Inside the US Administration's Rush to Cut US Dependence on China's Rare-Earth Metals

Recently, the US Treasury Secretary returned from South Carolina displaying a tiny sample of metal, announcing it was the first rare-earth magnet manufactured in the US in 25 years.

He remarked that this was evidence the US is breaking “China’s chokehold on our supply chain.” Thanks to a new rare-earth mineral processing center in the state, he added, “The nation is regaining its autonomy.”

Breaking China’s Dominance in Essential Minerals

Reducing China’s processing and manufacturing dominance in these materials, which are crucial for some semiconductors, energy storage, and military equipment, is a key goal for the federal government. Via tariffs and other approaches, the US is counting on bringing the industry back to domestic facilities.

Such tariffs prompted China to restrict rare-earth exports to the US and pushed the administration to forge agreements with an ally, a partner, another nation, and a key Asian economy.

Although the US and China have since brokered a trade truce on rare earths, China—with approximately the majority of worldwide extraction and over 90% of international refining—has a head start that may prove challenging to diminish.

“These materials are essential for EV engines but also in guidance systems that have clear uses for the military,” says a market analyst. “Anything that has a strong magnet in it requires rare earths.”

No Easy Fix for US Independence

There’s no easy fix for the US to reset its reliance on Chinese production of materials essential to defense, semiconductor production, and the transition from traditional energy to wind and solar. Data from federal reports, the US brought in 80% of the rare earths it used in recent years.

For some rare-earth minerals such as a key element, used in chip production, and another mineral, essential to defense systems, Chinese refinement dominance reaches almost total. These elements are found in magnets crucial to EV motors and power systems in renewable energy, along with applications for mobile devices, advanced lighting, and nuclear reactors.

Long-Term Efforts and Global Deposits

Efforts to reduce the US’s dependence on Chinese production of rare-earth minerals could take years. Analysts point out that “Rare earths” is somewhat of a misnomer because they’re relatively abundant in the earth’s crust, but many reserves, such as those in Eastern Europe, where an agreement was made recently, are only in the early stages of extraction.

“The issue isn't scarcity per se, it’s that China can control how much is sent abroad,” a specialist said, noting that obtaining permits from China can be a complex and time-consuming endeavor.

Greenland, another focus of American interest, and South America, are two other countries with substantial rare-earth resources. In the continental US, there are reserves in California, Wyoming, and Missouri, with the biggest active site located at Mountain Pass, California, not far from Las Vegas.

Federal Efforts and Investment

In July, the Pentagon took on the role of the largest shareholder in an industry operator, with plans to open a new “mine-to-magnet” plant, called 10X, to make magnets crucial for military aircraft, drones, and submarines.

Across the continent, estimated reserves of rare earths were calculated at millions of tons in the US and more than 14m tons in the northern neighbor—significantly lower than the vast reserves estimated to be in the Asian giant.

Following direct investment in other sectors and domestic technology firms, the interior department said it was ready to make direct investments in critical mineral companies.

“The US is up against state capital because China is picking these as priority areas that they aim to control,” a senior official stated during a address this spring.

The official floated that the US could use a sovereign wealth fund to accelerate production. “Why wouldn’t the richest nation in the world not possess the biggest state investment fund?” he questioned.

Past Challenges and Prospects

American attempts to promote homegrown output have struggled in the past when Chinese producers lowered prices, rendering unsubsidized rare-earth development unprofitable against China’s lower cost of production and far-sighted planning.

Five years ago, a market expert stated before a congressional panel that “nations that fund in energy storage and industrial networks today are likely to lead this industry for the foreseeable future. There is still time for the US but immediate steps are required.”

Since then, a race to assemble trading alliances around rare earths is accelerating.

“In about a year from now, we’ll have so much critical mineral and rare earths that you won’t know what to do with them,” a top leader told reporters. That came eight months after a demand for payment in the form of minerals from another country. More recently, the authorities in Asia signed a deal with an American company, securing rights to minerals such as antimony and copper.

Prospects for Success

But, can the US make up its shortfall and weaken China’s hold on rare-earth supply chains? “The US has taken really significant steps so far,” an analyst says. The nation, he continues, cannot be “independent in the near future because it takes time to start operations and establish processing plants.”