Rare Earth Magnets Key to US-China Rivalry
The geopolitical competition between the United States and China is increasingly focused on the supply of rare earth magnets. A market commentary argues that control over this critical resource will determine whether the U.S. can build military equipment at scale and maintain its technological edge.
China's dominance in the rare earth magnet market is staggering, controlling roughly 70% of rare earth mining, 90% of processing, and a striking 93% of manufacturing. In 2023, China produced approximately 240,000 tons of rare earth permanent magnets, which is between 85-90% of the global supply. This level of control gives Beijing significant leverage over global technology supply chains. These are not just any magnets; they are critical components in a wide array of U.S. military hardware. The F-35 Lightning II fighter jet, for instance, contains about 50 pounds of samarium-cobalt (SmCo) magnets, which are essential for its engine and power systems to withstand high temperatures. Similarly, Neodymium-Iron-Boron (NdFeB) magnets are vital for the electric drive motors in naval vessels and the guidance systems of Tomahawk cruise missiles and smart bombs. The U.S. has a near-total dependence on China for the heavy rare earth elements required for these high-performance magnets. This dependency is a significant vulnerability; between 2020 and 2023, 70% of U.S. rare earth imports came from China. The U.S. does have some domestic mining, like the Mountain Pass mine in California, but the vast majority of its extracted rare earths are sent to China for processing into finished products. Historically, China has demonstrated its willingness to use this dominance as a geopolitical tool. In 2010, China restricted rare earth exports to Japan during a diplomatic dispute, and more recently has implemented export controls and licensing requirements that impact U.S. supply chains. These actions have prompted fears of production delays for critical military and civilian technologies. In response, the U.S. government is actively trying to rebuild a domestic supply chain from "mine-to-magnet". This includes significant financial backing for companies like USA Rare Earth, which received a non-binding agreement for $1.6 billion in federal funding and loans to develop its Round Top project in Texas and a magnet facility in Oklahoma. The Department of Defense has also awarded contracts to companies like ReElement Technologies to expand rare earth separation and purification capacity in the U.S. These initiatives aim to create a domestic supply of high-purity rare earth oxides necessary for both defense and commercial applications, but establishing a comprehensive and competitive supply chain is expected to take years.
