Highlights

• China controls 90% of rare earth element separation and 98.8% of the gallium refined supply, creating significant geopolitical leverage.
• The U.S. military relies heavily on Chinese-controlled critical minerals.
• Virginia-class submarines require 4,200 kg of these materials.
• Ex-China rare earth companies face significant challenges in developing full-spectrum production.
• Competing with Chinese market dominance in rare earth elements is challenging for non-Chinese companies.

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A recent South China Morning Post (SCMP) “explainer (opens in a new tab)” paints a stark portrait of U.S. military vulnerability due to its dependence on Chinese-controlled critical minerals. While the article correctly identifies the Pentagon’s exposure to gallium, germanium, and heavy rare earths like dysprosium and terbium, it stops short of a full assessment—and offers little guidance for stakeholders seeking clarity in the unfolding U.S.–China trade war.

The Facts Are Clear—But Incomplete

The SCMP notes that U.S. Virginia-class submarines alone require 4,200 kg of critical minerals. It also cites the phased Chinese export bans from 2023 through April 2025, which span raw materials and processed components, including permanent magnets. These moves have already compelled American defense and tech manufacturers to initiate contingency planning. China’s stranglehold on REE separation (90% of global capacity) and gallium (98.8% of refined supply) is not up for debate.

However, the SCMP piece reads more like a passive recap than a forward-looking analysis. It lacks insight into the broader global response, omits details about non-Chinese supply developments, and fails to analyze market signals critical for investors.

What’s Missing? Ex-China Supply Chain Progress and Pitfalls

The article makes no mention of “ex-China” companies in the U.S., Canada, Australia, or Europe that are attempting to fill the gap—firms like Lynas Rare Earths, MP Materials, Arafura Rare Earths, and Iluka Resources. Not surprisingly, the Chinese media does not mention the REEx NdPr Project/Deposit Ranking Database.

Nor does it address investor-relevant challenges, such as the lack of processing capacity, lengthy permitting timelines, and the high cost and complexity of commercializing heavy rare earth element (REE) projects outside China.

This blind spot is especially significant for retail investors, many of whom have been drawn to “China hedge” REE stocks amid global trade instability. Without recognizing that most “ex-China” companies remain years away from full-spectrum production—and that few have magnet-making capabilities—the article gives a distorted view of diversification readiness.  We also note that one of the key ETFs includes Chinese companies in its basket of securities.

Implications for Retail Investors

The SCMP piece rightly confirms China’s geopolitical leverage, but leaves investors without a clear roadmap ahead. Ex-China rare earth juniors often surge on geopolitical headlines, but fundamentals remain grounded in decades-long development cycles, high capital expenditure, and intense regulatory friction.

For investors, the key questions are:

• Who owns the whole value chain (not just the mine)?
• How close are projects to revenue, not just resource estimates?
• Are governments prepared to subsidize REE industrial build-outs, like they have semiconductor production?

REEx View:

SCMP’s coverage is technically accurate but strategically shallow. Investors need more than military anecdotes—they need clarity on where the West stands in building a vertically integrated supply chain. Until former China companies can refine, separate, and manufacture at scale, markets will remain speculative, and Beijing will maintain the upper hand.