Rare earth elements are essential to modern technologies, from EVs and wind turbines to advanced defense systems. However, the supply chain for these 17 critical minerals is heavily concentrated, as China controls 70% of global mining, 90% of separation, and 93% of magnet production. This monopoly poses strategic risks as Beijing tightens trade restrictions, prompting the U.S. to accelerate efforts toward critical mineral independence.

China recently expanded its trade restrictions to include five additional rare earth materials, bringing the total number of restricted medium- and heavy-rare earths to 12. These materials now require government-issued export licenses, affecting global mining, refining, and manufacturing. Among the restricted minerals are terbium and dysprosium—key heavy rare earths essential for high-performance magnets used in EV motors and robotics. These restrictions underscore how China is leveraging its dominance to influence nations that depend on these materials for clean energy and technological advancement.

In response, the U.S. launched a “mine-to-magnet" strategy to reduce reliance on Chinese supply, with the ambitious goal of eliminating dependence on Chinese materials for defense by 2027. The Department of Defense has invested more than $439 million in rare earth projects since 2020, targeting key bottlenecks in extraction, processing, and separation. Key initiatives include:

  • Direct Investments and Grants: Government funding supports companies capable of scaling production quickly
  • Defense Production Act (DPA): Funding projects tied to national security
  • Recycling and Alternative Sources: Developing technologies to recover rare earths from recycled batteries and coal mines

These actions come as global demand for rare earths is projected to triple by 2030, driven by clean energy goals. This surge in demand presents substantial opportunities for investors across several areas:

  • Domestic Producers: U.S., Australian, and Canadian companies that benefit from government funding and partnerships
  • Processing Technology: Firms specializing in heavy rare earth separation as non-Chinese capacity grows
  • Strategic Partnerships: Increased capital from financial institutions to support industries vital to national security

Despite these efforts, challenges remain. Developing new mining and processing capacity is both time-intensive and costly. As the rare earths industry transitions from a niche market to a cornerstone of economic and defense strategy, investors should closely monitor the progress of government-backed projects and regulatory changes.

For more information on related investment opportunities and insights, read Rare Earth Minerals: Potential for Critical Mineral Sovereign Fund and Other Backing, by William Blair energy analyst Neal Dingmann.