Highlights

• China dominates 85% of global rare earth refining and 90% of permanent magnet production.
• The US and Europe are dangerously dependent on China for materials critical to electric vehicles (EVs), defense, and renewable energy.
• Dr. Erik Eschen, CEO of VAC, warns that only industry can fix this strategic vulnerability through firm commitments and a 'coalition of the willing,' as politics alone cannot replace industrial action.
• New Western production is emerging with VAC's South Carolina facility shipping magnets.
• Major projects from companies like Vulcan Elements, Energy Fuels-POSCO, and Korea's JS Link are underway.
• Experts estimate that replicating China's capabilities could take 5-10 years.

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China controls more than 85% of global rare earth refining capacity and over 90% of permanent magnet production — a grip that has left the United States and Europe dangerously dependent on a single geopolitical rival for the materials powering electric vehicles, wind turbines, smartphones, and missiles according to Dr. Erik Eschen, (opens in a new tab) CEO of German-based Vacuumschmelze GmbH & Co KG (VAC). Note the German-based company operates a subsidiary in the United States called VAC-Group. A Houston-based private equity house-- Ara Partners (opens in a new tab), now is a primary investor.

Despite decades of warnings, the U.S. has yet to build sufficient domestic capacity to separate and refine rare earth elements (REEs) at scale. Even ores mined at California’s Mountain Pass — the nation’s only active REE mine — are still largely shipped to China for processing. The bottleneck isn’t at the mine; it’s in the chemistry.

The Bottleneck: Bespoke, Dirty, and Difficult

As Rare Earth Exchanges just recently reminded in a piece, rare earth separation is notoriously complex. Though they’re called “rare,” these elements are fairly common — but they tend to occur together, and separating them requires painstaking, element-by-element chemical processing.

Each rare earth must be extracted through hundreds of solvent extraction stages using corrosive chemicals and precisely controlled reactions. Any deviation can ruin the purity or yield.

This is what China has mastered over three decades: refining at scale. With aggressive state backing, low-cost labor, and lenient environmental rules, China built a vertically integrated rare earth supply chain while Western nations ceded the industry.

Most competitors shut down under price pressure and environmental scrutiny, leaving China’s industrial ecosystem unrivaled in midstream capabilities and technical know-how.

Europe’s Wake-Up Call: "Industry Must Act"

That reality took center stage at Raw Materials Week in Brussels, where Dr. Erik Eschen, CEO of German-based Vacuumschmelze GmbH & Co KG (VAC), issued a blunt warning: “In Europe, we have debated and complained for years. But very little has actually happened. This must change — fast.”

Speaking after a keynote by the European Commission’s EVP Stéphane Séjourné, CEO Eschen underscored the geopolitical urgency. “Rare earths and permanent magnets are now central to global geopolitics — not only in negotiations between the United States and China, but also for Europe.”

He called for a “coalition of the willing” — countries and companies that share values and can build resilient supply chains together.

Eschen’s message: only industry can fix this. Policymakers can ease permitting, reduce bureaucracy, and offer financial incentives, but “politics can support, not replace, industry action.” Without firm offtake commitments from sectors like automotive and wind energy, Europe risks further de-industrialization — and losing what magnet-making capabilities it has left.

Growing Activity Outside China

VAC is one of a handful in a rare earth magnet race. The company announced this month that its new U.S. facility — eVAC Magnetics in South Carolina — has begun production and shipped its first batch of permanent magnets. That makes VAC one of the only Western companies currently delivering rare earth magnets at commercial scale.

Other companies involved with rare earth magnets include Permag (EEC (opens in a new tab)),  Arnold Magnetic Technologies (opens in a new tab) plus Canada-based Neo Performance Materials (opens in a new tab) (mostly bonded magnets) and exciting new entrants such as Vulcan Elements, with a several hundred million dollar deal with the U.S. government (plus partnership with ReElement Technologies (opens in a new tab)); Energy Fuels and POSCO are aligning on a rare earth refining and magnet supply chain.

Korea’s JS Link (opens in a new tab) announced a $223 million magnet plant in Georgia capable of producing 3,000 tons annually. Of course driving the activity in America is the major equity investment made by the U.S. Department of Defense (War) into MP Materials (opens in a new tab) and the 10x magnet production target. Apple inked a $500 million rare earth recycling magnet product with MP Materials.

Its European factories in Germany, Finland, and Slovakia are also ramping up production. It’s a rare bright spot in a field dominated by China. While firms like MP Materials, Lynas Rare Earths, and USA Rare Earth are investing in mining and separation facilities, most remain years away from full operation. Heavy rare earth elements like dysprosium — critical for high-temperature magnets — remain particularly difficult to refine outside China.

Time, Money, and Political Will

Rebuilding rare earth refining and magnet production in the West will take time. Experts estimate it could take five to ten years to replicate China’s capabilities — if projects can overcome permitting delays, funding gaps, and talent shortages.

China’s lead is built not just on capacity, but on experience: decades of chemical fine-tuning, trade control, and end-to-end industrial integration.

In this context, the VAC CEO warning is stark but timely: the decisions that led to this strategic vulnerability were made by industry — and only industry can correct them.

But the window is closing. Whether the U.S. and Europe seize the moment may determine who controls the building blocks of 21st-century technology. For now, China still holds the cards.

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