Highlights

• China controls 60% of rare earth production and nearly 90% of processing, creating a strategic chokehold on critical technology minerals.
• The U.S. is actively investing in domestic rare earth processing capabilities through the Defense Production Act and Department of Defense funding.
• Urgent policy recommendations include leveraging industrial policies, international partnerships, and accelerating domestic processing infrastructure.

China’s December 2023 ban on rare earth extraction and separation technologies has significant implications for U.S. national, economic, and energy security. Rare earth elements (REEs) are critical for defense systems, clean energy technologies, and consumer electronics. While China produces 60% of the world’s rare earths, it processes nearly 90%, holding a near-monopoly in heavy rare earth separation. The U.S. has recently initiated steps to build domestic capacity, including Defense Production Act (DPA) investments and Department of Defense funding for processing facilities. However, the delay in addressing rare earth vulnerabilities has left the U.S. dependent on China for critical technologies.

A report from the Center for Strategic and International Studies (opens in a new tab) authored by Gracelin Baskaran (opens in a new tab), Director, Critical Minerals Security Program and a prominent figure in the field in Washington, DC reports on opportunities for diversification, noting substantial rare earth reserves in allied countries like Vietnam, Brazil, and Australia.

Scaling up domestic processing is crucial to mitigate risks. The U.S. faces challenges, including China’s technical advantage in advanced rare earth processing and the lengthy timeline required to operationalize new facilities. The paper urges leveraging industrial policies, such as tax incentives and subsidies, to reduce costs and accelerate capacity building.

China’s broader restrictions on critical minerals signal an urgent need for the U.S. to strengthen domestic capabilities and foster international partnerships to secure supply chains and maintain economic competitiveness.

The recommendation for rapid diversification and capacity building might underestimate technical, economic, or political barriers in execution.

The analysis underscores the urgency for U.S. policymakers to address rare earth dependencies while balancing domestic and international collaboration efforts. The paper represents a clear and present U.S. policy framework.

See the report (opens in a new tab) authored last January, still as relevant as ever.