China’s grip on rare earths is still the cleanest reminder that industrial leadership is built over decades, not quarters. ING analysts Ewa Manthey and Coco Zhang argue that the West’s push to rebuild conflict-free supply chains outside China will not break that chokehold this decade. For investors, the message is straightforward: China remains the center of gravity in the world’s most strategic materials, and the rest of the world is still catching up in processing, separation, and magnet making.
The rare earth story is not really about mining ore in the ground. It is about turning that ore into usable metals, alloys, and finished magnets at scale. Manthey said, “The US has significant rare earth resources, but its supply chain remains heavily reliant on China. The biggest gaps do not sit in the mine, but rather in processing, heavy rare earth separation and magnet manufacturing.” She added, “The US rare earth challenge is industrial rather than geological. Its vulnerability lies in the difficult stages between the mine and the finished component.”
That distinction matters because industrial supply chains create durable advantages. China accounts for about 60% of mined magnet rare earths, 91% of refined output, and 94% of permanent magnet production, according to the IEA, as cited by ING. In other words, Beijing’s lead is not just upstream. It extends into the hard-to-build middle and downstream stages where value is added and where technology, chemistry, and scale all intersect.
MP Materials is the best example of what the United States can do when it commits capital and policy support. The miner produced a record 50,692 tons of rare-earth oxide in concentrate in 2025 and began manufacturing neodymium-iron-boron magnets in Texas that December. That is a real milestone. It shows the West can build domestic capacity when it decides to, and it gives the company a strategic role in a market that has long been dependent on Asia.
Yet the same case also shows why the gap is still so wide. MP Materials is developing a separation line designed to produce about 200 tons of dysprosium and terbium annually. Those heavy rare earths are critical because they help magnets retain performance at high temperatures, which matters across automotive, aerospace, and defense applications. Even with that capacity, feedstock remains a challenge because production is concentrated in conflict areas such as China and Myanmar. The bottleneck is not a slogan. It is the supply chain itself.
The strategic importance of rare earths is becoming more visible because defense demand is so material-intensive. The US Department of Defense estimates an F-35 requires more than 400 kilograms of rare earths, an Arleigh Burke destroyer about 2.4 tonnes, and a Virginia-class submarine about 4.2 tonnes. That scale explains why governments are treating magnet supply as a national security issue, not just a commodity issue. Once procurement rules tighten, suppliers that control the bottlenecks gain leverage, and those that do not face a longer road to relevance.
Policy support is starting to reflect that urgency. ING said a June agreement with USA Rare Earth included $277 million in grants, a $1.3 billion senior secured loan, and a 16% government equity stake. The federal government has also invested in MP Materials, while adding decade-long magnet purchase commitments and an NdPr oxide price floor. These are strong signals that Washington understands the industrial stakes. But policy support does not instantly create the hard assets, trained workers, and chemical know-how needed for full supply-chain independence.
The number of announced projects is growing. MP Materials, Vulcan Elements, and USA Rare Earth have each outlined plans for facilities capable of producing 10,000 tons of magnets annually. That sounds impressive, and it is. But these are planned capacities, not current output, and that difference is crucial. Investors should respect the scale of the ambition while also recognizing the time needed to bring complex processing lines, quality control, and supply security online.
Even outside the US, the broader effort is still not enough to dislodge China’s advantage this decade. The IEA estimates announced magnet projects outside China would meet well below 20% of demand outside China in 2035. That means the world’s biggest industrial economies are moving, but the base they are starting from is still small relative to demand. Australia, Brazil, and recycling are all part of the answer, yet they are not a shortcut around China’s current lead.
The timeline now matters as much as the strategy. From 1 January 2027, US defense procurement restrictions extend across the supply chain for NdFeB and samarium-cobalt magnets from China, North Korea, Russia, or Iran. ING also noted that the Trump-Xi meeting in late September extended the pause on China’s rare earth export restrictions until January 2027. That creates a very clear market calendar: policy flexibility is limited, and industrial transition has a deadline.
For companies and investors, that deadline reinforces the value of owning the bottlenecks rather than chasing the headlines. Stifel aerospace and defense analyst Jonathan Siegmann said last month that “owning the bottlenecks,” or investing in producers within conflict-free supply chains, was the best way to gain exposure as China chokes off the West’s access to critical materials such as tungsten, magnets, rare earths, and other materials. The logic is powerful because it focuses on control points, not broad thematic exposure.
The bigger picture is that China’s strength in rare earths is part of a broader manufacturing and industrial model that rewards patience, coordination, and scale. Christian Keller, Barclays’ global head of economics research, recently warned that “China’s quasi-monopolistic position” in the critical materials space would persist through at least the end of the decade. That is not a bearish view on the West; it is a realistic one about how long it takes to rebuild complex industrial ecosystems.
For global markets, this creates a two-track reality. On one track, China remains indispensable to the clean-energy transition, advanced manufacturing, defense systems, and high-performance electronics. On the other, Western governments are now funding a serious response, one that includes mines, separation, magnet plants, and recycling. The shift is meaningful, but the lead time is long. That is why China’s role still sets prices, shapes supply security, and influences industrial strategy well beyond its borders.
China’s rare earth position is not just a commodity story. It is a demonstration of how industrial policy, processing expertise, and manufacturing scale can combine into a durable global advantage. The West is moving faster now, and MP Materials proves that domestic capacity can be rebuilt when policy, capital, and demand align. But the evidence still points to a long transition, not a quick reset. For now, China remains the system’s anchor, and the world’s most advanced industries still have to plan around that reality.
