SEOUL, March 26 (Reuters) - Australia's Lynas Rare

Earths ( LYSCF ) and South Korea's LS Eco Energy said

on Thursday they plan to work together to process rare earths,

to help meet demand from customers scrambling to secure

non-Chinese sources of the key metals.

Under a preliminary agreement, Lynas said it would supply

rare earth oxides to a processing plant that LS Eco Energy plans

to build in Vietnam, with the South Korean firm looking to then

use the metals to make permanent rare earth magnets in the U.S.

LS said it aims to start operations at the Vietnam factory

in the fourth quarter of this year.

Rare earths, and the magnets made from them, are embedded in

small but critical amounts across devices from iPhones and cars

to F-35 jets.

China has for years dominated the global supply of rare

earths but its export restrictions in response to U.S. President

Donald Trump's tariffs have galvanised other nations to develop

alternative sources of supply.

"Our customers in the automotive and other industrial

sectors are trying to build supply chain outside of China,"

Lee Sang-ho, CEO of LS Eco Energy, told Reuters.

"As China weaponised rare earths, the key for them is to

quickly build a value chain on non-Chinese rare earths by buying

them at premium prices," he said.

Lynas said the new facility would help it supply more

metallised NdPr (Neodymium-Praseodymium) and selected heavy rare

earth products, with the first stage to focus on samarium, used

in the aerospace and automotive industries.

The partnership also commits the two companies to negotiate

separate definitive deals under which Lynas, the world's largest

rare earth producer outside China, and LS Eco Energy would each

cross-subscribe to about A$30 million ($20.84 million) of

convertible instruments.

LS Eco Energy, a unit of LS Cable & System, a major global

cable maker, hopes to use its expertise in metals while using

the group's existing factory sites in Vietnam and the United

States to reduce costs, Lee said.

Non-Chinese companies have been struggling to compete with

dominant Chinese rivals on prices and technology, with projects

stuck on the drawing board for years.

The slowing demand for EVs makes it even more challenging

for companies to invest in production of the key minerals that

are needed in every car, particularly electric vehicle motors.

($1 = 1.4393 Australian dollars)