The shift is arithmetic before it is politics. By 2030, the Pentagon could need some 10,000 tonnes a year of specialized rare earth magnets, roughly triple today’s demand and, on a Sprott Asset Management estimate published this month, nearly half of everything the non-Chinese world currently produces. The entire market outside China runs at 20,000 to 25,000 tonnes annually, inside a global total of about 250,000. Washington, in other words, is about to become the single biggest buyer in a supply chain it barely controls. “Reliability and source of supply matter more than cost to this buyer,” said Justin Tolman, Sprott’s senior portfolio manager and an economic geologist. “In a market where China administers rare earth prices through quotas and export controls, the US is carving out a parallel market in which supply security can take precedence over prevailing market prices.”
What’s changing is an old lesson resurfacing. The vulnerability went public in 2022, when deliveries of new F-35 fighters were briefly suspended after an engine magnet was found to contain a Chinese-sourced alloy, and Beijing tightened the screws in 2025 by placing controls on magnets and several of the heavy rare earths themselves. The choke point is not the rock: China accounts for about 60% of mine supply but 91% of global refining of magnet rare earths and 94% of finished magnet production, by International Energy Agency figures. Hence the blunt line from Sprott’s own report: “A new mine does little to strengthen supply security if its output must still be sent to China for processing or magnet manufacturing,” and, for the money men, “For investors, the critical constraint is not the availability of rare earth resources, but the lack of secure, integrated supply chains capable of turning those resources into finished products.”
The parallel market is already pouring concrete. The Pentagon last year set a price floor of $110 per kg on MP Materials’ neodymium-praseodymium products, guaranteed for 10 years, and promised buyers for a decade of magnets from the planned 10X complex, a facility of more than $1.25 billion sited in Northlake, Texas, in February. In June, USA Rare Earth landed nearly $1.6 billion from the Commerce Department, aiming at 6,400 tonnes a year of magnets in South Carolina, rising to 10,000 tonnes with an Oklahoma expansion. Energy Fuels has up to $725 million in conditional federal backing to widen rare earth separation in Utah, at its White Mesa mill, is buying Australia’s Strategic Materials and Germany’s Vacuumschmelze, and expects dysprosium and terbium circuits running by the end of 2027. The trend underneath: MP already stopped selling its Mountain Pass output to China, and US-backed producers still ship into Japan and South Korea, where magnet-making capacity is more established than at home.
Washington has also moved upstream and offshore: a $1.55-billion financing structure for Brazil’s Serra Verde, announced last month, combines a $750-million investment by the US government with forward purchases worth at least $300 million across five years, alongside USA Rare Earth’s pending acquisition of the operation. Since 2020 the Pentagon has pushed close to $1 billion into American separation, refining, metals and magnet plants. “US policy is shifting from supporting rare earth projects to helping make the domestic supply chain economically viable,” Tolman said. “But identifying a resource as strategic does not make every project economic. Some projects will require government support to proceed.”
Behind the industrial policy sits a diplomatic standoff that keeps slipping. When China squeezed exports of heavy rare earths and magnets in April 2025, the US and European governments were caught entirely unprepared, the Council on Foreign Relations wrote this month, and Beijing has manipulated supply for geopolitical advantage ever since. The October 2025 Busan detente postponed, until November 2026, the harshest controls, which would license five more rare earths and reach into components shipped between third countries. Yet the US summit fact sheet’s claim of the “de facto removal of [all] controls China imposed since 2023,” has not matched the record: supplies to Japan were cut to near zero through 2026 after Prime Minister Sanae Takaichi’s Taiwan remarks, and Rheinmetall and thirteen other European entities landed on China’s export control list in July. The IEA prices a full Chinese cutoff of rare earth magnets at around $3.5 trillion a year for the United States and Europe combined.
Watch this space on two clocks. One is industrial: seventeen of the thirty-four materials the EU deems critical are at least 70 percent controlled by China in mining or refining, a UN study projects China’s share of global manufacturing rising from over 30 percent toward 45 percent by 2030, and battery export controls activate in November if the truce lapses. The other is the market Washington is trying to build, where price floors and offtakes are meant to make magnets without Beijing. The race, in Tolman’s framing, is between that parallel supply chain coming online and the next squeeze arriving first.
Sources
- Pentagon rare earth push collides with China’s grip – MINING.COM
- Dismantling China’s Supply-Chain Weapon | Council on Foreign Relations
