Last week, the US Treasury Secretary came back from a southern state displaying a small piece of metal, declaring it was the first rare-earth magnet produced in the US in a quarter of a century.
The official stated that this was proof the US is overcoming “China's dominance on our industrial pipeline.” Due to a new rare-earth mineral processing center in South Carolina, the official continued, “We’re finally becoming independent again.”
Challenging China’s Dominance in Essential Minerals
Overthrowing China’s processing and manufacturing dominance in these minerals, which are vital for advanced electronics, batteries, and armaments, is a top priority for the American leadership. Using economic tools and other approaches, the US is betting on returning the industry home to American shores.
Such measures led Beijing to restrict rare-earth shipments to the US and motivated US leaders to forge agreements with Australia, a partner, another nation, and Japan.
Although the US and China have since reached a trade truce on rare earths, China—with approximately 70% of worldwide extraction and nearly all of international refining—holds an advantage that may prove challenging to overcome.
“These materials are used in EV engines but also in guidance systems that have clear uses for the military,” says a market analyst. “Any device that has a decent magnet in it uses rare earths.”
Challenging Path for US Independence
It won't be simple for the US to reset its reliance on Chinese production of materials critical to defense, chip manufacturing, and the shift from fossil fuels to renewable sources. Data from federal reports, the US imported 80% of the rare earths it consumed in recent years.
In the case of rare-earth minerals such as dysprosium, used in chip production, and another mineral, critical for defense systems, Chinese refinement dominance rises to 99%. Dysprosium and terbium are found in magnets crucial to EV motors and power systems in wind turbines, along with applications for mobile devices, advanced lighting, and nuclear reactors.
Long-Term Efforts and International Resources
Initiatives to cut the US’s reliance on Chinese production of rare-earth minerals could take years. Experts note that “Rare earths” is somewhat of a misnomer because they’re relatively abundant in the planet's surface, but many reserves, including those in Ukraine, where an agreement was signed recently, are only in the early stages of extraction.
“It’s not that there’s a shortage itself, it’s that China can control how much is exported,” an analyst said, noting that securing export licenses from China can be a complex and time-consuming endeavor.
The Arctic region, another focus of US attention, and South America, are additional nations with significant rare-earth deposits. Domestically, there are deposits in California, Wyoming, and the central US, with the biggest active site operating at a key location, the state, not far from Las Vegas.
Federal Efforts and Investment
In July, the Pentagon took on the role of the major investor in an industry operator, with intentions to open a new “mine-to-magnet” plant, named 10X, to produce magnets essential for military aircraft, drones, and naval vessels.
In North America, estimated reserves of rare earths were calculated at 3.6m tons in the US and more than 14m tons in Canada—far less than the vast reserves believed to be in the Asian giant.
Mirroring direct investment in other sectors and US chipmakers, the interior department announced it was ready to make targeted funding in strategic resource firms.
“You’re competing against state capital because Beijing is picking these as priority areas that they aim to control,” a cabinet member said during a address in April.
The official floated that the US could use a sovereign wealth fund to speed production. “How could the wealthiest country in the world not possess the largest sovereign wealth fund?” he questioned.
Past Challenges and Future Outlook
US efforts to promote domestic production have floundered in the past when China lowered prices, making unsubsidized rare-earth development unprofitable against China’s lower cost of production and long-term strategic outlook.
Five years ago, a market expert stated before a US Senate committee that “nations that fund in battery capacity and industrial networks now are likely to lead this sector for generations to come. There is still time for the US but action is needed now.”
Five years on, a scramble to build trading alliances around rare earths is speeding up.
“Soon, we’ll have an abundance of essential resources that supply will exceed demand,” a top leader told the media. That came eight months after a request for compensation in the form of natural resources from Ukraine. In September, the government of Pakistan signed a deal with an US firm, securing rights to minerals such as key metals.
Prospects for Success
However, can the US make up its shortfall and loosen Beijing's grip on rare-earth global networks? “The US has taken really significant steps already,” a specialist says. The US, he continues, is unlikely to become “independent in the near future because it takes time to start operations and establish processing plants.”
