PERTH, Australia, May 22 (Reuters) - The United States

is on track to establish a domestic rare earths supply chain to

meet its defence needs by 2027, a senior defence official said

on Wednesday.

The U.S has been driving the build out of a global supply

chain for rare earths, metals used in magnets for green energy

industries and defence, beyond dominant producer China since

COVID upended global supply chains early this decade.

"We are on track to meet our goal of a sustainable mine to

magnet supply chain capable of supporting U.S. defence

requirements by 2027," Assistant Secretary of Defense for

Industrial Base Policy Laura Taylor-Kale said at a mining

conference in Perth.

Australia is classified as a domestic source of supply,

alongside Canada and the UK, for critical minerals for the U.S.

under the Defense Production Act and the U.S. has been offering

funding opportunities to Australian mine developers.

The U.S. this year extended its support for the first time

to back two Australian-listed rare earths projects with up to

$850 million to help build out the supply chain.

It has already funded Australian producer Lynas Rare Earths ( LYSCF )

, the world's biggest producer outside of China, to

build a new rare earths processing facility in Texas.

Government support for the sector is also coming

domestically. In Australia, the federal government has pledged a

A$1 billion ($667 million) loan to mineral sands producer Iluka

Resources ( ILKAF ) to build a new minerals processing plant on

the country's west coast.

But these expansion projects have come as prices for rare

earths have slumped, hurt by rising supply as China exports more

to global markets.

As China-based prices of rare earths have plunged, so have

the cashflows and accounting profits of rare earths producers in

the West, but also China's top three rare earths producers, said

Iluka's Tom O'Leary.

"So today they are still losing money.. and yet they are

still producing. This is not a normal market," he said, arguing

for prices of Western rare earths to delink from Chinese prices.

Amanda Lacaze, chief executive of Lynas, agreed there was a

"market imbalance" that could be mitigated by more growth in

supply outside of China.

"The important thing is growing the non-Chinese industry,"

said Lacaze. "Things like the partnership that we have with the

U.S. government, Iluka's relationship with the Australian

government, these are all about growing critical mass outside of

China. And once we do that, we start to address the imbalance."

($1 = 1.4986 Australian dollars)

(Reporting by Melanie Burton; Editing by Lincoln Feast.)