Over the last few weeks, an obscure subject has sowed panic and speculation among investors, the federal government, national security experts, and business leaders: rare earth elements.
Commonly called “rare earths,” they encompass 17 elements on the periodic table that are found in underground ore deposits. They’re so useful that rare earths have been referred to as “21st-century gold.”
They help break down petroleum into gasoline, enhance color on TV screens, and can be developed into small permanent magnets used in:
Smartphones
Headphones
Electric vehicle motors
F-35 jets
Predator drones
MRI machines
Nuclear submarines
Wind turbines
But for the United States, there’s a problem: China has a stranglehold on rare earths.
China produces ~60-70% of the world’s mined rare earths and, more importantly, does ~90% of the world’s processing of rare earths and ~95% of the production of permanent magnets.
In April, responding to the Trump tariffs, China placed new restrictions on rare earth exports. This adds urgency to US plans for boosting its rare earths sector that started a few years ago and picked up in recent months.
The Pentagon has subsidized rare earths processing plants, and a Trump executive order has attempted to expedite their permitting. The US also signed an investment deal with Ukraine that grants mineral access.
The United States’ only significant rare earth mining facility in Mountain Pass, California. (George Rose/Getty Images)
The good news for the US is rare earths aren’t actually rare. The 17 elements are found all over the world. But extracting them, separating and processing them, and developing them into permanent magnets is difficult, risky for the environment, and incredibly expensive.
How did the US fall so far behind China in rare earths production? Can it ever catch up?
The Hustle turned to the rarest of sources for answers: Jack Lifton, an 85-year old industry vet who’s a co-founder of the Critical Minerals Institute and has consulted on rare earths for major businesses and countries.
When the United States dominated the rare earths industry
Back in the early 1960s, Lifton started work as a chemical engineer in Detroit, testing out the ultra purification of rare earths in components for integrated circuits.
This was an entirely different era for rare earths: The United States was at the forefront of mining and processing them and enabling technologies for their uses.
The elements were first utilized commercially in the late 19th century to help brighten lamps. Later, rare earths were used as an alloy in ammunition for machine guns.
“When you look at your war movies, and you see those white tracers as the machine guns are shooting into the sky, those are rare earth alloys catching fire,” Lifton says.
Olivia Heller/The Hustle
When the industry picked up in the 1960s, with rare earths being used as catalysts for refining petroleum and in TV sets, the US had a fortuitous head start.
In the late 1940s in Mountain Pass, California, prospectors Herbert Woodward and Clarence Watkins, had uncovered deposits of bastnasite, a mineral that contains rare earth oxides. The company Molycorp purchased claims to the Mountain Pass mine in 1950 and over the next few decades made Mountain Pass, located about 60 miles southwest of Las Vegas, into its own company town.
In addition to mining, Molycorp opened alarge-scale facility for separating the rare earth oxides — one of two in the world when it went on line, Lifton says. This complex process, which was pioneered by researchers in Iowa and can involve hundreds of steps, was necessary to isolate the elements individually so they could be further refined for commercial uses.
In the early 1980s, a breakthrough occurred when General Motors and the Japanese company Sumitomo developed a rare earth permanent magnet. GM started making these magnets at commercial scale through an Indiana-based company called Magnequench.
The magnet, derived from the rare earth element neodymium, was as strong as an iron magnet but a fraction of the volume, allowing automakers to introduce thin power doors, power steering, and power seats, as well as use permanent magnets in motors. These magnets would prove useful for newer technologies, too.
Olivia Heller/The Hustle
Molycorp rode the wave, increasing its production of rare earth oxides from ~6k metric tons in the 1960s to more than 20k by 1990. The company claimed annual revenues between $50m-$100m, and it supplied ~60% of the entire world’s rare earths in the early 1980s, according to Lifton.
In other words, the US had the majority of the world’s rare earth production and a lead in processing rare earths and producing permanent magnets. The problem, Lifton says, is that Molycorp couldn’t produce enough rare earths to feed the growing demand.
So, in the 1980s, Molycorp made the fateful decision to start doing business with China.
The blueprints released throughout China
As in California, the Chinese had mines for digging up ores containing rare earths. But China didn’t have the same capabilities as Molycorp to separate and process rare earths, the complex steps necessary to make the elements useful for end products.
According to Lifton, Molycorp made deals with existing Chinese mining companies, sharing its blueprints for how to build separation facilities next to the mines.
An outline of rare elements and other critical minerals used in smartphones. (Omar Zaghloul/Anadolu via Getty Images)
Lifton remembers telling others in the rare earths industry this would be a mistake. But the consensus was that the Chinese would essentially be suppliers to Molycorp, giving the company more product at a lower cost, while never developing their own processing facilities, much less permanent magnet companies.
That’s not what happened.
The Chinese businessmen “went and sold those blueprints all over China,” Lifton says. “And by the end of the decade, there were a hundred of these plants of all sizes throughout China.”
“I'm not blaming Molycorp,” he added. “They were trying to be good capitalists. They were trying to get the cost down. It just backfired.”
In 1988, according to media accounts at the time, Chinese companies, which could undercut Molycorp prices because of cheap labor, fewer environmental restrictions, and a greenlight to maximize output, overtook Molycorp as the world leader in refining rare earths. By the mid-1990s, China also produced more rare earth oxides than Molycorp and the US.
The power had shifted enough for Chinese Premiere Deng Xiaoping to boast, in 1992, “There is oil in the Middle East; there is rare earth in China.”
Olivia Heller/The Hustle
It went farther downhill from there.
The Mountain Pass mine, which faced toxic wastewater issues in addition to economic problems caused by China’s rise, closed in 2002, effectively ending US production of rare earths. Molycorp and its parent were sold to Chevron in 2005, with Molycorp reorganizing a few years later, only to file for bankruptcy not long after.
Meanwhile, a Department of the Treasury committee approved General Motors’s sale of Magnequench to Chinese-controlled investors in 1995, partially on the condition that a manufacturing facility remain in the US, which used Magnequench for ~85% of the Pentagon’s magnets.
Chinese owners closed Magnequench’s last Indiana plant in 2004, moving operations to China.
“This deal and subsequent deals around the globe have allowed China to come closer to cornering the market in rare earth minerals,” the US-China Economic Security and Review commission wrote in a 2005 report to Congress.
The front page of the Hammond, Indiana, Times newspaper after Chinese owners announced the closure of a Magnequench factory. Indiana Congressman Pete Visclosky said, “We’re giving our enemies our defense technology and your 225 jobs.” (The Times via Newspapers.com).
There wasn’t any mystery about why this happened: Once China developed and scaled its rare earths capabilities, the US rare earths industry couldn’t keep up. US electronic and car companies, not to mention defense contractors, preferred China’s lower prices.
With a near monopoly, China has largely been able to control the global trade of rare earths.
In 2010, it temporarily banned rare earths exports to Japan.
In 2023, it outlawed all exports of technology associated with extracting and separating rare earths, making it harder for other countries to build up their own supply chains.
And it responded to the Trump tariffs by forcing Chinese companies to obtain licenses to export permanent magnets and seven of the 17 rare earths elements, effectively suspending their export.
These seven elements are heavy rare earths, like dysprosium — used in wind turbines and electric car motors— which the US and other countries are particularly ill-equipped to procure and process.
A rare earths rebirth?
It took about a decade after China first showed its willingness to shut down the rare earths trade, but the US finally started to invest in the industry.
From 2020 to 2024, the Department of Defense contributed~$439m to companies such as MP Materials, Lynas Rare Earths, and Noveon Magnetics to help develop facilities to process rare earths and make permanent magnets in the US.
The country’s rare earth oxide production has also increased from 7k metric tons in 2014 to 45k metric tons in 2024, with nearly all coming from Mountain Pass.
Yet most of the rare earths that US companies mine and extract have ended up in China for processing and turning into magnets.
As for magnets, MP Materials has claimed it will annually produce 1k metric tons of neodymium magnets, which are used in smartphones, headphones, medical devices, and F-35 jets. (A company spokesperson did not respond to a request for comment.) Another magnet producer, Noveon Magnetics, has put its capacity at 2kmetric tons. China, though, has the capacity to produce ~300kmetric tons a year.
Olivia Heller/The Hustle
Given China’s advantages, Lifton says the US likely won’t ever catch up.
But he says government subsidies can boost the supply chain and reduce dependence on the Chinese, while countries like Brazil and India could one day compete with China.
To Lifton, however, another important question isn’t being seriously considered: Is there enough demand to justify businesses developing a domestic rare earths supply chain?
For as much discussion as rare earths have received this year, their use pales in comparison to other minerals or metals. Global steel production, for example, was nearly 2Bmetric tons in 2024 (and also dominated by China) — compared to ~400kmetric tons of rare earths.
Regarding national security, the Pentagon’s usage of rare earths has been estimated at 0.1% of total global demand, suggesting that a relatively small supply of rare earths processed and turned into permanent magnets domestically would fulfill its needs.
On top of all that, growth in permanent magnets may stall.
In the US, the Department of Energy estimates the country’s use of neodymium permanent magnets will increase to 37k metric tons in 2030, from ~16k in 2020. But it attributes much of that increase to electric vehicles and wind turbines, two sectors with murky futures, in part from slowing growth in EVs and Trump administration executive orders.
Plus, scientists are researching how to make powerful magnets without using rare earths.
“People tell me,” Lifton says, “‘Well, I'm gonna build a rare earth metal plant. I said, For what reason? Where's the market? Who are you going to sell it to?’”
Still, it’s highly unlikely discussions and concerns over rare earths will fade anytime soon. Lifton, who originally retired in 1999, certainly knows they’re a hot topic.
“I’m busier than I ever was in my working life,” he says.
