China’s Dominance in Rare Earth Magnet Manufacturing

Highlights

• China produces approximately 240,000 tons of rare earth permanent magnets in 2023, representing 85-90% of global supply and dwarfing production in Japan, US, and Europe.
• Rare earth magnets are crucial for defense systems, with applications in military platforms like F-35 fighters, Aegis destroyers, and advanced missile guidance technologies.
• China’s rare earth magnet supremacy is driven by a vertically integrated supply chain, government support, massive manufacturing scale, and strategic industrial ecosystem.

---

China has established a commanding lead in the production of rare earth permanent magnets – chiefly neodymium-iron-boron (NdFeB) and samarium-cobalt (SmCo) magnets. These are critical materials for high-tech industries and defense systems worldwide. China’s rare earth magnet industry dwarfs that of any other country in both scale and integration, giving it control over a strategic supply chain. Below is an overview of China’s capacity, global market share, defense applications, and its comparison to producers in Japan, the United States, and Europe.

Production Capacity and Global Market Share

China’s high-performance NdFeB magnet output has rapidly expanded over the past decade (2014–2025), soaring from under 30,000 tons in 2014 to a projected ~132,000 tons by 2025 (opens in a new tab).

China is today the largest producer of rare earth magnets. In 2018, China produced about 138,000 tons of NdFeB magnets (opens in a new tab) – roughly 87% of the world’s output, nearly ten times the output of Japan (the second-largest producer). This dominance has only grown in 2023, China’s output of rare earth permanent magnets (NdFeB and SmCo combined) reached approximately 240,000 tons (a 14% year-on-year increase).

Industry forecasts project that China’s magnet production will continue to rise (to ~260,000 tons in 2024) to meet the surging demand from electric vehicles and wind turbines.

By contrast, the rest of the world produces only a small fraction. China accounts for an estimated 85–90% of the global NdFeB magnet supply. For SmCo magnets– a smaller niche (SmCo accounts for <2% of total permanent magnet usage as reported by Rare Earth Exchanges.

China also holds a dominant share, thanks to its control over samarium raw material and magnet manufacturing. The table below highlights the global landscape of NdFeB magnet production by country:

• China – ~85–90% of the world supply. The output was ~240,000 tons in 2023, and China’s capacity is still expanding. Dozens of Chinese firms produce magnets at scale, with top players such as JL Mag, Ningbo Yunsheng, and others each expanding their annual capacity to tens of thousands of tons.
• Japan – ~5–10% of world supply (second-largest producer). Japan’s Hitachi Metals (now under Proterial (opens in a new tab)) historically held key patents on NdFeB magnets and, along with a few other Japanese firms, supplies high-performance magnets. However, Japan’s output (~10–15 thousand tons in 2018) is only about one-tenth of China’s.
• Europe – ~2–3% of global supply. Germany’s Vacuumschmelze (VAC) is a notable producer of high-grade magnets, and a few EU companies produce smaller volumes. European output is in the low thousands of tons, only a few percent of the global market.
• United States – <1% of global supply. The U.S. currently has virtually no large-scale NdFeB magnet manufacturing. One new entrant, MP Materials, aims to produce 1,000 tons of NdFeB magnets per year by 2025, which is less than 1% of China’s annual output, according to a CSIS report (opens in a new tab). Apart from this planned facility, U.S. production is limited to small specialty producers (e.g., for SmCo magnets used in defense), and the country remains almost entirely dependent on imports for magnet supply. Of course, change is coming on this front, with projects such as MP Materials and others.

China’s overwhelming market share highlights a significant scale gap: its rare earth magnet industry operates on a scale that is an order of magnitude larger than that of any other nation. Even in high-performance NdFeB magnets (the type used in EV motors and wind turbines), Chinese manufacturers command roughly 90% of global output. While Japan and Germany contribute some high-end production, their volumes are limited and have plateaued in recent years. China’s capacity expansions – often in large, state-of-the-art factories – have enabled it to meet growing global demand and maintain its market share dominance.

Military and Defense Applications for Rare Earth Magnets

Rare earth magnets are strategic materials for defense. Both NdFeB and SmCo magnets are essential components in a wide range of military platforms and weapon systems. For example, the U.S. F-35 Lightning II stealth fighter relies on rare earth magnets in its electric drive systems, control surface actuators, and radar, contributing to the 920+ pounds of rare earth materials used per aircraft.

Similarly, each Arleigh Burke-class Aegis destroyer contains about 5,200 pounds of rare earth elements, and a Virginia-class attack submarine about 9,200 pounds, largely in magnets for electric motors, power generation, and navigation systems.

In modern missiles and smart munitions, miniaturized high-power magnets enable guidance systems, control fins, and precision targeting. The Tomahawk cruise missile, Joint Direct Attack Munition (JDAM) smart bombs, and Predator/Reaper drones all depend on rare earth magnets for critical components (from fin actuators to sensors), defense.gov (opens in a new tab). Rare earth magnets also focus microwave energy in radar systems and are used in underwater sonar and mine-detection systems, per the Department of Defense (opens in a new tab) and Rare Earth Exchanges.

In many cases, these magnets allow for lighter, more efficient designs, enabling smaller motors or higher precision than would be possible with conventional magnets.

Samarium-cobalt (SmCo) magnets deserve special mention for defense applications. SmCo magnets, although largely superseded by NdFeB in commercial use, exhibit exceptional thermal stability and can operate at temperatures up to ~550°C without losing magnetic strength, according to Rare Earth Exchanges.com. This makes SmCo magnets irreplaceable in high-temperature and high-stress military contexts – for instance, in the engines of fighter jets, in high-speed projectiles, and in advanced radar and sonar systems, as reported in Rare Earth Exchanges.com.

Despite accounting for less than 2% of global permanent magnet volume, SmCo magnets are viewed as critical for these niche defense uses as we have reported.

The U.S. military secures a small supply of SmCo magnets from domestic or allied sources for such purposes. Still, China’s dominance in SmCo production (owing to its control of samarium supplies) means most of the world’s military-grade SmCo magnets still originate there.

The heavy dependence of defense systems on rare-earth magnets has become a national security concern for countries like the United States. The Pentagon has identified NdFeB and SmCo magnets as critical materials and is actively investing in a “mine-to-magnet” domestic supply chain.

Since 2020, the U.S. Department of Defense has allocated over $400 million to encourage domestic rare earth processing and magnet manufacturing, to source all defense-related magnets internally by 2027. However, until those nascent efforts bear fruit, U.S. defense contractors remain heavily reliant on Chinese magnet materials, often requiring waivers to bypass sourcing regulations to use Chinese-origin magnets in American weapon systems, as cited in National Defense Magazine (opens in a new tab).

China vs. Japan, U.S., and EU–Rare Earth Magnet Manufacturing at a Glance

China overwhelmingly dominates the global rare earth magnet industry, producing an estimated 85–90% of all NdFeB magnets—the most powerful type used in electric vehicles, wind turbines, and defense systems. Chinese companies produce over 250,000 tons annually, and that number is still growing. For comparison, Japan—the second-largest producer—outputs only about 10,000 to 15,000 tons per year. While Japan excels in high-performance magnet technology, its overall volume is less than 10% of China’s, and growth has been modest.

The United States, once a leader in the field, now produces virtually no commercial-scale NdFeB magnets. Most U.S.-based manufacturing disappeared after key assets were sold and relocated to China in the early 2000s. Today, only a few U.S. firms make small batches of magnets for military or niche uses. A new facility from MP Materials in Texas may produce 1,000 tons annually by 2025—but even that would account for less than 1% of China’s output.

Europe fares slightly better than the U.S., but still lags far behind. German firms like VAC produce high-quality magnets for cars and industry, but EU-wide output is likely only 2–3% of global supply. European countries are ramping up investment under the EU Critical Raw Materials Act, but for now, they remain heavily reliant on China, not only for raw materials but often for final magnet processing as well.

In short, China’s scale, integration, and government support make it the undisputed magnet manufacturing powerhouse. Japan, the U.S., and Europe are all trying to catch up—but rebuilding capacity will take years and billions in investment.

China’s Rare Earth Magnet Supremacy: State-Backed, Scale-Driven, and Strategically Leveraged

China’s dominance in rare earth magnet manufacturing—especially NdFeB and SmCo—rests on a deeply integrated, state-engineered industrial ecosystem. From mining rare earth oxides in Inner Mongolia to refining, alloying, and magnet fabrication, China’s vertically integrated supply chain ensures secure and low-cost access to critical inputs, such as neodymium, dysprosium, and terbium. Government incentives—subsidies, tax breaks, cheap land, and environmental leniency—have driven the development of massive domestic capacity, with magnet hubs like Baotou’s “Magnet Valley” streamlining production and cutting compliance costs far below Western norms.

China’s scale amplifies this structural advantage. Dozens of factories churn out magnets at volumes unmatched globally, allowing Chinese producers to underprice foreign competitors. Despite industry fragmentation, internal competition keeps prices low. With few serious challengers, China supplies over 80% of global NdFeB and SmCo magnets, powering everything from EVs to missile guidance systems. When Beijing imposed export controls in 2010 and again in 2023, the world got a stark warning: rare earth magnets are not just commercial goods—they are geopolitical leverage points. Export bans on elements like dysprosium or magnet-making technologies have made clear China’s willingness to weaponize its dominance.

For now, the West remains critically dependent. Even with the efforts of the U.S., EU, and Australia to develop rare earth supply chains, rebuilding magnet production capacity will take years. Specialized sintering and alloying expertise remains concentrated in China, creating a chokepoint that defense and tech sectors cannot yet bypass. Until global alternatives mature, any disruption—such as a trade war, embargo, or supply shock—could cripple vital industries, as we are learning now during Donald Trump’s second U.S. presidency.

For investors and policymakers, China’s monopoly on rare earth magnets is both a strategic asset for Beijing and a structural risk to global industrial stability.  As Rare Earth Exchanges has consistently called out, a rare earth element supply chain policy remains a matter of national security.