Al Root

It takes time to rebuild a supply chain.

The U.S. government has moved swiftly to solve its rare-earth problem, signing agreements to ensure China's dominance in these minerals can't upset domestic manufacturing. The early steps have been positive, but it will still take time before the threat of shortages fades.

On Sunday, Australian rare-earth producer Lynas announced a deal with the Defense Department for the purchase with a floor price of $110 per kilogram of Neodymium-praseodymium (NdPr) oxide, a key product for producing magnets.

Rare-earth materials are primarily used in magnets that end up in everything from fighter jets to electric cars. China dominates the production of rare earths, with an estimated 85% of global capacity.

That near-monopoly gives China a significant lever in geopolitical negotiations, one it has used several times in the past by threatening to restrict exports to other nations.

In July, the Defense Department announced an agreement with MP Materials, the largest rare-earth producer in the Western Hemisphere. The deal, which included price floors, offtake agreements, and capital, was designed to boost U.S. production of rare-earth materials, while insulating MP from the threat of Chinese market-based retaliation.

It's natural that investors might worry that the deal with Lynas means competition for MP. But the Western world needs a lot of rare-earth materials. The job of MP and Lynas is to expand production as quickly as possible.

Lynas stock was up 1.4% in overseas trading, putting shares up 184% over the past 12 months. MP shares were up 4.2% on Monday. Coming into the day's trading, MP stock was up 113% over the past 12 months.

The S&P 500 and Dow Jones Industrial Average were up 1% and 0.7%, respectively, in Monday trading.

Untangling the rare-earth supply chain isn't easy. Ore is mined, refined, and processed in China, which then exports some of the refined materials and turns others into products, such as magnets.

Problems can pop up in expected areas. Take GE Aerospace, which uses rare earth magnets in its jet engines, as an example. "GE is currently getting access to these rare earths, and has a decent buffer of inventory built up," wrote Vertical Research Partners analyst Rob Stallard in a Monday report. "However, if China were to abruptly halt sales of rare earths, this would quickly impact the company and many other areas of Western economies. Setting up alternative non-Chinese sources of rare earths is likely to take some time."

GE is working with others in the industry to diversify its supply base. "The [aerospace & defense] industry is unique compared to other manufacturing sectors due to our need for high-purity, aerospace-grade materials from qualified processing and refining operations," says Aerospace Industries Association VP Dak Hardwick. "AIA welcomes this Administration's forward-leaning actions to strengthen and secure the critical mineral supply chains."

Write to Al Root at allen.root@dowjones.com

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March 16, 2026 10:59 ET (14:59 GMT)

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