Rare Earth Exchanges

POSCO International and Star Group Drive U.S. Magnet Manufacturing Expansion – Australian Mine is Key

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Highlights

  • POSCO International is building a $220 million permanent magnet manufacturing facility in the US to support 2.5 million EVs annually.
  • The company has secured nearly $900 billion in contracts with North American and European automakers for traction motor magnets.
  • Strategic partnerships with Arafura Rare Earths and Hancock Prospecting aim to create a non-China rare earth supply chain for electric vehicles.

POSCO International (opens in a new tab), one of Korea’s largest steelmakers, is aggressively expanding its presence in the electric vehicle (EV) supply chain with a China-free rare earth magnet strategy. Partnering with Star Group Industrial Co (opens in a new tab), South Korea’s only producer of rare earth permanent magnets, POSCO announced plans in late 2023 to establish a permanent magnet manufacturing facility in the United States. The plant will start with 3,000 metric tons of annual production, scaling up to 5,000 metric tons, enough to supply 2.5 million EVs per year.                                                                                                                               

Discussions are already underway with Texas, Tennessee, and Arizona as potential locations. A $220 million investment is earmarked for the project. The move aligns with a broader strategy to diversify rare earth sourcing away from China, leveraging materials from Australia, the U.S., and Vietnam.

Securing Key Contracts in the EV Market

POSCO International has secured KRW 900 billion ($673 million) in orders from a North American automaker, with deliveries starting in 2026. Additionally, a KRW 260 billion ($195 million) contract with a European automaker will see supply continue until 2034. These traction motor magnets are critical components in medium- and large-sized EVs, solidifying POSCO’s role in the growing EV supply chain.

Beyond magnets, POSCO is ramping up global traction motor core production. A 100,000-square-meter facility in Poland, slated for construction in mid-2024, will supply Hyundai and Kia’s first locally produced European EVs. In Mexico, POSCO is expanding its existing motor core facility to meet demand from Hyundai Metaplant America (opens in a new tab) (HMGMA), boosting Mexican production capacity to 2.5 million units by 2030.

Arafura Rare Earths and the Nolans Project: A Key Supply Partner

POSCO’s expansion aligns closely with Arafura Rare Earths (opens in a new tab), an Australian company developing the Nolans Project (opens in a new tab), the country’s first mine-to-magnet rare earth operation. POSCO has strong ties to Arafura, which has secured supply agreements with Hyundai, Kia, and Siemens Gamesa Renewable Energy.

Despite a challenging rare earth market, Arafura locked in a $1.5 billion debt financing package for the Nolans Project in mid-2024, as reported last year by Financial Review (opens in a new tab). The funding, backed by Canada, Germany, South Korea, and major banks, positions Arafura as a key player in the non-China rare earth supply chain. The company is now focused on raising an additional $1.2 billion in equity to complete the project.

Rinehart’s Hancock Prospecting: A Major Stakeholder

Australia’s richest woman, Gina Rinehart (opens in a new tab), has positioned herself as a power player in rare earths, acquiring a 10% stake in Arafura Rare Earths. Hancock Prospecting (opens in a new tab), already invested in Lynas Rare Earths and MP Materials, continues to expand its footprint in battery and magnet materials, ensuring supply for major automakers and technology firms.

With POSCO and Arafura aligned, Rinehart’s involvement signals further strategic partnerships and potential joint investments. POSCO’s connection with Hancock’s long-term partner, POSCO Holdings, raises speculation about deeper collaboration in rare earth processing and manufacturing.

Final Push for China-Free Rare Earth Supply Chains

The global rare earth market is shifting, and POSCO International and Arafura are leading the charge. With secure financing, strategic supply agreements, and aggressive manufacturing expansion, both companies are positioning themselves as key players in the Western EV and renewable energy supply chain.

Suppose Arafura’s $1.2 billion equity raise succeeds. In that case, the Nolans Project will be the first fully integrated mine-to-magnet operation outside China, supplying neodymium-praseodymium oxide for EVs, wind turbines, and critical tech components. Meanwhile, POSCO’s U.S. magnet factory will ensure that automakers like GM, Ford, Stellantis, Hyundai, and Kia have access to a reliable, non-China rare earth supply, assuming everything goes according to plans. And, of course, many issues can emerge.

This is more than just a rare earth mine or a single magnet factory—it’s a global restructuring of the rare earth supply chain, one of a series of unfolding collaboratives meant to break China’s 90% market dominance. POSCO and Arafura are on the front lines of this economic and geopolitical shift, ensuring that Beijing doesn’t dictate the future of EVs and renewable energy.

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