West Races to Secure Rare Earths as China Tightens Supply
Growing restrictions on elements vital for defense and EV sectors are accelerating efforts to build non-Chinese supply chains and reduce strategic dependency.
A strategic squeeze is tightening around the global supply of critical minerals, forcing Western economies to confront a deep-seated vulnerability to China's dominance in the rare earths market. Beijing has intensified export controls throughout 2025 on key heavy rare earth elements (HREEs), such as dysprosium and terbium, escalating concerns among policymakers and industry leaders over the security of supply chains for vital defense, energy, and automotive sectors.
These obscure-sounding materials are irreplaceable components in the high-performance permanent magnets essential for modern technology. They are critical to the guidance systems of F-35 fighter jets, the efficient motors in electric vehicles, and the generators in offshore wind turbines. For decades, the West has offshored the complex and environmentally challenging process of separating these elements, leaving China in control of over 90% of the world's processed HREE supply.
This dependency has become a potent tool in geopolitical maneuvering. Throughout the past year, Beijing has methodically tightened its grip, introducing licensing requirements for terbium and dysprosium exports and, at one point, banning the export of certain rare earth magnet technologies altogether. These moves, according to analysis of China's export policies, are viewed as a direct response to the ongoing U.S.-China trade rivalry, transforming mineral supply into a form of economic statecraft.
The escalating restrictions are catalyzing a belated but forceful response from Washington and its allies. The U.S. Department of Defense has moved aggressively to onshore production capabilities, becoming a major shareholder in MP Materials (NYSE: MP), North America's largest rare earths producer. The investment, backed by billions in government funding, aims to establish a fully domestic supply chain, from mining at its Mountain Pass, California facility to finished magnet production.
MP Materials, with a market capitalization of nearly $11 billion, has become a cornerstone of America's strategy to break its dependency. The company is one of the few significant non-Chinese players in the sector, which also includes Australia's Lynas Rare Earths, which is developing a processing plant in the U.S. with Pentagon support.
"The West is scrambling to fill a heavy rare earth gap that has been decades in the making," noted a recent industry report on the deepening rivalry. Projections show that without a radical acceleration of these efforts, Western nations could remain 91% reliant on China for their heavy rare earth needs by 2030.
The effort extends beyond national borders. In October, the U.S. and Japan established a framework for securing critical mineral supply chains, and the European Union has been exploring measures such as joint stockpiling and potential tariffs on Chinese rare earth products to protect its industries from supply shocks.
For investors and manufacturers, the landscape is fraught with both risk and opportunity. The creation of a secure, resilient, and independent rare earths supply chain is a capital-intensive, multi-year endeavor. While companies like MP Materials are positioned to benefit from this strategic imperative, industries reliant on these inputs face continued price volatility and the persistent threat of supply disruptions tied to geopolitical tensions.