Highlights
- China controls up to 90% of global rare earth processing capacity, maintaining a stronghold on critical minerals essential to 21st-century technology.
- U.S. companies like MP Materials, Lynas, and Arafura are making incremental progress but remain far from supply chain independence.
- A coordinated industrial policy, international alliance, and centralized leadership are urgently needed to challenge China’s rare earth market dominance.
The rare earth supply chain in the United States and allied Western nations faces a sobering reality: despite an uptick in project announcements, offtake agreements, and supportive executive orders, even with an Executive 232 Action, China remains the dominant force. With state-owned giants controlling up to 90% of the global rare earth processing capacity and well over 60% of upstream supply, Beijing retains its grip on the minerals that power the 21st-century economy. The latest moves by MP Materials, Lynas Rare Earths, and Arafura offer progress, but not yet independence.
Progress, Not Autonomy
MP Materials, the linchpin of U.S. domestic rare earth production, continues operating the Mountain Pass mine in California. While MP has restarted rare earth oxide production and is expanding into magnet manufacturing in Texas, its dependence on Chinese processors for separation and final magnet production until recently has been a vulnerability. A major step forward came with the recent U.S. Department of Defense-supported funding to scale up domestic separation and magnet-making capacity, and the company’s output continues to grow.
In 2024, MP Materials refined and separated over 7,000 metric tons of rare earth oxides—approximately 1,300 metric tons of which were neodymium-praseodymium (NdPr)—with nearly all products sold outside of China. These midstream operations, including NdPr, cerium (Ce), lanthanum (La), and SEG+ (samarium, europium, gadolinium and others), now represent about half the company’s total concentrate output. Production is ramping steadily, with Q1 2025 alone yielding 563 metric tons of NdPr, signaling a meaningful shift toward domestic value-added rare earth capability.
Yet MP still faces cost disadvantages and environmental hurdles compared to Chinese firms.
Lynas Rare Earths (opens in a new tab), headquartered in Australia, delivered a critical milestone in May 2025: its first batch of heavy rare earths (HREEs) at the firm’s Malaysia plant, located in Gebeng, Malaysia.
This marks a pivotal diversification in non-Chinese HREE supply. The company, which has long relied on Malaysian refining capacity, is now shifting some downstream operations closer to home (another facility in Australia), though the volumes remain small relative to China’s.
Arafura Rare Earths (opens in a new tab), developing the Nolans Project in Australia’s Northern Territory (opens in a new tab), signed a strategic offtake agreement with Traxys, a critical materials trader with global reach. This builds on earlier deals with Hyundai, Kia, and Siemens Gamesa, and positions Arafura as a diversified supplier to both the automotive and renewable energy sectors. However, the project is still under development, with production not expected until 2026–2027.
While promising, these developments are incremental. None singularly threatens China’s command of the rare earth value chain.
Trump Executive Orders–Necessary but Not Sufficient
President Donald Trump’s second-term flurry of executive actions underscores renewed urgency. In March and April 2025, Trump signed a pair of orders prioritizing critical minerals, directing agencies to accelerate permitting, and invoking emergency authorities under the Defense Production Act and International Emergency Economic Powers Act (IEEPA).
As Rare Earth Exchanges reported (“Trump’s Executive Orders on Critical Minerals Are Not Nearly Enough“, April 2025), the language was assertive, but lacked specifics. No new funding programs were attached. The orders fell short of outlining a comprehensive industrial policy or naming key leadership, such as a dedicated Critical Minerals Czar.
Similarly, Trump’s broader energy shift (“Trump’s Energy Executive Orders Shake the Foundation of the U.S. Energy Transition“, April 2025) offered a policy boost for domestic mining. Yet, confused markets with mixed signals on clean energy, potentially scaring off foreign partners.
The Section 232 tariffs saga continues to cast a long shadow. As detailed in our May 2025 analysis (“Trump, Biden and Section 232“), the Trump-Biden approach to 232 actions illustrates a weaponized trade doctrine that has alienated key allies in Europe and Asia. In theory, these tools protect national security. They complicate the coordination needed to build a shared allied critical minerals strategy.
The Missing Link – A Real Industrial Policy
Despite aggressive rhetoric, the United States still lacks a distinct, coordinated industrial policy for rare earth elements and critical minerals. Unlike China, which has had a two-decade head start under the Made in China 2025 strategy and its vertically integrated state-owned enterprise system, U.S. projects remain relatively fragmented and dependent on venture capital, grant money, or limited DoD contracts.
Under centralized planning, China’s model integrates upstream exploration, midstream processing, and downstream manufacturing. In contrast, U.S. firms often struggle to finance separation capacity or downstream magnet production due to low margins and regulatory delays.
Critically, the Five Eyes nations (U.S., Canada, U.K., Australia, and New Zealand) have not yet coalesced around a shared plan. An alliance involving South Korea, Japan, and the EU could strengthen leverage and boost diversification, but Trump’s unilateral tariff strategy has made this more difficult. Even traditional allies are wary of being swept into a broader trade war.
Should Trump Appoint a Critical Minerals Czar?
One of the most strategic moves Trump could make now is to appoint a Critical Minerals Czar—a centralized coordinator empowered to align U.S. agencies, fast-track project funding, secure offtake agreements, and negotiate allied coordination. The Departments of Energy and Defense already support specific efforts, but interagency friction and a lack of centralized leadership stall progress.
Without such coordination, the U.S. risks losing its remaining lead in rare earth mining (e.g., Mountain Pass) while still importing magnets from Chinese-controlled entities. Naming a Czar would not only send a signal to industry, but it would also offer Wall Street, foreign partners, and U.S. manufacturers a sense of strategic clarity.
What If the U.S. Fails to Act?
Strategic stagnation is likely if Trump does not embrace a serious industrial policy backed by coordinated leadership. Projects like Arafura, Lynas, and MP Materials may continue progressing, but the broader ecosystem, from HREE separation to permanent magnet manufacturing, will remain fragmented and noncompetitive. As electric vehicles, defense systems, and wind turbines expand, Western dependence on Chinese rare earths may even increase, not decline.
Worse, China’s retaliatory leverage could grow. Already in 2025, Beijing has enacted rare earth export restrictions in response to U.S. tariffs. That scenario could kneecap Western high-tech industries.
Is Time Running Out?
The West—led by the United States—has made gains in rare earth project development, offtake diversification, and strategic awareness. But the system remains fragile and disjointed overall. The recent executive orders and new deals from MP Materials, Lynas, and Arafura represent momentum, not a resilience system.
A Rare Earth Exchanges (REEx) hypothesis: Unless Trump’s administration builds a coordinated industrial policy, launches an international alliance, and empowers a central critical minerals leadership function, the West will remain vulnerable to Chinese market manipulation and supply chain dominance.
Following the recent U.S.-China trade discussions in Switzerland, a 90-day suspension of certain export restrictions and a much lower tariff level was agreed upon, temporarily easing tensions.
However, U.S. defense contractors continue to face significant challenges in accessing critical rare earth elements. Despite the suspension, China maintains stringent export controls on seven key rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—requiring exporters to obtain licenses and provide assurances that these materials will not be used for military purposes.
This bureaucratic process has led to delays and uncertainties, particularly affecting U.S. defense and aerospace companies that rely on these materials for advanced military systems such as fighter jets and submarines.
The situation underscores the U.S.’s vulnerability due to its heavy reliance on rare earth supplies from China. It highlights the urgent need to develop alternative domestic and allied sources to ensure national security and supply chain resilience.
Per that industrial policy, alliances and centralized Czar position recommended by REEx, it is not too late—but it is getting harder every month.
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