Highlights

• China controls over 98% of heavy rare earth processing, with Myanmar's conflict zones serving as a critical source of dysprosium and terbium for global high-tech industries.
• Western governments are investing billions to break China's monopoly, with the US Department of Defense backing domestic rare earth projects like MP Materials to diversify supply chains.
• The current HREE supply is built on an unstable foundation of unregulated mining, environmental destruction, and geopolitical tensions, presenting both risks and opportunities for investors.

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Heavy rare earth elements (HREEs) like dysprosium (Dy) and terbium (Tb) are critical for high-performance magnets used in EV motors, wind turbines, and, importantly, state-of-the-art defense technologies. Today, China wields near-absolute control over HREE supply chains – from mining to processing – with estimates that over 98% of heavy rare earth refining and magnet production occurs in China. A new Rare Earth Exchanges (REEx) database underscores this dominance: Chinese and Myanmar sources dominate the top-ranked HREE deposits globally, while Western output remains minimal. This imbalance has strategic industries scrambling for alternatives as Beijing’s leverage grows.

Ranking the World’s HREE Sources: China and Myanmar on Top

According to REEx’s Heavy Rare Earth Project/Deposit Ranking Database, the highest-rated HREE assets are overwhelmingly under Chinese influence or in its orbit. Topping the list at #1 is the “Myanmar Rebels – Kachin Clays” deposit in Myanmar, reflecting huge scale despite its conflict-zone setting. In fact, Myanmar’s remote Kachin State – controlled by the Kachin Independence Army (KIA) rebels – holds the world’s largest known heavy rare earth resource, seized by the rebels after Myanmar’s 2021 coup. REEx ranks this Kachin deposit #1 globally in HREE potential, underscoring how a war-torn frontier now underpins a key link in the supply chain.

By contrast, Western HREE projects rank much lower. The highest Western entry is Lynas’s Mount Weld (#2) in Australia, and MP Materials’ Mountain Pass in the U.S. ranks only #6. Most non-Chinese/Myanmar (or Laos) projects are still in development and far from significant production. Western HREE output today is tiny – Lynas, for example, produces on the order of only hundreds of tonnes of Dy/Tb combined per year, versus Chinese/Myanmar operations measured in the thousands of tonnes. This scale gap highlights China’s entrenched advantage.

Crucially, it’s not just volume but also project maturity and ESG profiles that differ. Chinese and Myanmar operations are generally in full production but score abysmally on environmental, social, and governance metrics (for example, Kachin’s rebel-run mines score 1 out of 10 on REEx’s ESG scale for severe environmental harm and poor governance). Western projects often tout stronger ESG standards – Lynas’s Mount Weld has a far higher ESG score (around 8/10) – but these projects remain nascent or limited in output. In short, the heavy rare earths needed by global industry largely come from places with high geopolitical risk and low transparency, underlining a precarious status quo.

How China Leverages Myanmar’s Blighted and Dangerous “Treasure Trove”

China’s dominance in HREEs is built not only on its domestic reserves but also on access to Myanmar’s supply. After cracking down on its own environmentally damaging ion-adsorption clay mining, China increasingly turned to Myanmar to feed its refineries. Analysts estimate China imported around 170,000 tonnes of rare earth feedstock from Myanmar in recent years as cited by Rare Earth Exchanges (REEx)– valued at a record $1.4 billion in 2023 alone – to sustain its magnet industry. By tapping unregulated mines in Myanmar’s Kachin and Shan states, Beijing effectively outsources the raw supply – and the pollution that comes with it – to its weaker neighbor. This strategy allows China to preserve its own environment while still securing the heavy rare earths needed for downstream production.

The arrangement, however, comes at tremendous human and ecological cost. In Myanmar’s Kachin region, an REEx frontline investigation revealed “environmental disasters, broken promises, and profound danger” for local communities living amid the mining rush. Over 240 rare earth mining sites sprang up in Kachin after Myanmar’s coup, operating with no meaningful oversight. Toxic chemical leachate from these sites has poisoned rivers, decimated fisheries, and tainted farmlands. Recent satellite imagery shows contamination crossing into Thailand’s waterways, as mining expands under militant groups in Myanmar’s borderlands.

The social devastation is equally stark: reports chronicle exploitative labor practices and heavy metal pollution afflicting indigenous communities. Meanwhile, Myanmar’s rare earth boom is fueling conflict. The KIA rebels fund their resistance against the junta through HREE mining levies, even as they sell ore into China’s supply chain.

See “_We Never Got What We Were Promised: A Rare Earth Report from Kachin State.” The Myanmar military (Tatmadaw and part of the Junta)– backed by Beijing – has repeatedly clashed with these rebel forces in attempts to reassert control over the mineral-rich borderlands. Essentially, China’s HREE supply chain rests on a volatile balancing act: tacit arrangements with insurgents who control the mines, and a Myanmar junta that tolerates cross-border trade even while fighting those same rebels. As REEx analysts note, this is less a “shadowy secret deal” than a systemic outsourcing of risk – China externalizes environmental destruction and political instability to Myanmar, while reaping the supply benefits._

For Beijing, this strategy has shored up its HREE access in the short term, but it exposes a fragile backbone in the rare earth supply chain. The flow of Dy/Tb from Myanmar could be disrupted by many factors: intensified civil war, rebel decisions to cut off exports, or international sanctions responding to human rights abuses. These volatile frontier supplies thus prop up China’s magnet industry. As REEx observes, “Myanmar’s instability makes it a critical pressure point: a weak link in China’s armor”.

Western Responses: Funding and Partnerships to Break the Monopoly

Alarmed by China’s stranglehold on heavy rare earths, the United States and its allies are taking unprecedented steps to rebuild an independent supply chain. A centerpiece of the U.S. strategy is a public-private partnership with MP Materials, owner of the Mountain Pass mine in California. In July 2025, MP announced a multibillion-dollar deal with the U.S. Department of Defense (DoD) aimed at jump-starting domestic magnet production. The deal includes a $400 million DoD equity investment (convertible into a 15% ownership stake in MP) and a $150 million DoD loan specifically to add heavy rare earth separation capacity at Mountain Pass—[see REEx]. With this infusion, DoD is poised to become MP’s largest shareholder – a striking move that effectively positions MP as a quasi-strategic asset for U.S. national security.

The goal of the MP-DoD partnership is to create a vertically integrated domestic magnet supply chain by 2028, capable of producing 10,000 tons of magnets per year. This includes building a massive new “10×” magnet factory and expanding Mountain Pass into full light and heavy rare earth refining. Notably, the Pentagon’s $150 million loan is earmarked for separating heavy elements like samarium, dysprosium, and terbium – elements that today are “still overwhelmingly sourced from China and Myanmar,” as REEx points out. The U.S. government’s deep involvement – from equity stakes to price floor guarantees on NdPr oxide – shows an extraordinary commitment to counter China’s supply chain leverage. In effect, Washington is “nation-building” a rare earth industry at home: reshoring critical mineral processing with DoD as both investor and customer, to insulate against Chinese control.

Beyond MP Materials, the DoD has been scouring the globe for heavy rare earth deals with allies. One high-profile effort is its support for Lynas Rare Earths, the Australian firm operating Mount Weld (the only significant HREE-producing mine outside Asia). The DoD awarded Lynas an initial $120 million contract – later expanded to roughly $258 million – to build a heavy rare earth separation facility in Texas.  Some rumblings are that this plan will be further delayed. This U.S.-based plant (targeted to open in 2026) will process Mount Weld ore to produce separated Dy, Tb, and other heavy oxides for defense and commercial use. Such investments aim to ensure that Western mines can actually refine what they produce, rather than sending concentrate to China for separation.

America’s allies are similarly motivated. India, for instance, has turned to Myanmar’s rebel-held mines in an effort to diversify supply. In September 2025, reports emerged that New Delhi – spurred by China’s curbs on rare earth magnet exports – opened talks with the KIA rebel group to obtain HREE-rich ore samples.

India’s government-run and private firms have been tasked with evaluating Kachin ore, even as Prime Minister Modi raised the topic of rare earth mining with Myanmar’s junta chief.

This outreach is extraordinary: it shows India’s willingness to engage a non-state armed group to secure resources, highlighting the geopolitical desperation to find alternatives to China.

However, REEx analysts caution that talk of a quick India-Myanmar supply deal may be optimistic, given the logistical hurdles and India’s lack of HREE processing capacity. In other words, even if India accesses raw Burmese ore, without its own refineries, that material would still need to go through China or another country with separation technology – a bottleneck that keeps China firmly in control. And right now in all reality the only processor for heavies at scale is China.

Elsewhere, a handful of Western HREE projects (in Canada, Africa, and Australia) are advancing with government or strategic backing. Examples include Namibia’s Lofdal deposit (opens in a new tab) (in JV with Japan’s JOGMEC) and Canada’s Nechalacho project (recently impacted by wild fires (opens in a new tab)) – but these remain years from production and face technical hurdles.

Some are ion-adsorption clay prospects (like Uganda’s Makuutu or Brazil’s ionic clay projects) that aim to replicate China/Myanmar’s clay mining model in more stable jurisdictions. However, scaling these to meaningful output will take time, and most will still need to send mixed rare earth concentrates to China for final separation unless Western midstream capacity expands. The bottom line is that for the next few years, China’s dominance in heavy rare earth refining will not be easily unseated. Brazilian Rare Earths (opens in a new tab), according to REEx, shows promise but remains at an early stage.

Investor Implications: A Fragile Status Quo and Emerging Opportunities

For investors and market observers, China’s grip on heavy rare earths represents both a supply chain risk and an opportunity. On one hand, the current situation is precarious: a single country (China) – aided by unregulated mining in a conflict zone (Myanmar) – controls the lifeblood of many high-tech industries. Any disruption in Myanmar (escalating conflict, environmental crackdown, etc.) or a geopolitical move by Beijing (such as export restrictions) could shock global HREE supply. Such shocks would ripple downstream to manufacturers of EV motors, wind turbines, and defense systems, potentially driving up costs and causing shortages. REEx analysts emphasize that the entire HREE supply chain is built on an “opaque, unregulated, and politically volatile” foundation, making it a source of systemic risk. Recent Chinese moves to tighten rare earth magnet exports as a trade lever only underscore how real this leverage is.

On the other hand, these stresses are catalyzing new investments that could yield long-term opportunities. Government-backed projects in the U.S. and elsewhere, while not an immediate fix, are seeding a future where HREE supply is more diversified. Companies like MP Materials and Lynas – now buoyed by strategic funding – are at the forefront of this development. If they execute successfully, they stand to benefit from first-mover advantage in a non-Chinese heavy rare earth supply chain. Policy support is strong: the U.S. DoD’s heavy investment in MP (and price guarantees for its product) effectively anoints it as a national champion.

Other ventures to watch include USA Rare Earths (opens in a new tab), ReElement Technologies (opens in a new tab) (American Resources Corporation), (opens in a new tab) Energy Fuels (opens in a new tab), and a handful of others.

Similarly, the EU and Japan are providing incentives for rare earth projects to reduce reliance on Chinese refining.

Investors should also weigh the ESG dimensions. The current HREE supply dominance comes with severe environmental and social externalities – something downstream industries and consumers are paying more attention to. A supply chain dependent on “dirty, destabilizing extraction practices” in Myanmar’s jungles carries reputational risks.

Automakers and tech companies, under pressure to ensure ethical sourcing, could eventually favor suppliers with cleaner pedigrees. And remember, defense-related companies in America must adhere to a new Department of Defense (DoD) rule banning Sino-based inputs in rare earth magnets by January 1, 2027.  Major aerospace defense contractors will need to seek exemptions—there is no way American companies will adhere in any meaningful way at scale.

This means projects with higher ESG standards (and located in stable countries) may command a premium in the future, even if their costs are higher. Indeed, Western HREE developers often promote their adherence to environmental regulations and community engagement as key differentiators.

Finally, geopolitical dynamics will remain a wild card. China’s virtual monopoly gives it a potent bargaining chip in great-power competition. If tensions with the West rise, heavy rare earths could be “weaponized” in the form of export controls or pricing games – Beijing has already shown willingness to use critical minerals in trade disputes. Conversely, any improvement in Myanmar’s political situation or a peace deal with Kachin rebels might either stabilize China’s supply line or disrupt it, depending on who gains control and how China recalibrates its approach. Unexpected alliances (like India’s outreach to Myanmar’s KIA) also hint at how the global chessboard for HREEs is in flux.

Conclusion

China effectively controls the HREE supply chain—from mine to refinery—reinforced by reliance on Myanmar’s conflict-zone clay deposits, which incur offshore environmental and social costs. Western governments are responding with industrial policy, notably the U.S. DoD’s equity/financing push at MP Materials and India’s exploratory outreach to Myanmar sources, but meaningful non-Chinese volumes remain years away.

Until new capacity scales in North America, South America, Australia, and Africa, HREEs stay a single point of failure for global tech, giving Beijing outsized pricing power. Or perhaps if disruptive technology involving recycled heavy rare earth magnets materializes.  Could Phoenix Tailings (opens in a new tab), Cyclic Materials (opens in a new tab), ReElement Technologies (opens in a new tab), or India’s Attero (opens in a new tab) be that source? To date, only about 1% of all rare earth magnets are sourced from recycled material.  Nitin Gupta, head of Attero, told REEx co-founders in a podcast (opens in a new tab) that he anticipates an accelerated recycling impact.

But REEx suggests the probabilities for such an accelerated impact in the short run [recycling] remain low.  

For investors, this is the paradox of not only defense resilience of America and other Western nations, but also representative of clean-energy demand riding on dirty, destabilizing extraction; however, that very fragility is catalyzing capital, alliances, and ESG-driven projects that could gradually chip away at China’s dominance involving the heavies, making geopolitics and ethical sourcing as decisive as geology. 

REEx’s rankings (upstream, midstream, and downstream) will soon be reported for subscribers along with supply chain maps and a corresponding bundle of company stocks for what we hope to be representative of a compelling “liberty” rare earth investment pathway.