Can the U.S. Reduce Its Reliance on Imported Rare Earth Elements?

The Issue:

China is the world’s largest supplier and processor of rare earth elements, the minerals used in a broad range of key products that include fighter jets, drones, guided missiles, wind turbines, servers, computer chips, electric vehicle batteries and lasers. These elements have become a key area of contention in the trade friction between the United States and China. In April, China responded to U.S. tariffs by placing export restrictions on 7 rare earth elements as well as some rare earth magnets. Since the U.S. has almost no domestic capacity to process and refine rare earths into end-use components, and there are few alternatives for refined rare earth elements outside China, the restrictions threatened production delays and plant stoppages in American car manufacturing plants. Although negotiations resolved the impasse, dependence on China for these key components remains a vulnerability in the manufacturing supply chains for many military and high technology products. Building a domestic capacity to process rare earth elements in the United States will likely take a decade or more, even if tariffs tilt the playing field in favor of U.S.-based production.

Dependence on China for rare earth elements remains a vulnerability in the manufacturing supply chains for military and high technology products.

The Facts:

• Rare earth elements are critical raw materials for a wide range of advanced manufactured goods. Rare earth elements (REs) are 17 metallic elements that exist in two forms: light rare earths (e.g. neodymium and praseodymium) and heavy rare earths (e.g. dysprosium and terbium). These elements are combined with other ores such as iron, cobalt, nickel, magnesium, aluminum, graphite, and boron to produce metal alloys and permanent magnets that are necessary to manufacture electric vehicles, wind turbines, drones, robots, missiles and spacecraft. Rare earth elements are also used in defense applications like sonars, guidance systems, radiation detection, and signal amplification that strengthen surveillance, navigation, and threat detection capabilities. 
• Mining, processing and refining rare earth minerals is resource-intensive and involves high environmental costs and risks. Rare earth minerals are found at low concentrations (2%-10%) in certain types of mineral deposits (the most common are monazite and bastnäsite). The mineral ore extracted from the ground must undergo numerous steps to concentrate the ore, separate it into individual rare earth elements, and purify it into salts or oxides that are then combined with other raw materials to make end use components (see here for the multiple steps involved in processing and refining, along with the associated environmental impacts). The process of refining rare earth minerals in particular generates large volumes of waste, including strong acids (hydrofluoric and sulfuric), radioactive elements (thorium and uranium), and heavy metals (cadmium, lead, and arsenic). Rare earth processing and refining consumes 22 times more water and energy than mining of the minerals. 
• While China has a large advantage with respect to other countries in mining rare earth minerals, it has absolute dominance in the refining process that turns them into the final components needed for manufacturing. China mined 69% of the world’s rare earth ores in 2024, followed by the United States (11.5%), Myanmar (8%), Australia, Nigeria and Thailand (3.3% each). But China is the only country that has built a completely integrated supply chain for both heavy and light rare earths. The production of critical rare earth magnets offers a clear example: China’s share of global mining of four of the rare earth elements used in the production of rare earth magnets was over 50% in 2023. But, China’s share of the later stages of the process, including separating the individual rare earth elements and metal refining, was closer to 90% in 2023 (see chart). The United States exports over 95% of its domestically mined rare earths to Asia for processing and refining into metal alloys, batteries and permanent magnets, among other components. Overall, China produces 85% of the refined light rare earth elements used worldwide, and 100% of the refined heavy rare earth elements. Rare earth mining and refining will continue to be dominated by a limited number of countries for the foreseeable future. 
• Environmental and regulatory costs and risks are the main reason why the supply chain is not yet fully developed outside of China. The United States was the main global source of rare earth minerals until the mid-1980s but a combination of high environmental costs in the U.S. with competition from lower-cost production shifted the industry to China (see here). The environmental impact of the industry’s growth in China has been documented. In 2019 China's Ministry of Industry and Information Technology (MIIT) estimated a cost of $5.5 billion to clean up illegal mining sites. A 2014 report on the impacts of rare earth mining and refining on China's water resources estimated $2 billion Chinese Yuan (US $314 million) in clean-up costs for a small segment (<10%) of the Dongjiang River watershed where southern China's rare earth refining industry is concentrated. Similarly, other countries involved in refining rare earth minerals (Myanmar, Malaysia) have poor environmental regulation and enforcement. Australia's Lynas mining company chose to off-shore its development of a refining plant in Malaysia. Relocating refining and manufacturing of rare earth ore and components to the US, Europe, Japan, South Korea, or other countries which have stricter environmental regulations and greater public concerns about environmental contamination would make the production of usable rare earth elements much more expensive.
• Since 2010, the United States government has prioritized building a domestic rare earth mineral supply chain but has only succeeded in building the front end: mining and concentration. In 2010, China imposed export restrictions on rare earth products to Japan in response to a trade dispute. This heightened national security concerns in the U.S. and other countries over dependence on China for rare earth elements used in critical military technologies. In response, the U.S. has revived domestic mining of rare earth minerals significantly. In 2024, the U.S. mined 45 kilotons (kts.) of RE ore, making it the world's 2nd biggest producer. But despite $450 million in Defense Production Act (DPA) appropriations to jump start RE magnet production the build out of a domestic processing and refining capacity has been slow. 
• Building the refining and processing parts of the supply chain are estimated to take 10-15 more years because of long development times, concerns about significant waste byproducts, and complex permitting and licensing. The average time horizon for the development of new mines in the U.S. is 29 years, the world’s second longest. The average time to permit and license smelting and refining projects in the U.S. is 7-10 years, further extending the time horizon. Consequently, in 2024 the U.S. had only 1 operational refining facility in Texas that produced 1.3 kts. of neodymium-praseodymium (NdPr) metal alloy. This facility will begin manufacturing 1 kt. of automotive-grade neodymium-iron-boron (NdFeB) magnets in 2025. By contrast, China produced 240 kts. of NdFeB permanent magnets in 2023, and between 240-260 kts. in 2024. Moreover, China’s RE refining capacity grew 5% in 2024, jumping from 255 kts. in 2023 to 270 kts. in 2024. The Trump Administration has prioritized accessing rare earth elements through annexation (Greenland) or negotiated deals (Ukraine) but these efforts only address new mining sources, and do not solve the processing and refining bottleneck. (In fact, neither Greenland or Ukraine currently mine their RE deposits, requiring the development of completely new mines.) Malaysia is one of the few countries outside of China with any significant refining capability. The Australian mining company Lynas operates a plant that produces 16-19 kts.of neodymium-praseodymium (NdPr) metal alloys annually in Malaysia. But even though Lynas is adding 1.5 kts. of capacity to refine heavy REs (dysprosium and terbium) in 2025, this remains a small fraction of worldwide requirements.