Rare Earth Magnets Key to US-China Rivalry
The geopolitical competition between the U.S. 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 United States can build military equipment at scale. The analysis frames the struggle for these materials as a new strategic battlefield.
China accounts for the production of 85-90% of the world's rare earth magnets, with its output reaching approximately 240,000 tons in 2023. This dominance extends across the entire supply chain, as China also controls over 85% of rare earth processing and 90% of the manufacturing of the high-strength magnets. The United States, in contrast, produces less than 1% of the global supply of these powerful magnets. The country's single operational rare earth mine, Mountain Pass in California, currently ships the majority of its extracted ore to China for the final processing stages. These magnets, specifically Neodymium-Iron-Boron (NdFeB) and Samarium-Cobalt (SmCo), are indispensable components in modern U.S. military hardware. They are critical for guidance systems in Tomahawk cruise missiles, the flight controls of an F-35 fighter jet, and in the radar and sonar systems of naval destroyers. To counter its supply chain vulnerability, the U.S. government has initiated significant investment programs. The Department of Commerce, through the CHIPS Act, and the Department of Defense have provided billions in loans and funding to companies aiming to build a domestic "mine-to-magnet" pipeline. Companies like MP Materials, USA Rare Earth, and Vulcan Elements are central to this new American strategy. Projects include developing the Round Top rare earth deposit in Texas, building new magnet manufacturing facilities in Oklahoma, and expanding the nation's capacity to separate and purify the essential raw materials. The Department of Defense has moved to directly underwrite the nascent industry by guaranteeing purchase agreements. For example, the government has agreed to buy a significant portion of MP Materials' future magnet output for a decade to ensure a stable market for the domestic producer.
