Defense Stocks Surge Amid Rare Earths 'Arms Race'
What happened
Defense and aerospace stocks are surging as geopolitical tensions highlight a critical vulnerability: rare earth minerals. A podcast report noted that with China controlling ~90% of refining, the U.S. is investing billions to build a North American supply chain ahead of a 2027 legislative deadline. Newly public RE Alloys (ALOY) aims to be first to market with North American heavy rare earths.
Why it matters
The looming 2027 deadline is governed by 10 U.S.C. §4872, a law that will prohibit the use of rare earth magnets and other sensitive materials from China, Russia, Iran, and North Korea in all U.S. defense contracts. This legislation is forcing a complete overhaul of the supply chain, as defense systems like the F-35 fighter jet rely on approximately 418 kg of rare earth elements for advanced targeting, radar, and stealth capabilities. Heavy rare earth elements are particularly vital for high-performance defense applications. Metals like dysprosium and terbium are added to neodymium-iron-boron magnets to allow them to function at the extreme temperatures found inside jet engines, missile guidance systems, and unmanned aerial vehicles. China currently controls over 98% of the global supply of these critical heavy rare earths. In response, the U.S. government has initiated substantial investments to build a domestic supply chain. The "One Big Beautiful Bill Act" allocated $5 billion to support critical minerals supply chains and another $2 billion to expand the National Defense Stockpile. This is in addition to direct investments in private companies, such as a $1.6 billion commitment to USA Rare Earth and a $400 million equity stake in miner MP Materials. The Defense Logistics Agency (DLA) is actively funding domestic production capabilities. A subsidiary of RE Alloys recently received a contract to design a 300-ton-per-year facility for samarium and gadolinium, two heavy rare earths crucial for magnet applications. This contract is a step towards creating a domestic source for materials that currently have almost no commercial production outside of China.
Key numbers
- A podcast report noted that with China controlling ~90% of refining, the U.S.
- is investing billions to build a North American supply chain ahead of a 2027 legislative deadline.
- The looming 2027 deadline is governed by 10 U.S.C.
- §4872, a law that will prohibit the use of rare earth magnets and other sensitive materials from China, Russia, Iran, and North Korea in all U.S.
What happens next
- §4872, a law that will prohibit the use of rare earth magnets and other sensitive materials from China, Russia, Iran, and North Korea in all U.S.
- The "One Big Beautiful Bill Act" allocated $5 billion to support critical minerals supply chains and another $2 billion to expand the National Defense Stockpile.
- Newly public RE Alloys (ALOY) aims to be first to market with North American heavy rare earths.
Quick answers
What happened in Defense Stocks Surge Amid Rare Earths 'Arms Race'?
Defense and aerospace stocks are surging as geopolitical tensions highlight a critical vulnerability: rare earth minerals. A podcast report noted that with China controlling ~90% of refining, the U.S. is investing billions to build a North American supply chain ahead of a 2027 legislative deadline. Newly public RE Alloys (ALOY) aims to be first to market with North American heavy rare earths.
Why does Defense Stocks Surge Amid Rare Earths 'Arms Race' matter?
The looming 2027 deadline is governed by 10 U.S.C. §4872, a law that will prohibit the use of rare earth magnets and other sensitive materials from China, Russia, Iran, and North Korea in all U.S. defense contracts. This legislation is forcing a complete overhaul of the supply chain, as defense systems like the F-35 fighter jet rely on approximately 418 kg of rare earth elements for advanced targeting, radar, and stealth capabilities. Heavy rare earth elements are particularly vital for high-performance defense applications. Metals like dysprosium and terbium are added to neodymium-iron-boron magnets to allow them to function at the extreme temperatures found inside jet engines, missile guidance systems, and unmanned aerial vehicles. China currently controls over 98% of the global supply of these critical heavy rare earths. In response, the U.S. government has initiated substantial investments to build a domestic supply chain. The "One Big Beautiful Bill Act" allocated $5 billion to support critical minerals supply chains and another $2 billion to expand the National Defense Stockpile. This is in addition to direct investments in private companies, such as a $1.6 billion commitment to USA Rare Earth and a $400 million equity stake in miner MP Materials. The Defense Logistics Agency (DLA) is actively funding domestic production capabilities. A subsidiary of RE Alloys recently received a contract to design a 300-ton-per-year facility for samarium and gadolinium, two heavy rare earths crucial for magnet applications. This contract is a step towards creating a domestic source for materials that currently have almost no commercial production outside of China.
