U.S. Investment Highlights Shift Towards Critical Mineral Supply Chain Resilience

Strategic Question

Can the U.S. reduce its dependence on China’s critical mineral processing dominance?

Key Judgements

• The U.S. is expanding its domestic processing capacity to reduce its dependence on China.

• Strategic competition is shifting from critical mineral deposits towards processing.

• Developing integrated critical mineral supply chains is becoming a national security and defence policy priority.

Core Assessment

The White Mesa Mill in San Juan County has invested USD 104 million in an expansion that will develop the capacity for heavy rare earth separation to a commercial scale. Heavy rare earth separation is technically complex, and the expansion will enable commercial-scale separation of heavy rare earth elements essential for permanent magnets used in defence systems, electric vehicles, data centres and robotics.

Background

China’s dominance of critical mineral processing has created vulnerabilities across global rare earth supply chains. With China holding 70% of rare earth stock and 90% of rare earth processing capability, many of the essential critical minerals used in industrial manufacturing, including defence manufacturing, remain reliant on Chinese access to inputs.

China has implemented critical mineral export restrictions and sanctions, which have impacted Japan, the U.S., and European industries. While countries have access to raw minerals through extraction, China’s dominance of critical mineral refining has left countries dependent on access to Chinese supply chains.

Strategic Assessment

China’s dominance of critical mineral processing and recent restrictions on exports have highlighted many countries' supply chain vulnerabilities. With many industries heavily reliant on critical minerals, Chinese export restrictions have caused industrial disruption. Geopolitically, the restrictions and more recent sanctions have demonstrated that critical mineral supply chains can also be used as economic leverage and as an instrument in geopolitical competition. 

While critical mineral extraction and deposits are essential, the capacity in rare earth refining remains widely underdeveloped. Many rare earths are used in commercial products; however, they are an essential component used in defence systems, aerospace technologies and advanced manufacturing, which has made access to quantities of rare earth a security issue. The recognition of security concerns led the U.S. Department of War to make USD 725 million in loans towards expansion of domestic rare-earth element processing and manufacturing capabilities.

Governments are shifting policy beyond solely extraction towards processing to increase whole supply chain resilience. Beyond extraction, domestic investment in processing, refining, and manufacturing is increasing. Many countries face processing restraints within rare earth supply chains, as refining heavy rare earths requires specific expertise, technology, and investment. The White Mesa Mill in San Juan County expansion demonstrates significant domestic investment in efforts to increase refining capacity, particularly in heavy rare earths such as the quantities of dysprosium and terbium used in defence systems.

Expansion and investment in rare earth refining capacity demonstrate that strategic competition is increasingly focused on industrial processing rather than solely on mineral extraction. Dependence on Chinese processing has led governments to invest in whole critical mineral supply chains, from extraction to refining and manufacturing. 

What to Watch

• Increased U.S. investment in domestic critical mineral processing capacity.

• Progress towards the White Mesa Mill’s commercial refining objectives.

• Government policies supporting the expansion of domestic magnet manufacturing capability.

• Further Chinese export restrictions, controls, or licensing targeting specific countries.

• New critical mineral agreements with allies and partner countries to reduce dependence on China. 

Strategic Indicator: 

Development of Parallel Critical Mineral Supply Chains

Assessment▲ Increasing

The U.S. Department of War has provided loans to expand domestic critical mineral processing. Department of War loans highlight the policy shift in which secure rare earth supply chains are increasingly viewed as a national and industrial security priority.

Japan has managed Chinese export restrictions since 2010 and has pursued supply chain diversification. Recent deep-sea mineral exploration alongside the USD 43 million investment in an extraction project in Namibia reflects Japan's objective to diversify supply chains. Although Japan has spent 15 years aiming to reduce dependence on China, currently the country still relies heavily on China for rare earth imports.

The recent announcement of Chinese rare earth export sanctions on European companies signified an expansion of China’s willingness to restrict supply chains. The European Union has initiated numerous policy measures, including the Critical Raw Materials Act, the European Raw Materials Alliance, and the RESourceEU initiative for joint purchasing, stockpiling, and diversifying supplies in recognition of supply chain dependency.

Globally, countries are shifting towards building greater critical mineral independence through investment in whole supply chain infrastructure. Although requiring significant investment, partnership building, agreements, and technological expertise, the policy shift is increasingly perceived as an industrial and security matter.