An Uncomfortable Reality: China’s Rare Earth Chokehold May Outlast This Decade

An inconvenient reality for the Trump administration’s race to rebuild Western conflict-free critical materials supply chains outside China, whether domestically or through friendshoring, is that it won’t break China’s chokehold this decade.

The main problem for the US lies well beyond the mine, ING analysts Ewa Manthey and Coco Zhang wrote in a note on Monday titled “The US rare earth push: what comes next?” Extracting more ore does very little for US companies that depend on Chinese processing plants to turn ore into usable metals, alloys, and finished magnets.

“The US has significant rare earth resources, but its supply chain remains heavily reliant on China. The biggest gaps do not sit in the mine, but rather in processing, heavy rare earth separation and magnet manufacturing,” Manthey said.

China accounts for about 60% of mined magnet rare earths, 91% of refined output and 94% of permanent magnet production, Manthey said, citing the International Energy Agency.

Manthey added, “The US rare earth challenge is industrial rather than geological. Its vulnerability lies in the difficult stages between the mine and the finished component.”

MP Materials represents both America’s progress in rebuilding domestic rare earth supply chains and its continuing constraints. The miner produced a record 50,692 tons of rare-earth oxide in concentrate in 2025 and began manufacturing neodymium-iron-boron magnets in Texas that December.

The biggest gap is heavy rare earths, particularly dysprosium and terbium, which help magnets retain performance at high temperatures. These materials are critical across automotive, aerospace, and defense applications.

MP Materials is developing a separation line designed to produce about 200 tons of dysprosium and terbium annually. Even with that capacity, securing feedstock remains a challenge because production is concentrated in conflict areas such as China and Myanmar.

Manthey cited a June agreement with USA Rare Earth involving $277 million in grants, a $1.3 billion senior secured loan and a 16% government equity stake. She also highlighted the federal government’s investment in MP Materials, alongside decade-long magnet purchase commitments and an NdPr oxide price floor.

The number of announced projects is growing: MP Materials, Vulcan Elements and USA Rare Earth have each outlined plans for facilities capable of producing 10,000 tons of magnets annually. Those targets, however, represent planned capacity rather than current output – and that is a major problem. 

The US is also pursuing supplies from Australia and Brazil while funding recycling technologies. Yet alternative supplies are unlikely to eliminate the China dependency this decade: The IEA estimates that announced magnet projects outside China would meet well below 20% of demand outside China in 2035. 

Last week, Bloomberg Intelligence analysts questioned whether more than $40 billion in announced federal support to rebuild conflict-free critical materials supply chains outside China would translate into reliable near-term supplies and improve defense readiness.

Christian Keller, Barclays’ global head of economics research, recently warned that “China’s quasi-monopolistic position” in the critical materials space would persist through at least the end of the decade.

Not just in mining…

…but also refining.

Stifel aerospace and defense analyst Jonathan Siegmann wrote last month that “owning the bottlenecks,” or investing in producers within conflict-free supply chains, was the best way to gain exposure as China chokes off the West’s access to critical materials such as tungsten, magnets, rare earths, and other materials.

News last Friday of the US Commerce Department’s move to squeeze jet parts supplies to China in response to Beijing’s weaponization of critical material exports indicates that an uncomfortable reality is setting in across the West: Mining and processing supply chains might not be rebuilt in time to meet demand from the massive rearmament supercycle.

Professional subscribers can read the full note here at our Marketdesk.ai portal.