europe, Japan and other Western economies race to secure alternative sources of rare earths, critical for defence systems, electronics, electric vehicles and wind turbines. China currently controls around 90% of global rare earth processing capacity, leaving rival powers heavily dependent on Chinese supply.

When Serra Verde’s mine was under development, the company signed 10-year offtake agreements with Chinese firms to process its rare earth concentrate, as there were no other viable separation options outside China at the time.

Unlike many Western deposits, the Serra Verde mine is rich in heavy rare earths, including materials such as dysprosium and terbium, which are essential for high-performance permanent magnets. Only now are Western plants beginning to gear up to process these heavier elements.

“In a couple of years we’ll have some options to separate the heavies outside of China”. CEO Thras Moraitis told Reuters.

Serra Verde, which is privately held, has renegotiated its Chinese contracts, which now expire at the end of next year, Moraitis said. That shift gives the company greater flexibility to diversify its customer base beyond China.

“The Chinese, the Americans, the Japanese, the Europeans, the Canadians all have approached us, given that we are the only supplier of heavy rare earths, at least for the foreseeable future,” he added.

Analysts have warned that forecast shortages of heavy rare earths like dysprosium and terbium could become a major bottleneck in the West’s efforts to build domestic supply chains for rare earths and permanent magnets.

Calls for price floors outside China

Moraitis, a former executive at Xstrata — later acquired by commodities giant Glencore — argued that government-backed price floors are crucial for the development of a rare earths industry independent of China.

In July, the United States approved a guaranteed minimum price for rare earths producer MP Materials as part of a multibillion-dollar Pentagon-backed investment, and sources have told Reuters the mechanism is likely to be extended to other firms.

Members of the Group of Seven (G7) and the European Union are also considering price support mechanisms to encourage rare earth production and reduce reliance on Chinese supply.

Cleaner production model in Brazil

Serra Verde’s operation is based on an ionic clay deposit in Brazil. In China and Myanmar, such deposits have typically been exploited using a leaching method that flushes the ore with chemicals, leading to water contamination and deforestation.

By contrast, Serra Verde says it has invested several hundred million dollars in a plant designed not to discharge toxic waste, positioning the project as a lower-impact alternative in an industry often criticized for its environmental record.

The company launched commercial production in early 2024 and is still optimizing its operations. It expects to reach full output of about 6,500 metric tons of total rare earth oxides per year by 2027.

Earlier this year, the U.S. International Development Finance Corporation (DFC) approved a $465 million loan to support the project, underlining Washington’s interest in securing non-Chinese rare earth supplies.

Serra Verde is owned by private equity groups Denham Capital, Energy and Minerals Group and Vision Blue, the latter led by former Xstrata CEO Mick Davis.

As Western governments push to de-risk critical mineral supply chains, Serra Verde’s heavy rare earth output — and its decision to loosen long-term ties with Chinese processors — is emerging as a strategic piece in the global rare earths puzzle.