Highlights

• The U.S. faces significant barriers in developing a competitive domestic critical minerals processing sector.
• China currently controls 87% of rare earth element processing.
• Six major investment challenges include:
  • Feedstock scarcity
  • Labor competition
  • Immature markets
  • Price uncompetitiveness
  • Limited investor interest in rare earth processing
• Urgent policy reforms and public-private partnerships are needed to secure U.S. supply chains for:
  • Clean energy
  • Defense
  • High-tech industries

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In The Missing Midstream: Identifying Investment Challenges for American Critical Mineral Processing Projects (opens in a new tab) (May 2024), authors Adam Johnson of Metis Endeavor and John Jacobs of the Bipartisan Policy Center deliver a comprehensive policy analysis of the structural barriers preventing the United States from developing a competitive domestic midstream critical minerals sector. Drawing attention to China’s overwhelming control—processing 87% of the world’s rare earth elements (REEs)—the report identifies six primary investment challenges: feedstock scarcity, labor competition, lack of technical expertise, immature markets, price uncompetitiveness, and limited investor interest. The authors argue that solving these barriers is essential not only for energy security and clean technology deployment but also for safeguarding U.S. economic resilience and national defense. The study calls for mineral-specific policy approaches, workforce investment, and strategic public-private partnerships to build out America’s midstream processing capacity, especially for rare earths.

Key Findings

In The Missing Midstream, Johnson and Jacobs examine why the U.S. lags behind China in critical mineral processing capacity—especially in the "midstream," the critical step that transforms raw mineral concentrates into high-purity inputs for manufacturing. With China processing 87% of global rare earth elements (REEs), the report urges urgent domestic investment and policy action.

Midstream REE Processing Breakdown

Rare earth elements (REEs)—including neodymium, praseodymium, dysprosium, and terbium—are indispensable to electric vehicles, wind turbines, military technologies, and mobile electronics. But the U.S. lacks sufficient midstream capacity to process REE concentrates into usable materials like oxides, metals, and alloys.

Midstream REE Processing Techniques:

• Physical beneficiation: gravity separation, flotation, magnetic separation
• Hydrometallurgy: leaching, solvent extraction (SX), precipitation
• Pyrometallurgy: calcination, molten salt electrolysis
• Ion exchange: emerging alternative to SX

U.S. Investment Challenges for REE Processing

The authors identify six core barriers for U.S. rare earth processing projects:

Challenge	Severity	Explanation
Feedstock Scarcity	Major	U.S. lacks sufficient mined REEs and must compete with China’s market dominance.
Labor Competition	Major	Skilled operators, engineers, and technicians are scarce amid competing sectors like semiconductors.
Technical Expertise	Mild	REE separation is technically complex due to chemical similarities across lanthanides.
Immature Market	Major	Opaque pricing, lack of liquidity, and few domestic buyers make investment risky.
Price Competitiveness	Major	China’s scale, low labor/energy costs, and subsidies make U.S. processing uncompetitive.
Investor Interest	Major	High upfront capital costs, technical risk, and policy uncertainty deter private investment.

This high-risk profile, especially for non-exchange-traded minerals like REEs, results in a broken feedback loop: weak markets limit private capital, and a lack of capital prevents commercial scale-up.

Broader Policy Implications

The authors argue that midstream investment decisions must be mineral-specific. REEs differ from exchange-traded minerals like copper or nickel, and policy must reflect that. Key recommendations include:

• Develop feedstock access through domestic mining + allies.
• Fund workforce development for midstream skills.
• De-risk capital through federal incentives and loan guarantees.
• Improve pricing transparency and long-term off-take commitments.

Conclusion

The Missing Midstream highlights the rare earth midstream as the most strategic—and vulnerable—segment of the U.S. critical mineral supply chain. Without urgent policy reform and private-public co-investment, the U.S. will remain reliant on China for core materials that power its clean energy, defense, and high-tech economy.