De-Risking Rare Earths: Sharp Diagnosis, Blunt Prognosis

Highlights

• China maintains a stronghold on rare earth elements, particularly in heavy REEs and magnet production.
• The U.S. currently lacks operational heavy REE refineries and has limited investment compared to China's state-backed strategy.
• Supply chain rebalancing is slow but ongoing, with potential for industrial policy shifts and alternative sourcing strategies.

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Elly Rostoum’s (opens in a new tab) recent Center for European Policy Analysis (CEPA) article asks a timely and vital question: Can the U.S. de-risk from China’s rare earth dominance? The short answer—accurately laid out—is: not easily, not cheaply, and not soon. But while the piece hits several factual targets, it mixes strategic insight with speculative framing and omits some hard-nosed industrial realities.

What Holds Up

Rostoum nails the big picture in this piece (opens in a new tab): China still dominates the rare earth game, especially heavy REEs and magnet production, with Jiangxi as the nerve center. It's April 2025, and the export clampdown rattled global tech and defense. Meanwhile, the U.S. remains stuck without a single operational heavy REE refinery—still leaning on foreign processors, often Chinese. America’s response? A modest $439 million in DoD spending over five years, a drop in the bucket compared to China’s sprawling state-backed machine. And yes, sourcing from the Global South is getting trickier, with Chile, DRC, and others tightening control over their minerals.

Where It Slips

The piece overemphasizes the notion that U.S. firms are hindered by democracy while China surges ahead. U.S. institutions like Ex-Im and DFC can fund risky ventures—they just haven’t scaled with urgency. The claim that China’s “bad banks” swallow toxic assets as a savvy hedge lacks depth; these financial safety nets might just be kicking a debt crisis down the road.

What’s Missing

Not a word about allied efforts in Canada, Australia, or the EU to stand up new refining capacity. And no mention of recycling or substitution—both small today, but vital to long-term de-risking. Rare Earth Exchanges reports on numerous dynamic unfolding movements.

Bottom line? Strong framing, but the devil’s in the details.

Investor Takeaway

Rostoum gets the macro picture mostly right: the U.S. is behind and racing uphill. But retail investors should beware the narrative that China always plays chess while the West dithers. Industrial policy is shifting. And while supply chain rebalancing is slow, it is happening.

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