According to Reuters, the US Defense Logistics Agency (DLA) plans to buy up to USD 40 million (£29.62 million) worth of scandium oxide from Rio Tinto over the next five years to boost US defense stocks. $RIO (+0.32%)
$RIO (+1.28%) over the next five years to boost US defense stocks.
The move is aimed at ensuring a stable supply of scandium, a rare earth element (REE) that is critical to the Western defense and technology sectors after China imposed export controls.
The agency intends to purchase 6.4 tons of scandium oxide over a five-year period, starting with nearly 2 tons in the first year.
This initial purchase represents about 5% of last year's global scandium oxide production, which according to the US Geological Survey was 40 tons, with current production capacity at 80 tons.
The DLA stated in a document: "Until recently, scandium was sourced primarily from China.
In late 2024, China implemented export controls on scandium, which restricted the supply chain and led to this acquisition for the National Defense Reserve.
"Rio Tinto Services Inc. was identified as the only supplier capable of meeting the government's product needs in the capacity required for the contract."
Rio Tinto said it was actively working with the US government to identify opportunities and leverage available support to increase domestic production and strengthen supply chains for the US market, according to media reports.
In an emailed response, Rio Tinto told Reuters: "Rio Tinto is uniquely positioned to help secure materials that are critical to America's future."
In August this year, the US government granted Elk Creek Resources, a subsidiary of NioCorp Developments, up to $10 million to bolster domestic resources.
Despite these efforts, the government still relies on foreign sources for the material, which is essential for various defense systems, according to the release.
Rio Tinto scientists made a breakthrough in 2020 by developing a method to extract high-purity scandium oxide from waste streams in the production of titanium dioxide, eliminating the need for additional mining.
The Canadian plant in Quebec, which produced its first batch of scandium oxide three years ago, now has an annual production capacity of 3 tons.
In July, Rio Tinto announced that it will incur gross costs of up to $300 million in the first half of 2025 due to US tariffs on its primary aluminum exports from Canada.
》Perhaps a good lever to talk about the tariffs, not that the US government will have to pay tariffs afterwards 😅 《
