Highlights

• China controls approximately 70-90% of rare earth mining and processing.
• China has near-total dominance in heavy rare earth elements critical for defense and technology.
• Historical shifts from U.S. leadership to Chinese strategic investment have resulted in a complex global rare earth supply chain monopoly.
• Emerging efforts by companies like MP Materials, Lynas, and Energy Fuels aim to rebuild non-Chinese rare earth processing capabilities by 2030.

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Rare earth elements (REEs) are a group of 17 metals critical to modern technologies in consumer electronics, clean energy, and defense applications. They are essential in high-strength permanent magnets, electronics, and military hardware. Despite this importance, China overwhelmingly dominates the refining and separation of rare earths today. By the mid-2020s, China controls ~70% of mining and ~90% of processing, and ~99% of heavy-REE processing—a stranglehold Beijing treats as strategic. Heavy rare earths like dysprosium (Dy) and terbium (Tb) – crucial for defense applications such as jet engines and missile guidance systems – are almost exclusively processed in China. This article explores how China achieved this near-monopoly, the history behind it, and the efforts underway to rebuild rare earth supply chains outside China.

A Brief History of Rare Earth Refining and China’s Rise

Commercial rare earth production took off in the mid-20th century, initially led by the United States and Europe. The Mountain Pass mine in California, discovered in 1949, became the world’s largest rare earth source from the 1960s through the 1980s. During that period, the U.S. and allies supplied most of the global demand, using emerging solvent-extraction techniques to separate the various REEs.

China began to prioritize rare earths in the 1980s. Chinese leader Deng Xiaoping famously declared in 1992 that “the Middle East has oil, China has rare earths,” underscoring Beijing’s strategic intent. China’s government invested heavily in rare earth mining and refining, and Chinese companies aggressively increased exports. By the mid-1990s, China was producing over 85% of the world’s rare earths. In the late 1990s, China bolstered its capabilities through the Magnequench acquisition, licensing and joint ventures, and the relocation of Japanese magnet production to China. These moves further cemented China’s dominance. The last major U.S. rare earth mine (Mountain Pass) shut down in 2002 amid spills, environmental costs, and price pressure from Chinese exports. By 2010, China accounted for roughly 95% of global rare earth oxide supply, and that year it demonstrated its leverage by halting exports to Japan during the Senkaku Islands dispute.

Why China Dominates Rare Earth Processing

The following factors converge to benefit China’s rare earth refining position.

Resource Endowment & Strategic Commitment	China has large rare earth reserves and made their development a national priority, building a full domestic supply chain from mining to magnets. Consistent state support and long-term planning gave China an edge in scaling up the industry.
Low-Cost Production (and its Consequences)	From the 1980s onward, Chinese rare earth producers undercut international competitors by offering low prices. This was enabled by government subsidies and lax environmental enforcement. Meanwhile, U.S. and other Western operations faced stricter environmental regulations and higher labor costs, making it hard to compete. Many Western mines closed, while China bore the environmental burden in exchange for global market share.
Technical Refining Know-How	Rare earth separation is notoriously complex, requiring dozens of chemical steps. The solvent-extraction process was pioneered in the West, but China perfected and massively scaled it. By 2018, Chinese entities had filed 25,911 rare earth patents, compared with 9,810 for the U.S. China’s capacity to separate even the most difficult heavy rare earths like Dy and Tb at industrial scale is unmatched. This accumulated know-how is a strategic moat.
Integrated Supply Chain Control	China produces not only rare earth oxides, but also the metals, alloys, and permanent magnets that downstream industries consume. With ~90% of NdFeB magnet production, Chinese refiners enjoy guaranteed domestic customers and economies of scale. Vertical integration has entrenched China’s dominance, allowing it to dictate market terms.
State* Support & IP Protection	The Chinese government has declared rare earths a “state resource” and moved to consolidate industry under large state-owned groups. In December 2023, Beijing banned the export of magnet and separation technologies, and on April 4, 2025, it imposed export licensing on seven medium/heavy REEs and certain magnets. These policies keep critical intellectual property and expertise within China, making it extremely difficult for competitors to catch up.

*Rare Earth Exchanges has translated planning linked to the Chinese State and CCP, articulating how rare earth monopolies are leveraged for longer-term economic leverage downstream.

Efforts to Build Alternative Supply Chains

Recognizing the risks of dependency, governments and companies outside China are investing in rare earth processing capabilities. Progress remains uneven, but several initiatives stand out:

Lynas Rare Earths (Australia)

The largest non-Chinese rare earth producer, operating the Mt. Weld mine (Australia) and a separation plant in Malaysia. Lynas has DoD backing for a Texas heavy-REE facility originally slated for 2025–26. However, Lynas has flagged uncertainty over proceeding due to wastewater and cost issues, raising questions about its timeline.

MP Materials (U.S.)

Owner of the Mountain Pass mine in California, MP is rebuilding an integrated U.S. supply chain. In July 2025, the DoD took a $400M preferred-equity stake and extended a ~$150M loan to support heavy-REE separation. MP also plans a second “10X” magnet plant, with commissioning expected in 2028, alongside its existing Nevada separation plant. The firm has a $1 billion loan funding via Goldman Sachs and JPMorgan.

Energy Fuels (U.S.)

Its White Mesa Mill in Utah produced its first separated NdPr oxide in 2024. Energy Fuels is advancing pilot programs for heavy rare earths like Dy and Tb, targeting commercial output by the late 2020s.

ReElement Technologies (U.S.)

Developing a chromatography-based separation method that may outperform traditional solvent extraction. ReElement claims its Indiana pilot facility already produces 99.99–99.999% purity oxides, with commercial-scale production planned for 2026. If validated, this could offer a cleaner, modular alternative to China’s large-scale refineries.

Other Initiatives

Phoenix Tailings is working on zero-waste extraction and recycling; Rivalia is pursuing ionic-liquid methods from coal ash; and Europe is advancing new separation plants. These efforts remain small compared to China’s capacity, but they mark diversification. USA Rare Earth is developing a mine-to-magnet ecosystem initially targeting small- to mid-sized markets downstream.

Outlook

China’s dominance—especially in heavy rare earths—remains overwhelming. Much of the ore it processes comes from Myanmar as we have discussed at Rare Earth Exchanges (REEx),  a politically unstable source, raising further supply chain risks. Western companies face long permitting timelines, environmental hurdles, and the challenge of scaling up expertise lost over decades. Emerging technologies like chromatography and zero-waste processing offer hope, but they are not yet proven at scale.

In the meantime, China’s grip is unlikely to loosen unless profound changes via America, such as a truly comprehensive and integrated industrial policy.   Yes, there has been a surge of activity following President Donald Trump's executive orders, such as the 232 action, but more will be needed if the United States seeks to establish a resilient supply chain by 2030.

For policymakers, the lesson is clear: diversifying supply will take sustained investment and patience. For investors, the few credible ex-China players—Lynas, MP Materials, Energy Fuels, and ReElement—represent early-mover opportunities in what will remain one of the most strategically important industrial arenas of the coming decade.

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