Highlights

• Phil Verleger argues that U.S. energy dominance is illusory compared to China's rare earth control—dominance requires low costs and choke point control, not just export volume.
• China's integration across mining, separation (85% global capacity), and magnet manufacturing creates genuine market power that energy exporters cannot replicate.
• The next decade's strategic advantage lies in controlling hard-to-replace materials like rare earth magnets, not energy volumes—policy now shapes these markets as much as price.

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Power feels permanent until the supply chain is tested. Phil Verleger’s argument that the United States cannot achieve true energy dominance lands hard for audiences raised on export tallies and LNG triumphalism. His claim is simple and largely correct: dominance belongs to low-cost producers that control choke points—not to high-cost suppliers leaning on diplomacy, finance, or coercion.

In rare earths, Verleger points to China as the uncomfortable counterexample: a nation that truly commands pricing power, allocation, and downstream manufacturing.

That comparison matters. Energy markets are fluid. Rare earth markets are not.

Where the Analysis Holds Firm

Verleger is right in his opinion piece (opens in a new tab) on the structural facts investors too often gloss over. China remains the world’s lowest-cost producer across rare earth mining, controls roughly 85% of global separation capacity, and manufactures the overwhelming majority of permanent magnets—the true value engine of the sector. That integration, not mine output alone, defines dominance.

By contrast, the U.S. produces energy at relatively high marginal cost and lacks the ability to block substitutes. Oil, gas, and LNG can be rerouted through global spot markets. Rare earth magnets cannot. His observation that China preserved control by suppressing prices—discouraging alternative supply—is historically sound. Western producers did not fail for lack of geology; they failed because economics never cleared.

Where the Frame Tightens Too Much

The argument leans heavily on cost curves while understating how policy now shapes markets. Rare earths today are no longer governed solely by price signals. Export controls, defense procurement, stockpiling, and state-backed offtake agreements are actively rewriting market logic. China’s dominance remains real—but it is no longer frictionless. Verleger’s framing risks freezing the picture at its most convenient angle.

There is also a subtle asymmetry: energy “coercion” is treated as artificial, while China’s industrial policy is framed as organic. In reality, both systems are state-shaped. Investors should recognize the difference without romanticizing either.

Why This Matters for the Rare Earth Supply Chain

The most telling insight is not about energy at all. It is the implicit admission that rare earths represent the modern gold standard of strategic dominance. Energy exports buy influence. Rare earth magnets confer leverage. That distinction explains why governments now subsidize processing plants—not wells.

For Rare Earth Exchanges™ readers, the message is clear: the next decade will not be decided by who produces the most molecules or electrons, but by who controls the hardest-to-replace materials. On that battlefield, dominance is less about volume—and more about chemistry, cost discipline, and downstream control.

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