Highlights
- China dominates rare earth processing with a 30-year vertically integrated ecosystem, making U.S. independence a complex multi-year challenge.
- Rebuilding rare earth capabilities demands comprehensive industrial policy, including workforce development, environmental regulation reform, and strategic investments.
- Defense readiness is at risk, with 78% of U.S. weapons systems containing Chinese-sourced rare earth materials, highlighting the urgent need for domestic supply chain resilience.
In the heated debate surrounding U.S. national security and economic resilience, rare earth elements (REEs) occupy center stage. As China tightens its export controls yet again, some voices in Washington and industry circles argue that with the “right investment and focus,” America could rebuild its rare earth supply chain within a year or two. This is dangerously naive.
True, a national treasure trove is the company MP Materials (opens in a new tab) (MP) and the Mountain Pass rare earth mine. And that company is making bold investments and directed moves to help accelerate the resilience movement. But this will not be enough, at least not in the short to intermediate run.
The reality is clear: China holds a decade-plus lead not just in mining rare earths, but more crucially in separation, refining, alloying, magnet production, and component assembly. Rare earth resilience will not be achieved overnight through venture capital or defense contracts. It will require serious, coordinated industrial policy, and a national commitment unlike anything seen since the early Cold War. How many times do we have to repeat that here at Rare Earth Exchanges (REEx)? We’ll keep doing it.
Why China Dominates Rare Earth Processing
At the heart of China’s advantage is a complex, vertically integrated ecosystem built over 30 years. And ongoing massive state investment, oversight, and management.
China invested systematically across every stage of the value chain. They have built an overwhelming lead across the rare earth supply chain, starting with separation technology. It has mastered solvent extraction — a painstaking, capital-intensive process requiring hundreds of precise separation stages to isolate critical elements like dysprosium, neodymium, and terbium — while the U.S. has almost no commercial-scale separation facilities left—MP Materials and their admirable effort aside. They will need massive help in form of guaranteed capital injections.
China’s refining infrastructure, concentrated in Inner Mongolia and Sichuan, can process thousands of tons of rare earths annually; by contrast, America’s Mountain Pass mine can produce concentrates but must ship them back to China for actual separation and finishing (although they are stopping that now per recent announcement).
China also absorbed the massive environmental costs: processing rare earths creates radioactive and hazardous waste, and while looser Chinese regulations enabled continued production, Western firms shut down under billion-dollar liability threats. But the Chinese have invested in mitigating environmental damage, much of which is proprietary. The U.S. and the West will need to understand what the Chinese have been up to on this front.
Meanwhile, China’s workforce — thousands of engineers, metallurgists, and technicians with real-world rare earth processing experience — stands in stark contrast to the U.S.’s tiny, aging, and inexperienced talent pool. Finally, China utterly dominates permanent magnet production, making over 90% of the world’s NdFeB magnets, a capability that requires not only refined oxides but a full ecosystem of specialized alloying, sintering, and magnetization technologies—and a deep, trained supply network America no longer has.
The “One or Two Year” Fantasy
Building a mine takes 5-10 years. But even assuming raw material is available, constructing a separation facility, staffing it with trained chemists, scaling it to hundreds of tons annually, and meeting environmental compliance standards would take at least five to seven years under normal conditions.
Consider Lynas Rare Earths, based in Australia. After nearly two decades and billions of dollars in investment, Lynas still processes some material offshore and is only now building a heavy rare earth separation facility in Texas, backed heavily by U.S. Department of Defense grants.
Meanwhile, the U.S. has minimal large-scale domestic capabilities for refining gallium, germanium, or dysprosium—critical elements not just for green tech but for fighter jets, radars, and hypersonic missiles. Several facilities in the USA are ramping up what is hoped to be scalable processing capabilities for refining gallium, germanium, and dysprosium, though not all are fully operational or at the same scale.
Throwing money at the problem without addressing the underlying gaps—in permitting, workforce, technology, and industrial coordination—is a recipe for failure. Although President Trump’s recent Executive Orders are a start, and certainly can be leveraged for acceleration purposes.
What It Will Actually Take
If the United States is serious about building rare earth independence, it will need to adopt true industrial policy. This means rebuilding America’s rare earth independence, requiring a massive, sustained capital investment—not just in mining, but in end-to-end separation, refining, alloying, and permanent magnet production facilities, with public-private funding guarantees over multi-year timelines.
Universities and technical schools must immediately establish specialized programs to train a new generation of metallurgists, process engineers, and quality technicians dedicated to rare earth supply chains.
Trump’s Executive Orders aside, regulatory agencies must reform and streamline environmental approvals for rare earth processing and waste management, maintaining safety without the bureaucratic paralysis that crippled the last generation of domestic producers. A more sustained approach must be taken, given Trump will be gone in 2028.
Simultaneously, the government and key defense contractors must secure long-term strategic stockpiles and offtake agreements, providing the market certainty private investors require. Mining operations should be incentivized to harvest rare earth byproducts like gallium, germanium, and tellurium from existing copper, zinc, and phosphate mines, boosting supply without requiring entirely new mines. Finally, to not merely catch up but leap ahead, the U.S. must aggressively fund advanced research into next-generation separation technologies, such as ion exchange and selective membrane systems, that could shatter China’s dominance once and for all.
The appropriate partners must be identified in other nations. We have argued for a tight-knit alliance, a critical mineral and rare earth network of nations. Rare Earth Exchanges has reviewed Brazil Rare Earth’s (opens in a new tab) large holdings, access to a deep seaport on the Atlantic, and desire to build a processing facility as a target for the U.S. government. Obviously, more due diligence is necessary.
Defense Imperatives Demand Action
Recent Defense Department studies reveal that 78% of U.S. weapons systems contain Chinese-sourced rare earth materials. Nearly every jet fighter, naval radar, smart munition, and satellite relies on these elements.
If China escalates rare earth restrictions—targeting dysprosium, samarium, gallium, and other critical inputs—American defense readiness could face catastrophic delays. Restarting production of key platforms like the F-35 or Arleigh Burke-class destroyers could be crippled by a shortage of invisible yet indispensable materials.
Blueprint for U.S. Rare Earth & Critical Mineral Independence
| Pillar | Focus Area | Strategy |
|---|---|---|
| Capital Investment | Full-cycle Production | Fund mining, separation, refining, alloying, magnet production through public-private commitments |
| Workforce Development | Talent Pipeline | Launch university and technical programs to train metallurgists, process engineers, and quality specialists |
| Environmental Streamlining * | Faster Approvals | Adapt regulations for safe, accelerated rare earth processing and waste management. |
| Strategic Stockpiles & Offtake Agreements | Supply Security | Lock in long-term supply contracts and build national rare earth reserves** |
| Companion Mineral Strategy | Broaden Sources | Incentivize rare earth byproduct recovery from copper, zinc, and phosphate mining |
| Advanced Research Innovation*** | Future Advantage | Invest in next-gen separation technologies (ion exchange, membranes) to leapfrog China |
*Trump Executive Orders are a start, but many may be challenged in court. We need a more sustainable approach with national buy-in
**We believe venues such as Brazil Rare Earths have exceptional value for the Department of Defense and the U.S. government. They should undertake due diligence. There are others.
***Tax and government incentives, an enduring program in recycling, non-REE magnets, etc.
Is this a False Dilemma–Industrial Policy or Industrial Collapse?
The myth that “a little money and urgency” can rebuild America’s rare earth supply chain within a couple of years must be laid to rest. Without aggressive, coordinated action on the scale of a Strategic Minerals Manhattan Project, the United States will remain dangerously vulnerable to Chinese leverage.
Defense resilience, energy security, and technological leadership depend on elements that cannot be conjured overnight. True rare earth independence requires patience, strategic planning, and an industrial renaissance—not political slogans.
The clock is ticking. Words are cheap. Supply chains are not.
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