China and Rare Earths: Current Challenges North America Faces with Decoupling Supply Chains

China and Rare Earths: Current Challenges North America Faces with Decoupling Supply Chains

With an estimated 44 million tons of rare earth reserves, China is by far the largest producer of rare earth elements (REE) in the world. In fact, China produced 61 percent of global rare earths in 2021, compared to the USAā€™s 15.5 percent, so there is a significant gap to close in the market. Although countries like the U.S., Australia and Canada are looking for ways to onshore their processes, shifting dependence away from China is not easy.

Thanks to government funding, lower environmental standards in the past, and the ability to keep working wages low, mines throughout China in the 1980s and ā€˜90s blossomed and REEs supply increased significantly. During that period, western manufacturers looking for lower production costs were excited to move east. At the same time, they basically exported their processing and manufacturing technologies from the west to the east, allowing China to seriously develop its own mineral resources and manufacturing capabilities. The development of the manufacturing infrastructure, coupled with a significant supply of critical minerals, has allowed China to hone its extraction process and become a dominating force globally in the REE supply chain.

North Americaā€™s Dependency

Although North America has its own REE deposits, its extraction and processing capabilities are currently nowhere near Chinaā€™s. For example, companies with REE projects in the U.S. have not been able to complete the final process of economically producing oxides and there is no economic or sizable production of rare earths metals, alloys and magnets. The only mine producer in the U.S., MP Materials, located in the Mojave Desert in southeastern California, exports its mineral concentrate material to China for processing.

Demand is only expected to continue increasing, with an estimated 315,000 tons of REEs needed by 2030. The demand is high because REEs are used in a multiplicity of applications, including technologies like flat-screen televisions, smartphones, electric vehicles and wind turbines, to name a few. In addition, REEs are critical to the military as they are found in fighter jets, night vision goggles, firearms, sonars, missiles and many other crucial technologies.

Because of this heavy dependence on Chinese REEs, the U.S. and other countries are highly concerned that they are strategically vulnerable and could be cut off from REE supply at any time, if their trading relationship with China significantly deteriorates. Itā€™s becoming more and more clear that avoiding these chokepoints in the supply chain is a matter of national security.

Current Action Plans

So, what is North America doing to onshore production and move away from dependence on China? Certain operations, such as MP Materialsā€™ Mountain Pass mine, intend to restore a full supply chain in the U.S. This includes plans for establishing hydrometallurgy and separation facilities, along with a manufacturing facility that is being built in Fort Worth, Texas, which is expected to be completed in 2025, and will convert refined materials into metals and alloys. The Mountain Pass mine should produce enough REEs to fulfill all of the Pentagonā€™s requirements; however, the process of decoupling from Chinese supply chains is slow given the technological complexity and is a risky financial investment for developing companies if there is no government support.

Looking Forward

Although it is a phenomenal effort for western countries to move away from reliance on China and create domestic REEs supply chains, economic and regulatory support from the government is critical, and there are efforts to make funding available for advanced REE projects and downstream capacity. However, if U.S. President Biden and Canadian Prime Minister Trudeau decide to put more investment upstream to support junior mining companies at all stages, we could see this significant gap between domestic/regional supply and demand being fulfilled by local producers instead of foreign sources. Unfortunately, with demand on the rise (electric vehicles alone will require 200,000 tons of rare earths over the next decade), there is a need to begin planning, investing and executing new mining and processing facilities sooner rather than later.

Key Takeaways

Despite efforts in places like North America, China will continue to dominate the REE market in the foreseeable future thanks to its significant capacity and established infrastructure. However, this likely wonā€™t be the case forever, as countries like the U.S., Australia and Canada look to expand their local operations, develop domestic supply chains, and reduce their political risk, as they work to decouple their supply chains from China moving forward.

Author Profile
Luisa Moreno
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Dr.Ā LuisaĀ MorenoĀ is the president of Defense Metals. She is a physics engineer, with a PhD in Materials ScienceĀ andĀ Mechanics from Imperial College London, in theĀ United Kingdom. She is known as a leading analyst in rare earthsĀ andĀ has published several reportsĀ andĀ articles for the investment community. Dr.Ā MorenoĀ has co-authored a book on mineral processingĀ andĀ project financing,Ā andĀ authored a number of advanced industryĀ andĀ technical reports on several technology minerals. She can be contacted on LinkedIn orĀ  by email atĀ Website:

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