Orlando Harmon
Rare earths are crucial for a range of defense technologies, including aircraft engines, computer chips, and electric vehicles. While they are not actually as rare as their name suggests, the investment, equipment, skills, and regulatory approval required to produce them in large quantities can be significant, along with the potential for environmental damage. The United States, which relies heavily on imports from China, has taken steps to secure its supply of rare earth elements (REEs) for national security and to reduce its vulnerability to cost surges in the world market. China's dominance in the REE market and its recent export restrictions have highlighted the importance of developing independent supply chains and the potential benefits of international cooperation among suppliers.
| Characteristics | Values |
|---|---|
| Rare earths are crucial for | Computer chips, aircraft engines, F-35 fighter jets, Virginia- and Columbia-class submarines, Tomahawk missiles, radar systems, Predator unmanned aerial vehicles, Joint Direct Attack Munition series of smart bombs, electric vehicles, batteries, cobalt, lithium, neodymium, vanadium, gallium, nuclear reactors, etc. |
| Rare earths are mostly sourced from | China |
| Rare earths are used in | Defense, energy, and automotive sectors |
| Rare earths are critical for | National security |
| Rare earths are often imported from | China, Australia, Vietnam, Brazil, India |
| Rare earth mining requires | Significant investment, equipment, technical skills, regulatory approval, and environmental considerations |
| Export restrictions on rare earths | Can impact sourcing and supply chains, causing vulnerabilities and market stress |
| Developing domestic rare earth supply chains | Requires substantial time, investment, and government support |
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What You'll Learn
- Rare earths are crucial for defence technologies, such as fighter jets and missiles
- The US is vulnerable to China's dominance in the rare earths market
- China's export restrictions on rare earths impact US supply chains
- The US is investing in domestic rare earths production to reduce reliance on imports
- Rare earths are in high demand due to their use in batteries and electric vehicles
Rare earths are crucial for defence technologies, such as fighter jets and missiles
Rare earth elements (REEs) are crucial for defence technologies, such as fighter jets and missiles. They are used in advanced weapons targeting systems, radar, and laser technologies. Elements like neodymium and praseodymium are especially important in the permanent magnets that support flight control and stealth functions. For example, the Arleigh Burke-class destroyer uses about 2,600 kg of REEs, while the Virginia-class submarine demands approximately 4,600 kg. These elements support radar, sonar, missile guidance, and propulsion systems critical for both offensive and defensive missions.
F-35 fighter jets alone use over 400 kg of REEs, which are essential for weapons targeting systems, lasers, and other advanced onboard technologies. Rare earth elements are also used in the construction of missiles, such as the Spear 3 Missile. These minerals are crucial for the development of modern defence technologies, including fighter jets and missiles.
The United States, in particular, relies heavily on rare earth imports from China, which possesses an estimated 37.9% of the planet's REE reserves and accounts for 80% of US rare earth imports as of 2019. This dependence on a single geopolitical rival has raised strategic concerns, with the US government making efforts to diversify supply chains and boost domestic production. However, establishing mining and processing facilities for rare earth elements outside of China can be challenging due to the extensive investment, equipment, technical skills, and regulatory approval required.
To address this issue, the US has implemented several strategies, including stockpiling critical minerals, developing substitutes, and funding the construction of rare earth processing facilities. For instance, the Pentagon invested $30.4 million in Lynas USA LLC to construct and operate a light rare earth elements processing facility in Texas. Additionally, grants have been provided to reopen the primary rare earth mine in Mountain Pass, California. These efforts aim to secure a stable supply of rare earth elements for the US defence industry and reduce dependence on imports from China.
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The US is vulnerable to China's dominance in the rare earths market
Rare earths are crucial for a range of defence technologies, including fighter jets, submarines, missiles, radar systems, and unmanned aerial vehicles, and more. The United States is heavily dependent on China for its supply of rare earths, with China mining and refining the majority of these materials globally. This dependence has significant implications for US national security and economic vulnerability, as China's dominance in the rare earths market grants them leverage in trade negotiations and the ability to influence global prices and supply availability.
Until the 1980s, the US dominated the global rare earths industry. However, China's lower labour costs, weaker environmental standards, and robust government backing propelled them to become the dominant force in rare earths production. China's strategic focus on rare earths, coupled with massive state subsidies and investments in mines and processing facilities, enabled them to produce rare earths at a fraction of the cost of Western competitors.
The US has recognised its vulnerability and is taking steps to develop domestic supply chains. The Department of Defense (DOD) has committed significant funding towards building a complete mine-to-magnet REE supply chain independent of China. However, the US is still a long way from meeting this goal, and its capabilities remain in the early stages.
The challenge for the US lies not only in the high costs of rare earth projects but also in China's massive processing capacity, which allows them to flood the market and price out potential competitors. China's willingness to inject fiscal support at any part of the supply chain further strengthens its dominance.
The US must address this vulnerability through careful planning, investment, and public-private partnerships, recognising that international cooperation may be necessary to effectively challenge China's rare earths dominance.
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China's export restrictions on rare earths impact US supply chains
China's dominance in the rare earths supply chain has been decades in the making, with strategic government policies and investments contributing to its current position. In response to tariffs imposed by the US, China has recently restricted exports of seven rare earth minerals, most of which are "heavy" rare earths crucial to the defence sector and used in a wide range of products, from smartphones to military hardware. This has significant implications for the US, which has historically relied on China for rare earths. The restrictions are expected to lead to surging prices and potential production slowdowns for US companies, with some analysts predicting a 10- to 15-year timeline to develop a robust supply chain that excludes China.
The US has been vulnerable in the rare earths sector for years, and this vulnerability has been exposed by China's export restrictions. The US is now exploring ways to diversify its supply chains and scale up domestic production capabilities, but this will require substantial investment, technological advancements, and potentially higher overall costs compared to relying on China. The Pentagon has awarded $35 million to a heavy rare earths processing facility, and the Department of Defense (DOD) aims to develop a complete mine-to-magnet REE supply chain.
China's curbs on rare-earth exports have alarmed US agencies, with some companies facing potential stock shortages within 40 to 60 days. The restrictions have also highlighted the risks of relying on a single country for critical materials, as it leaves supply chains vulnerable to disruptions. This has prompted discussions about reshoring and the importance of international cooperation to ensure stable access to rare earths.
The impact of China's export restrictions on the insurance industry is not directly mentioned in the sources. However, it can be inferred that the disruptions to supply chains and potential production slowdowns could lead to increased costs and risks for businesses, which may, in turn, affect their insurance needs and premiums. The specific impact would depend on various factors, including the duration of the restrictions, the success of US efforts to diversify supply chains, and the resilience of individual companies in managing supply chain risks.
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The US is investing in domestic rare earths production to reduce reliance on imports
Rare earth elements (REEs) are critical components of numerous advanced technologies, including military systems, that great powers compete to control. The US government has long sought to increase domestic production across the rare earth supply chain to reduce its reliance on China, which has dominated the global production of rare-earth elements since the 1990s. China currently controls nearly 60% of mined production, over 85% of processing capacity, and over 90% of permanent magnet production. This dominance has become a focal point in the great power competition between the US and China.
To encourage private sector investment in American rare earth projects, the US government must lower the industry's high barriers to entry, including capital costs, technical challenges, and an incumbent oligopoly. Numerous rare earth bills have been introduced in Congress to promote domestic production, but few have become law. Despite these challenges, the US is making progress in developing a domestic REE supply chain. Rare earth deposits have been found in at least 19 states, and several projects to build domestic mining and processing capacity are ongoing, with significant federal government backing.
One significant development was Presidential Executive Order 13817, signed on December 20, 2017, which directed the Department of Commerce to offer strategies to reduce US reliance on critical minerals, increase recycling and substitutions, improve trade relationships, and develop better mapping and permitting processes. The US Geological Survey's Earth Magnetic Resonance Imaging project is currently investigating and mapping areas in the United States where rare earth elements and other critical minerals are likely to be found. Texas, in particular, is expected to play a crucial role in building the domestic REE supply chain, as it contains one of the largest domestic rare earth deposits, and is a major location for high-tech, clean energy, and electric vehicle manufacturing—primary users of REEs.
While the US has made strides in increasing domestic rare earth production, it still faces challenges, including the high barriers to entry in the industry and the extensive investment, equipment, technical skills, and regulatory approval required for bulk production. However, with the ever-increasing demand for rare earth elements and the national security implications of dependence on Chinese metals, the US remains committed to building a secure and vertically integrated domestic REE supply chain.
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Rare earths are in high demand due to their use in batteries and electric vehicles
Rare earths are a group of elements with unique properties that make them highly sought-after in various industries, especially in the manufacturing of electric vehicles (EVs) and their batteries. While the use of rare earths in these applications is controversial, their demand remains high due to their functionality in these products.
Rare earths are not actually rare in terms of their abundance in the Earth's crust, but they are considered rare because they occur in low concentrations compared to other metals. Their extraction is often challenging, costly, and environmentally destructive, which has led to a concentration of the market in countries with lower environmental standards, such as China.
The use of rare earths in EV batteries is a subject of debate. While early hybrid vehicles used batteries containing rare earths, most modern electric vehicles have transitioned to lithium-ion batteries, which do not contain rare earths. However, rare earths are still essential for the magnets used in EV motors, which provide propulsion. These magnets, typically composed of neodymium-iron-boron (NdFeB) or samarium cobalt (SmCo), offer significantly higher performance compared to alternatives without rare earth content.
The demand for rare earths in EV motors has led to concerns about supply chain security and sustainability. The environmental impact of rare earth mining and refining has been devastating, and the working conditions in these mines have been linked to literal slave labor. As a result, there are ongoing efforts to develop alternatives to rare earth magnets and reduce their usage in high-performance applications.
In conclusion, rare earths are in high demand due to their functionality in electric vehicles, particularly in the magnets used for propulsion motors. However, the environmental and ethical concerns surrounding their extraction and refining have sparked debates about their continued use, leading to a search for alternative solutions.
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Frequently asked questions
Rare earths are a group of metals that are crucial for a range of defence and commercial technologies, from computer chips to aircraft engines. While they are not actually that rare, the investment, equipment, technical skills and regulatory approval required to produce them in bulk can be extensive and challenging.
Rare earths are highly sought-after commodities, with countries such as the US relying on imports to meet their demands. In 2025, China imposed export restrictions on seven rare earth elements, requiring special licenses to export. This caused a potential vulnerability in the supply chain, affecting the insurance industry, which often covers the costs of natural disasters and other disruptions.
The insurance industry often has to adapt to geopolitical shifts and supply chain issues. In the case of rare earths, the industry may have to provide coverage for alternative sourcing strategies, such as reshoring or developing domestic supply chains, which can be costly and time-consuming.
To reduce the potential impact on the insurance industry, governments and companies can invest in developing independent supply chains, diversifying their sourcing, and building domestic production capabilities. This can reduce the reliance on imports and the potential for supply chain disruptions, thus reducing the cost burden on the insurance industry.
