Highlights

• The rare earth economy is constrained by processing capacity and magnet recycling logistics, not ore availability—China's dominance stems from mastering separation chemistry, not owning deposits.
• A rapidly forming ex-China ecosystem is emerging with $100B+ in U.S. government backing, yet over 80% of refining and 90% of magnet manufacturing remains in China, creating a significant security premium.
• Recycling won't solve near-term deficits since EV and wind turbine feedstocks won't arrive until the mid-2030s, while processing infrastructure—not mining projects—will determine who controls the magnet economy.

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For years, the rare earth debate has fixated on geology—who has deposits, who doesn’t, and who can bring the next mine online fastest. While accessing feedstock, especially heavy rare earth elements, continues to be a collective challenge, the framing misses the point. The real constraint in the rare earth economy is the processing and recycling of permanent magnets, not the availability of ore. However, we must emphasize that there are shortages of certain feedstock at the moment, too.

Until that reality is confronted, supply-chain vulnerability will persist regardless of how many new projects are announced.

Rare Earth Exchanges has suggested that rare earth refining will need to be subsidized by the government, at least over the next several years.

High-performance Nd-Fe-B magnets now dominate the global magnet market by value and sit at the heart of electric vehicles, wind turbines, robotics, defense systems, and modern data infrastructure. These magnets are unusually dense in rare earth content—roughly a third of their mass—primarily neodymium and praseodymium, with dysprosium and terbium added to withstand high temperatures. Demand is accelerating sharply, driven by electrification and renewable energy. Yet supply models built around today’s processing capacity are already strained, especially for dysprosium and terbium.

Where the Supply Chain Actually Breaks

China’s advantage is not that it owns all the rocks or clays. It has mastered chemistry. Separating and refining rare earths—especially to magnet-grade purity—is the most capital-intensive, environmentally complex step in the value chain. The industry standard, solvent extraction, involves hundreds or even thousands of stages, enormous water and acid consumption, and difficult waste streams. This explains why magnet-ready materials remain scarce outside China even as mining expands elsewhere.

New mines without downstream capacity simply shift dependence from one chokepoint to another.

Recycling: Necessary, Not Sufficient—Yet

Recycling is often presented as the solution, and it will matter—but physics and timing impose limits. There are two broad pathways. Direct recycling, which preserves magnet material with minimal reprocessing, offers large energy and emissions savings. But it is constrained by product design: extracting magnets from EV motors and wind turbines is labor-intensive, difficult to automate, and inconsistent across platforms.

Extended recycling, which breaks magnets down into powders or oxides, is more flexible but often reintroduces the same chemical burdens as primary refining. In many cases, it looks more like delayed mining than true circularity.

Worse, the biggest recycling feedstocks—EVs and wind turbines—have long lifespans. Large volumes of end-of-life material will not arrive until the mid-2030s, while supply deficits loom earlier.

Progress Is Real—but Incremental

Yes technology is advancing: processes that reduce dysprosium intensity, techniques that reclaim magnets from manufacturing scrap, alternative dissolution chemistries, and early automation efforts. These are meaningful steps. But no single breakthrough eliminates the need for scale, permitting, capital, and systems integration, and industrial policy that facilitates and ensures enduring support even when the Chinese dump cheap products on the market.  Processing is just as much infrastructure, not a mere lab trick.

The Strategic Takeaway

For investors and policymakers, the message is straightforward. The rare earth magnet market is constrained less by resources than by processing capability, recycling logistics, expertise and know-how, and time. Substitution can help at the margins, but high-performance applications will remain magnet-dependent. Those who build scalable, low-impact processing and recycling—rather than simply owning deposits—will shape the next decade of the rare earth economy.

But the Race Is On

For years, the rare earth policy focused on mines. That era is ending. The real constraint—now openly acknowledged in Washington—is refining and magnet production, not geology. Under President Trump 2.0, progress has accelerated sharply through emergency declarations, tariffs, defense-linked financing, and direct state intervention, mostly in various matching loans. The Big Beautiful Bill includes up to $100 billion in loans for example.  The result is a rapidly forming—but still fragile—ex-China rare earth ecosystem.

That said, as we explore below, this administration is still leaning heavily on narrative—and narratives, if not matched by hard capacity and execution, have a way of circling back with consequences.

So on to the race. At the center sits MP Materials (opens in a new tab), now effectively a public–private hybrid after the U.S. Department of Defense took a 15% equity position. The objectives are explicit: 10,000 tons per year of rare earth magnets within a few years, $150 million to build heavy rare earth refining, a magnet recycling partnership with Apple, and a $1+ billion credit facility led by Goldman Sachs and Morgan Stanley. MP is refining some materials today and plans to ramp—but the United States still lacks refining at true commercial scale.

That gap defines the moment.

An Ecosystem Takes Shape—Fast

Around MP, parallel efforts are accelerating. USA Rare Earth (opens in a new tab) has acquired Less Common Metals, declaring an aggressive mine-to-magnet strategy aimed at small- and mid-sized markets. ReElement Technologies (opens in a new tab) secured an $80 million loan (with strict conditions), while Vulcan Elements has raised $600+ million, much of it defense-linked, to build out a magnet complex. Energy Fuels (opens in a new tab), Phoenix Tailings (opens in a new tab), and ReElement Technologies are positioning to refine domestically, while Belgium-based Solvay (opens in a new tab) is establishing a Western processing footprint.  French startup Carester, made up of ex-Solvay rare earth refinery experts, catches our attention.  They inked a consulting deal with Brazilian Rare Earths, a super large, rich deposit on the Atlantic Coast of Brazil.

Outside the U.S., capacity is also building. Australia’s ANSTO has announced a refinery under construction. The Saskatchewan Research Council (opens in a new tab) is ramping up refining capacity in Canada. Australia’s Lynas Rare Earths (opens in a new tab), the largest rare earth element operation outside of China,  is now shipping refined light and heavy rare earths, largely to Japan.

Downstream with magnets, Vacuum­schmelze (opens in a new tab) (VAC) has completed construction of its rare earth magnet facility in Sumter County, South Carolina, operating under its subsidiary eVAC Magnetics; the plant, which received significant government support, is ready for commercial production in early 2026 to serve North American EV and defense markets. Korea’s JS Link (opens in a new tab) has committed capital and is building a magnet manufacturing facility in Georgia. Operating players include Neo Performance Materials (opens in a new tab), Permag (opens in a new tab), Arnold Magnetics (opens in a new tab), and Noveon Magnetics (opens in a new tab) in Texas.  Posco inked deals with Australia’s Arafura Rare Earths (opens in a new tab), focusing on Asia. Posco signed up with ReElement Technologies as well for American efforts.

All of this is real—and much of it will come online in the next 24 to 36 months.

The Hard Reality

Despite accelerating momentum, more than 80% of global rare earth refining and roughly 90% of magnet manufacturing remain concentrated in China. Rare Earth Exchanges (REEx) is already observing the downstream effect: ex-China magnets are materially more expensive, reflecting higher operating costs, smaller production runs, and stricter environmental compliance. That price gap is likely to widen as a “security premium” is layered into non-Chinese supply chains over the next several years—an adjustment that could reshape the economics of cost-sensitive sectors.

Remember, there is little standardization, with much of the market taking on a bespoke characteristic depending on company needs.

At the same time, China’s state-owned enterprises are expanding capacity with urgency and intent, applying a well-worn playbook: drive prices lower to stress emerging competitors, then capitalize when market pressure peaks.

An Inevitable Reckoning

REEx is cautiously optimistic—but realistic. The ecosystem is forming faster than at any point in decades.  But we lack a comprehensive, integrated industrial policy (although again, President Trump has done more than any other sitting president).  Yes, we also suspect a renewed crisis is likely within a year or two—possibly as we approach the midterms—when markets fully grasp how dependent we remain on China, even as ex-China capacity ramps. A lot of chatter out of the current administration has conveyed that we have nothing to worry about. There will be more rare-earth magnets in the next year or so.

While we believe the long-term trajectory shows a potential for the positive, the near-to intermediate-term will likely be marked by volatility. Processing—not mining—will determine who ultimately controls the rare earth magnet economy. Markets must now mature to support the scale-up of ex-China transactions. This is precisely where Rare Earth Exchanges seeks to play a catalytic role.

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