Pentagon’s Rare Earth Gambit: Billions Spent, but China Still Holds the Magnets

Highlights

• The U.S. Department of Defense has invested $439 million in rare earth projects since 2020.
• China still dominates the entire rare earth supply chain.
• China controls over 90% of global magnet capacity and critical military-grade rare earth elements.
• This dominance limits Western defense capabilities.
• Building true rare earth independence requires a comprehensive industrial strategy spanning multiple countries.
• Massive capital investment is needed by the early 2030s to achieve rare earth independence.

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The Department of Defense has poured more than $439 million into rare earth projects since 2020. But as the Mining.com (opens in a new tab) June 20 exposé via Rick Mills ‘Ahead of the Herd’ lays bare—and as Rare Earth Exchanges has long reported—no amount of tactical funding can overcome the structural absence of an American rare earth industrial policy.

Despite headline deals, such as MP Materials’ Texas magnet plant and Lynas’ Seadrift heavy rare earth facility, China continues to dominate the entire rare earth supply chain. With over 90% of global magnet capacity and complete control over the separation of heavy rare earth elements—including military-critical elements like samarium, terbium, and dysprosium—Beijing can significantly impact allied defense readiness at will.

The U.S.-China June 2025 agreement on rare earths offers only a six-month reprieve on civilian-grade exports. Military applications remain locked out. Samarium-cobalt magnets, essential to F-35 jets, JDAMs (guidance system), and missile defense systems, are unavailable outside China.

Rare Earth Exchanges (REEx) has consistently warned that less any industrial policy manifesting in:

• Strategic mine-to-magnet buildout
• Multilateral allied supply chains
• Procurement-backed industrial investment

…the West will remain years behind. MP’s 1,000-tonne NdFeB output covers just 0.3% of China’s 300,000-tonne annual production. Heavy rare earth processing, essential for military use, has yet to reach commercial scale.

Conclusion

The Pentagon’s checkbook alone won’t unshackle America from China’s rare earth grip. We will need a flood of capital, both institutional and retail, supported by a coordinated industrial strategy—stretching from Wyoming to Western Australia—can build real independence by the early 2030s.

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