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The European Union has been looking for rare-earth suppliers outside China for a while now. Last year, Commission president Ursula von der Leyen declared, “The aim is to secure access to alternative sources of critical raw materials in the short, medium and long term for our European industries.” It seems one of these alternative sources will be Brazil.

“We will speed up work on critical raw materials partnerships with countries like Ukraine and Australia, Canada, Kazakhstan, Uzbekistan, Chile and Greenland,” von der Leyen also said in October last year when she made the alternative sources declaration. Brazil was not even mentioned, and yet Brazil has the world’s second-largest rare earth resources after China and seems eager to start developing them.

Earlier this month, as the EU and its South American partners in the Mercosur deal were putting the finishing touches to said deal, Ursula von der Leyen said that rare earths would have a central place in the relationship between the EU and Brazil. This highlights the top priority spot that the leadership in Brussels places on those minerals, which, despite their name, are not rare at all. The problem is the processing part—and it will remain a problem for Europe even if it starts importing rare earths from Brazil.

There are plenty of rare earths in the planet’s crust. They are, however, concentrated in a relatively limited number of deposits, which are the only ones that make commercial sense to develop. But rare earths need to be refined, like all other ores, before becoming usable. Most of the world’s rare earth refining capacity is in China. So the European Union wants to build its own.

Per targets announced by the Commission, the economic and political bloc wants to process as much as 40% of its rare earths domestically by 2030. It also wants to mine 10% of the rare earths it plans on using domestically. That second part just became a lot more challenging after President Trump declared he wants Greenland, and he will not stop pressuring the EU until he gets it. Greenland is widely considered Europe’s motherlode of rare earths and other critical elements.

Yet even the EU’s decision-makers realize European countries cannot become fully self-reliant on critical minerals and rare earths. Brazil, in this context, makes a very good bet, with its critical mineral resources barely tapped. The potential problem is that the United States also wants a piece of Brazil’s rare earths.

Of course, a race between Europe and the United States for Brazil’s rare earths is by no means inevitable. But it is also not improbable, as both the world’s largest economy and the 27-country bloc vie for the secure supply of the minerals that are used in a wide variety of components for the electronics, automotive, and defence industry, among others.

Indeed, some in the mining industry are already positioning themselves to benefit from the surge of demand for non-Chinese rare earth supply. Bloomberg reported this week that an Australian-listed miner, Viridis Mining, had started talks with both European and U.S. buyers of its output from the Colossus project in the Brazilians state of Minas Gerais. The talks, the company said, include establishing a floor price to provide protection from Chinese price-setting, which is notoriously low, undercutting competitors.

The European Union and the United States, in other words, are competing for Brazil’s critical mineral—and especially rare earth—resources. For Brazil, this would likely mean more investments in mining. For the two competitors, it might mean one more vector for potential arguments. Yet perhaps both should instead focus on building rare earth processing capacity to reduce their reliance on China.

By Irina Slav for Oilprice.com