Highlights

• China dominates 80-90% of global rare earth refining capacity, which is the critical midstream bottleneck that separates elements for EVs, weapons, and clean energy, not just mining.
• The West faces a severe workforce gap with only dozens of experts in rare earth separation compared to China's large trained cohort, making new refineries hard to staff.
• U.S. projects from MP Materials, Energy Fuels, and Lynas are emerging with government backing, but breaking China's refining grip requires subsidies, years of training, and treating refineries as strategic infrastructure.

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Rare earth elements power the modern world quietly and completely. They sit inside electric vehicle motors, wind turbines, smartphones, precision-guided weapons, and fighter jets. Yet roughly 80–90% of rare earth separation/refining capacity remains concentrated in China. For years, even America’s flagship rare earth producer shipped concentrate across the Pacific to be processed there.

While much of the public believes the vulnerability exists in the pit—and we do need sustainable flows of feedstock —the real challenge remains the midstream—the dark art of separation and refining. And it’s here primarily, in solvent columns rather than open pits, that China built its dominance.

This is the part of the supply chain most people never see—and the part governments now realize they cannot afford to ignore.

The Chemistry That Nobody Wanted

Mining rare earths is difficult, but refining them is harder. The elements occur together, tightly bound, and chemically similar. Separating neodymium from praseodymium—or dysprosium from terbium—often demands many sequential solvent-extraction stages run with relentless precision. A small error can contaminate batches. Scaling is punishing. Operating safely is worse.

This isn’t plug-and-play metallurgy. It’s industrial chemistry: capital-intensive, waste-heavy, and deeply technical. It requires purpose-built equipment, rigorous handling of hazardous (and sometimes radioactive) residues, and teams that learn by doing—year after year.

China leaned into this complexity while much of the West walked away. Since the 1980s, Beijing has invested in capacity, tolerated environmental externalities that other jurisdictions wouldn’t, and trained specialists at scale. Over time, it built not just plants, but institutional memory—operators who can stabilize a circuit at 3 a.m., engineers who read yield drift like a pulse.

In December 2023, China made the knowledge gap harder to close by tightening controls on exports of rare earth processing know-how, including magnet-related technology. The refinery, Beijing signaled, is not just an industrial asset—it’s a strategic one.

The West’s Missing Workforce

Infrastructure is only half the problem. People are the other half—and the scarcer one.

By some estimates, across the U.S., Europe, and Japan combined, only a small cohort (dozens) of professionals have deep, hands-on experience running rare earth separation at scale—while China has far more. That imbalance is the residue of offshoring. Universities shrank pipelines. Companies stopped hiring. Expertise migrated.

So even when new Western refineries are financed, staffing them is a struggle. Solvent extraction control, rare earth hydrometallurgy, residue management—these skills are uncommon outside China. Training new experts takes years, not quarters. The midstream isn’t just capital-constrained. It’s human-constrained.

America’s Wake-Up Call

For years, Mountain Pass produced rare earth concentrate—much of it sold into a China-centered processing chain via Shenghe-linked offtake arrangements. According to some accounts, over 70% of MP’s revenue was tied to concentrate sales, and the company refined nearly half of its concentrate in California by April 2025.                                                                                             

Then geopolitics hit the balance sheet. In April 2025, MP halted China-bound shipments amid tariff escalation and accelerated domestic refining and downstream plans. Mining without refining stopped looking like a business model—and started looking like strategic theater.

The U.S. government financing of MP Materials, announced in July 2025, came just in time.

A New Refining Map Emerges

Now, a different of refining must evolve.  

• Texas: Lynas’s DoD-backed U.S. separation effort represents a serious allied attempt to rebuild midstream capacity on U.S. soil, but the effort has stalled.
• MP Materials secured $150 million to build out its health rare earth refining capability.
• Utah: Energy Fuels says White Mesa is producing separated rare earth oxides (including heavy REE oxides from commercial ores), a claim that—if sustained at scale—matters enormously for Western optionality.
• Gulf Coast / Louisiana (planned): U.S. defense-linked separation proposals (e.g., Ucore’s planned complex) underscore that Washington is treating midstream as strategic infrastructure, not a nice-to-have.

These projects share three features: long timelines, high costs, and government involvement. None is cheap. None is fast. All are strategic. And no Western system yet matches China’s breadth.

Why Subsidies Are Inevitable

Rare earth refining is a textbook candidate for state intervention.

The economics are brutal: high capex, uncertain pricing, stringent permitting, and competition against an incumbent system that has directly benefited from state-backed (and owned) policy, scale, and accumulated know-how. Private capital rarely funds that risk alone.

That’s why defense funding, emergency authorities, and trade tools are converging on midstream. The logic mirrors semiconductors: if the asset is strategic, the state helps build it.

The Lithium and Cobalt Warning

Rare earths aren’t unique. Across lithium and cobalt, the pattern repeats: mining is geographically dispersed; refining concentrates in China; leverage follows. If you don’t own the midstream, you don’t own the supply chain.

The Real Choice

Breaking China’s grip on rare earth refining won’t be quick, clean, or cheap. It will require subsidies, training pipelines, environmental seriousness, and political will. It will require treating refineries not as profit centers, but as infrastructure—like shipyards and power grids.

The alternative is clearer: a future where the motors in American vehicles, the magnets in allied weapons systems, and the materials of the energy transition remain processed elsewhere, under conditions Washington does not control.

The midstream is no longer invisible. It is the battlefield.

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