Highlights

• China currently dominates rare earth magnet production, producing over 200,000 tons annually compared to Western efforts of just a few thousand tons.
• Multiple countries, including the US and Estonia, are investing in new magnet manufacturing facilities to reduce dependence on Chinese supply chains.
• The strategic importance of rare earth magnets extends beyond manufacturing, representing a critical geopolitical and technological competition between global powers.

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Six months after Beijing abruptly suspended exports of rare earth magnets, the world has been jolted into a race it can’t afford to lose. Magnets may seem like small parts, but they are the quiet heartbeat of modern industry—driving electric cars, defense systems, and even drones. With supply chains thrown into crisis, the scramble to build non-Chinese capacity has taken on urgent momentum.

A New Line in the Sand

On Friday, Neo Performance Materials (opens in a new tab) opened a major magnet factory in Narva, Estonia. The move nearly doubles annual magnet-making capacity across Europe and the United States combined. Neo’s site, with its expansion-ready footprint, is the most significant non-Chinese facility to date. Yet the numbers tell a sobering story: Western demand exceeds 40,000 tons a year, but the new plant will start at just 2,000 tons. China, by comparison, churns out more than 200,000 tons annually.

Washington’s Magnet Moment

In the United States, four factories are coming online. VAC Group (opens in a new tab) is preparing a South Carolina facility, staffed by American workers trained in Germany, with a 2,000-ton capacity. MP Materials, backed by a $400 million Pentagon investment, is building a Texas plant to feed General Motors. USA Rare Earth (opens in a new tab) is scaling a site in Oklahoma, aiming for 600 tons by late 2026. Noveon Magnetics (opens in a new tab) has launched production in Texas. These projects, promising as they are, face the challenge of exacting quality standards and long ramp-up times—up to three years to reach full stride.

The Leverage of Control

China’s dominance is not just about magnets. It controls almost all refining capacity for rare earth ores, supplies most of the processing equipment, and employs the bulk of the trained technicians. With a hand on nearly every lever, Beijing has used this dominance in trade negotiations with the U.S. and Europe, even throttling supply to push back against tariffs. Meanwhile, Chinese-linked firms like Shenghe Resources (opens in a new tab) have stakes in new mines abroad, extending Beijing’s reach further.

Estonia’s Gamble at the Edge of Russia

Neo’s choice of Narva, a border city within sight of Russia, highlights the geopolitical dimension of this race. Estonian leaders frame the project as a strategic stand for European self-reliance, backed by NATO’s security umbrella. Yet the risks remain palpable, as Russia has openly mused about Narva’s importance since its invasion of Ukraine.

Reality Check

While the West’s factories are tangible signs of progress, the gap remains daunting. The U.S. and Europe together may add several thousand tons of magnet capacity in the next few years, but scaling from near-zero to even 10,000 tons is dwarfed by China’s entrenched 200,000-ton base. For now, Beijing retains the power to squeeze or release supply lines as it sees fit.

The question is not whether the West can build magnet factories—it already is—but whether it can develop the refining, technical expertise, and political resolve to match China’s decades-long head start. Until then, supply chains remain fragile, and the “magnet wars” are far from over.

Source: “The race is on to make rare earth magnets outside China,” NYT News Service/Syndicate Stories, September 20, 2025.

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