Rare earth magnets are a U.S.-China battlefield
The geopolitical competition between the United States and China is increasingly focused on the supply of rare earth magnets, according to a market commentary published by OilPrice.com. These components are described as critical for determining whether the U.S. can build military equipment at scale. The analysis frames control over the rare earth supply chain as central to geopolitical supremacy.
China currently produces 85-90% of the world's rare earth magnets, creating a significant strategic vulnerability for the United States, which relies on these components for critical military hardware. This dominance extends across the entire supply chain, with China refining over 85% of all rare earths and manufacturing nearly all high-performance magnets. Key U.S. military systems are heavily dependent on these Chinese-supplied magnets. An F-35 fighter jet requires over 900 pounds of rare earth materials, a Virginia-class submarine needs about 9,200 pounds, and they are essential for the guidance systems in Tomahawk missiles and smart bombs. Neodymium, praseodymium, dysprosium, and samarium are among the crucial rare earth elements for these defense applications. The U.S. was once a leader in the rare earths industry but ceded its position due to the high environmental and financial costs of processing, which shifted production to China where standards were lower. This has left the U.S. with limited domestic capacity for processing and magnet manufacturing, a weakness that was highlighted in 2010 when China temporarily restricted exports to Japan during a diplomatic dispute. In response, the U.S. government is now actively investing to rebuild a domestic supply chain. The Department of Defense has taken a significant equity stake in MP Materials, the country's only major rare earth miner, and is backing the construction of a magnet factory in Texas. The goal is to establish a secure "mine-to-magnet" supply chain capable of meeting all U.S. defense needs by 2027. Several private companies are at the forefront of this push. MP Materials is developing a magnet manufacturing facility in Fort Worth, Texas, with a goal of producing around 10,000 metric tons of magnets annually. Meanwhile, USA Rare Earth has accelerated its timeline for the Round Top heavy rare earth deposit in Texas, aiming for commercial production by late 2028. Despite these efforts, the U.S. faces significant hurdles, including long timelines for developing mines and processing plants, which can take five to ten years. The scale of the challenge is immense, as the planned U.S. production will still be a fraction of China's current output of approximately 240,000 tonnes of rare earth magnets in 2023. The European Union and other U.S. allies are also taking steps to reduce their dependence on China. The EU has launched initiatives with over €1.7 billion to support mining, processing, and recycling projects. Australia, a country with significant rare earth reserves, is actively developing its own processing capabilities and has entered into partnerships with the U.S. to bolster alternative supply chains.
