MW China is locking up rare-earth elements - and the U.S. is running out of time to stop it

By Crescencia Maurer and Sharon Squassoni

America's dependence on China risks the manufacturing supply chains for many military and high-technology products

China is the world's largest supplier and processor of rare-earth elements - which have become a key area of contention in the trade friction between the United States and China.

In April, China responded to U.S. tariffs by placing export restrictions on seven rare-earth elements as well as some rare-earth magnets. Since the U.S. has almost no domestic capacity to process and refine rare-earths into end-use components, and there are few alternatives for refined rare-earth elements outside China, the restrictions threatened production delays and plant stoppages in American car manufacturing plants.

Although negotiations have resolved this impasse, America's dependence on China for these key components remains a vulnerability in the manufacturing supply chains for many military and high-technology products. Building a domestic capacity to process rare-earth elements in the United States will likely take a decade or more - even if tariffs tilt the playing field in favor of U.S.-based production.

Critical elements

Rare-earth elements provide the critical raw material for a wide range of advanced manufactured goods. These elements, combined with other ores such as iron, cobalt, nickel, magnesium, aluminum, graphite and boron, produce metal alloys and permanent magnets that are necessary to manufacture electric-vehicle batteries, wind turbines, servers, computer chips, drones, robots, fighter jets, missiles and spacecraft.

Rare-earth elements are also used in military applications including sonar, guidance systems, radiation detection and signal amplification that strengthen surveillance, navigation and threat-detection capabilities.

Mining, processing and refining rare-earth minerals is resource-intensive and involves high environmental costs and risks. The mineral ore extracted from the ground must undergo numerous steps to concentrate the ore, separate it into individual rare-earth elements, and purify it into salts or oxides that are then combined with other raw materials to make end-use components (see here for the multiple steps involved in processing and refining, along with the associated environmental impacts).

The process of refining rare-earth minerals in particular generates large volumes of waste, including strong acids (hydrofluoric and sulfuric), radioactive elements (thorium and uranium) and heavy metals (cadmium, lead, and arsenic). Rare-earth processing and refining consumes 22 times more water and energy than mining of the minerals.

While China has a large advantage with respect to other countries in mining rare-earth minerals, it has absolute dominance in the refining process that turns them into the final components needed for manufacturing. China mined 69% of the world's rare-earth ores in 2024, followed by the United States (11.5%), Myanmar (8%), Australia, Nigeria and Thailand (3.3% each).

But China is the only country that has built a completely integrated supply chain for both heavy and light rare-earths. The production of critical rare-earth magnets offers a clear example: China's share of global mining of four of the rare-earth elements used in the production of rare-earth magnets was more than 50% in 2023. But, China's share of the later stages of the process, including separating the individual rare-earth elements and metal refining, was closer to 90%.

The U.S. exports more than 95% of its domestically mined rare-earths to Asia for processing and refining into metal alloys, batteries and permanent magnets, among other components. Overall, China produces 85% of the refined light rare-earth elements used worldwide, and 100% of the refined heavy rare-earth elements. Rare-earth mining and refining will continue to be dominated by a limited number of countries for the foreseeable future.

Environmental and regulatory costs and risks are the main reason why the supply chain is not yet fully developed outside of China. The United States was the main global source of rare earth minerals until the mid-1980s but a combination of high environmental costs in the U.S. and competition from lower-cost production shifted the industry to China.

The environmental impact of the industry's growth in China has been documented. In 2019 China's Ministry of Industry and Information Technology (MIIT) estimated a cost of $5.5 billion to clean up illegal mining sites. A 2014 report on the impacts of rare-earth mining and refining on China's water resources estimated $2 billion Chinese yuan (U.S. $314 million) in cleanup costs for a small segment (<10%) of the Dongjiang River watershed, where southern China's rare-earth refining industry is concentrated.

Similarly, other countries involved in refining rare-earth minerals (like Myanmar and Malaysia) have poor environmental regulations and enforcement. Australia's Lynas Rare Earths (AU:LYC) (LYSDY) mining company chose to offshore its development of a refining plant to Malaysia. Relocating refining and manufacturing of rare-earth ore and components to the U.S., Europe, Japan, South Korea and other countries with stricter environmental regulations and greater public concerns about environmental contamination would make the production of usable rare-earth elements much more expensive.

Since 2010, the U.S. government has prioritized building a domestic rare-earth mineral supply chain - but has only succeeded in building the front end: mining and concentration. In 2010, China imposed export restrictions on rare-earth products to Japan in response to a trade dispute. This heightened national security concerns in the U.S. and other countries over dependence on China for rare-earth elements used in critical military technologies.

Slow going

In response, the U.S. has revived domestic mining of rare-earth minerals significantly. In 2024, the U.S. mined 45 kilotons (kts.) of rare-earth ore, making it the world's second-biggest producer. But despite Defense Production Act (DPA) appropriations to jump-start rare-earth magnet production, the buildout of U.S. processing and refining capacity has been slow.

Building the refining and processing parts of the supply chain in the U.S. is estimated to take another 10-15 years because of long development times, concerns about significant waste byproducts, and complex permitting and licensing. The average time horizon for the development of new mines in the U.S. is 29 years, the world's second-longest. The average time to permit and license smelting and refining projects in the U.S. is seven to 10 years, further extending the time horizon.

Consequently, in 2024 the U.S. had just one operational refining facility, in Texas, that produced 1.3 kilotons of neodymium-praseodymium (NdPr) metal alloy. This facility will begin manufacturing 1 kts. of automotive-grade neodymium-iron-boron (NdFeB) magnets in 2025. By contrast, China produced 240 kts. of NdFeB permanent magnets in 2023, and 240-260 kts. in 2024.

Moreover, China's rare-earth refining capacity grew 5% from 255 kts. in 2023 to 270 kts. in 2024. The Trump administration has prioritized accessing rare earth elements through annexation (Greenland) or negotiated deals (Ukraine), but these efforts only address new mining sources and do not solve the processing and refining bottleneck. (In fact, neither Greenland or Ukraine currently mine their rare-earth deposits, requiring the development of completely new mines.)

Malaysia is one of the few countries outside of China with any significant refining capability. Lynas Rare Earths operates a plant that produces 16-19 kts.of neodymium-praseodymium (NdPr) metal alloys annually in Malaysia. But even though Lynas is adding 1.5 kts. of capacity to refine heavy REs (dysprosium and terbium) in 2025, this remains a small fraction of worldwide requirements.

China will retain its dominance of the rare-earth mineral supply chain in the near-to-medium term, despite efforts to develop rare-earth minerals elsewhere. While the United States has significantly ramped up rare-earth mineral mining, it has not solved its vulnerabilities in refining or component manufacture. The time horizon to build out the U.S. supply chain remains at 15-20 years, and this is not made shorter by tariffs, a critical minerals deal with Ukraine, nor a series of White House executive orders focused on energy and mineral production - including one declaring a national energy emergency.

The U.S. Defense Production Act represents an effort to subsidize development of the supply chain, but it is unclear whether this is well-targeted and adequate to significantly speed up refining and processing in the U.S. There are few, if any, shortcuts that can overcome the high capital requirements, regulatory complexity, significant environmental costs and public health risks associated with building a complete rare-earth mineral supply chain. But resolving this will remain a priority for key national-security-relevant areas: computing, defense and the energy sector.

Crescencia Maurer and Sharon Squassoni are co-founders and co-presidents of Climate Security Initiative.

This commentary was originally published by Econofact - "Can the U.S. Reduce Its Reliance on Imported Rare Earth Elements?"

More: Why it's nearly impossible for America to meet its rare-earth needs after China's export restrictions

Also read: Chinese rare-earth stocks surge after Beijing tightens controls

-Crescencia Maurer -Sharon Squassoni

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August 26, 2025 07:35 ET (11:35 GMT)

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