With 44 million tons of rare earths reserves, China is the largest producer of these elements. China produced 61 percent of global rare earths in 2021. Compared to the United States’ 15.5 percent, there is a significant gap to close in the market. 

Although the United States, Australia and Canada are looking for ways to onshore their processes, shifting dependence away from China is challenging.

Thanks to government funding, lower environmental standards, and the ability to keep working wages low, mines throughout China in the 1980s and ’90s blossomed, and the supply of rare earths increased significantly. During that period, Western manufacturers looking for lower production costs were excited to move east. 

Meanwhile, they exported their processing and manufacturing technologies from the West to the East, allowing China to develop its 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 in the rare earths supply chain.

Although North America has its own deposits, its extraction and processing capabilities are nowhere near China’s. For example, companies with projects in the United States have not been able to complete the process of economically producing oxides, and there is no economic or sizeable production of rare earths metals, alloys and magnets. The only mine producer in the United States, MP Materials, exports its mineral concentrate to China for processing.

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

Because of this heavy dependence on Chinese rare earths, the United States and other countries are concerned that they are strategically vulnerable and could be cut off from the supply anytime if trading relationships with China significantly deteriorate. It’s becoming clear that avoiding these chokepoints in the supply chain is a matter of natural security.

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

Although it is a phenomenal effort for Western countries to move away from reliance on China and create domestic supply chains, economic and regulatory support from the government is critical. There are efforts to make funding available for advanced projects and downstream capacity. However, if President Biden and Canadian prime minister Justin 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.

Despite efforts in North America, China will continue to dominate the market in the foreseeable future thanks to its significant capacity and established infrastructure. However, this won’t likely be the case forever as other countries 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.