LONDON/BEIJING, Aug 26 (Reuters) - Prices of two rare

earth elements needed for super-strong magnets have surged to

their highest in more than two years after U.S. miner MP

Materials ( MP ) stopped raw material exports to leading magnet

maker China amid rising demand.

China dominates the global supply chain for rare earths,

accounting for 90% of refining capacity and around 70% of mined

output, but the U.S. has pushed back, signing a deal with its

biggest producer MP in July to refine its output domestically.

MP's shipments had in the past three years fed 7%-9% of

China's oxide production from mine output of rare earths

neodymium and praseodymium (NdPr) - vital to magnets that power

electric vehicles, wind turbines and defence equipment -

consultancy Adamas said.

"MP's shipments were a very material portion of NdPr oxide

supply for China's factories, so that's left a big void," said

Ryan Castilloux, managing director of Adamas.

The Chinese price of NdPr oxide , regarded as a

benchmark, has jumped to 632,000 yuan per metric ton or $88 per

kg, the strongest since March 2023, from $63 on July 9.

Its 40% rally after several years of weakness will boost

prospects for mine projects seeking investment outside China as

the West seeks to wean off reliance on Beijing.

Boosting the West's rare earth output became more urgent

after China clamped down on exports in April amid a trade war

with the U.S., prompting some auto plants to shut.

The U.S. government announced a ground-breaking deal with MP

last month stipulating the company halt shipments to China. It

also offered price support to MP for the NdPr it produces based

on $110 per kg, at the time about twice the Chinese price.

MP had paused shipments to China in April due to high

tariffs, but any shortage was masked by weakness in magnet

demand due to Chinese export curbs, analysts said. U.S. rare

earth ore supply to China slid in May and hit zero in June

before jumping last month, probably due to the final MP

shipments, they added.

China's exports of rare earth magnets recovered to hit a

six-month high in July after Beijing eased its export controls,

having agreed a series of deals with the U.S. and Europe.

PEAK MANUFACTURING SEASON

NdPr prices have been weighed down by oversupply in recent

years and in March last year, they sank to 345,000 yuan, the

weakest since November 2020.

Their recent gains have also been driven by a rebound in

demand.

"China is currently in its peak manufacturing season for

electric vehicles, wind turbines, and consumer electronics. This

cyclical uptick in demand has put additional pressure on

available NdPr supply," said Neha Mukherjee, research manager

for rare earths at consultancy Benchmark Mineral Intelligence.

Support has also come from uncertainty surrounding Chinese

rare earth mining and smelting quotas, which were released this

year without the typical public statement.

Castilloux said some players may be anticipating lower

quotas, adding that he expects a modest 5% increase in Chinese

output this year, in contrast to demand growing at about 10%.

Whether the rally will continue will partly depend on demand

from magnet makers and whether they can absorb the higher

prices, said Ellie Saklatvala, head of metal pricing at Argus.

"Producers of NdPr products are relieved to now see prices

lift away from loss-making territory - it'll be a question for

buyers such as magnet makers whether their margins are healthy

enough to keep paying those higher prices for feedstock."