LONDON, Feb 18 (Reuters) - Prices of two key rare earths, crucial for making super-strong magnets used in EVs and defence equipment, have rallied on firm demand and bottlenecks in supply, above a ground-breaking price floor provided by the ​U.S. last year to miner MP Materials ( MP ).

The near ‌doubling of prices over seven months means the U.S. government will not have to subsidise MP Materials' ( MP ) output of ⁠neodymium and praseodymium (NdPr) as long as it remains above the threshold of $110 per kg.

The ⁠rally in prices to $123 a kg, the highest since July ‌2022, will also boost ‌other rare earth companies that Western governments hope will be able to cut reliance on top producer China.

China ​dominates the global supply chain for rare earths, ‌accounting for 90% of refining capacity and around 70% of mined output.

"The price rally has been driven by firm downstream magnet demand and ​deliberate supply management in China," said Neha ​Mukherjee, research ‌manager for rare earths at consultancy Benchmark Mineral Intelligence.

She cautioned that the elevated prices are likely to be temporary, with a downward correction expected by ⁠the end of March.

The Chinese price of NdPr oxide, regarded as a benchmark, ⁠has jumped to 850,000 yuan per metric ton or $123 per kg, from $63 on July 9, when MP Materials ( MP ) unveiled its multibillion-dollar deal with the U.S.

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.

"While many operations can sustain output ‌at today's elevated prices, the current market tightness is short term and does not reflect ⁠underlying market fundamentals," Mukherjee added.

As part of the ground-breaking deal with MP, the Pentagon offered price support to MP for the NdPr it produces, based on $110 per kg to help it better compete with China.

The U.S. government also stipulated that the company halt shipments of its mined output to China after the material had fed 7%-9% of China's NdPr oxide production over the ​previous three years, according to consultancy Adamas.

The cut-off of supply from MP coincided with tightened supply in China due to what analysts regarded as lower rare earth mining and ​smelting quotas, although the government did ‌not make a public statement about the quotas.

($1 = 6.9080 Chinese ​yuan renminbi)