【By Observer News, Ruan Jiaqi】
Under the large-scale investment by the Trump administration, the United States has seen a "rare earth boom," with the market once in a frenzy; however, compared to China's mature and complete rare earth industry system, some American companies have realized that the challenges ahead are far more severe than imagined. The experience of Noveon Magnetics is a typical example.
According to U.S. media Bloomberg, this company located in Texas was co-founded by Scott Dunn, and after ten years of research and development, it achieved commercial sales of rare earth permanent magnets in 2023. Although its production capacity is limited, the company is still regarded as the "frontline soldier" for the United States to expand the supply of key industrial components and reduce China's dominance in the rare earth sector.
According to the introduction, Noveon has already signed cooperation agreements with customers such as General Motors of the United States, Swiss electrical and industrial automation company ABB Group, etc. Recently, the company also signed a cooperation agreement with Australian Lynas Rare Earths, and the two parties will cooperate in the procurement of light and heavy rare earths, and supply magnets for the U.S. defense and commercial sectors.
Dunn told the U.S. media that after China announced the implementation of rare earth export control measures earlier this year, he received a large number of inquiry calls, "customers not only want to proceed as planned, but also hope to increase the production volume several times."
At this point, Dunn looked troubled, "some customer requirements are something that China has accumulated over decades." Obviously, the implication is clear - I can't do it.
Due to the surge in inquiries, Noveon has received more inquiries this year than it can handle, and had to refuse some business cooperation. Currently, Dunn is pushing the Texas factory to increase the production capacity of permanent magnets to the designed annual capacity of 2,000 tons. He frankly admitted that in the entire industry, built-up capacity does not mean that it can be immediately put into production.
In his view, for new participants in the rare earth industry outside of China, it is extremely difficult to prove their own supply capabilities at all links of the supply chain: because customers mostly want to see "visibility, certainty, and stability" to plan short-term development.
The U.S. media "Wall Street Journal" on the 28th also noticed the Western "funding boom". The report said that the Chinese measures of deterrence have indeed promoted the recovery of the Western rare earth industry to some extent, which is similar to the effect of the U.S. chip export controls forcing China to accelerate its catch-up. More rare earth industry consultants even claimed that China "awakened the sleeping giant."
However, this report also gave a cold splash to the West above: regardless of the time required to rebuild the Western rare earth supply chain, the industry has already experienced multiple "false prosperity" before. The fact is that the rare earth industry outside of China has gaps in experience and professional technology. The U.S. media also predicted that if China and the United States reach a long-term agreement and restore normal trade relations, Western key mineral purchasers would still tend to purchase from China.
The CEO of Orion Resource Partners, a New York-based investment company, Oskar Lewnowski, said directly, "Now it's not even the end of the beginning, but the beginning of the beginning."
Several data show that China dominates in rare earth mining and production. Bloomberg chart
According to U.S. media reports, China occupies a core position in the global rare earth industry, not only possessing half of the world's rare earth reserves, but also controlling most of the refining capacity. Since the 1980s, China has continuously expanded the scale of the rare earth industry, and currently, more than 90% of the global rare earth permanent magnet supply comes from China.
To counter a series of U.S. tariff measures, China introduced rare earth export control policies in April this year; by October, it further announced expanding the scope of control, clearly stating that when transporting products containing trace amounts of specific rare earth components overseas, an export license is required. Last weekend, the U.S. and China held trade talks in Malaysia, and the rare earth issue is expected to be included on the agenda.
Bloomberg reporting pointed out that under this context, although the industry generally believes that the world will no longer return to relying on a single rare earth supplier, and governments of Western countries led by the U.S. are further increasing support for the rare earth industry, how much breakthroughs the West can achieve in the rare earth industry and how fast the progress is, remains unknown; even whether rare earth factories can be completed on schedule and meet the diverse needs of customers, there are uncertainties.
Reports from the key mineral consulting company Adamas Intelligence also analyzed that theoretically, if a batch of permanent magnet factories currently planned in the U.S. can be successfully launched, their capacity could be sufficient to offset import demand by 2028. However, this goal requires all projects to be advanced according to plan and operate at full capacity, and as demand growth exceeds supply growth, this solution is not a long-term solution.
Goldman Sachs analysts mentioned in a report that in 2010, when China imposed a rare earth export ban on Japan due to the "Diaoyu Islands dispute," it also triggered a global attention boom in the rare earth industry, but ultimately failed to shake China's dominant position. One of the main reasons was the long construction cycle of the rare earth industry: building a new rare earth mine takes 8 to 10 years, and building a refining plant also takes about 5 years.
Additionally, the nature of the rare earth industry itself also restricts the speed of Western breakthroughs. On one hand, the rare earth industry is much smaller than other industrial metals. According to Goldman Sachs data, the global rare earth value in 2024 was approximately $6.5 billion, only one-third of the copper market size; on the other hand, low transparency and poor liquidity in rare earth trade also restrict the ability of mining companies to hedge against price fluctuations.
Procurement of heavy rare earths is another major obstacle for Western industry expansion. The Chinese control policy in April focused on certain heavy rare earths, which are used as additives in magnetic materials, ensuring the performance of permanent magnets under high temperature environments. Most of the heavy rare earths in the world either come from China or from conflict areas in Myanmar, a neighboring country of China, and ultimately need to be transported to China for refining.
Finally, whether customers are willing to bear higher costs is also a key factor in determining the development of the Western rare earth industry. Measures set by the government to support the emerging industry, such as setting minimum prices for producers, will eventually be passed on to consumers. Theoretically, some customers may be willing to accept high prices to avoid geopolitical risks, but government goals and corporate procurement needs are not always consistent.
Based on the above factors, several industry veterans gave the judgment to Bloomberg: With technological advantages, cost control capabilities, and a complete supply chain, China will continue to dominate the global rare earth market in the long term.
China has repeatedly emphasized that rare earth-related items have dual-use military and civil attributes, and the implementation of export controls in accordance with the law is an international practice. But after the new regulations were introduced, the U.S. showed a terrible situation.
Last week, the U.S. and Australia signed an $8.5 billion critical minerals agreement. U.S. media touted that the agreement "aims to counter China." Trump was very happy and immediately wanted to open champagne, and claimed with a bit of bragging that in a year, mineral resources would be so abundant that they wouldn't know what to do with them.
On the 20th, the U.S. and Australia signed a critical minerals agreement, screenshot of the tweet
However, after the celebration, rare earth experts and directors of the international trade and investment company Ginger International Trade & Investment, Thomas Kruemmer, raised a soul-searching question: Is the U.S. trying to build a system that can replace China's rare earth and critical minerals supply chain, "but why use Australian taxpayers' money to solve other countries' problems?"
The Financial Times reported earlier that analysts pointed out that high energy and labor costs make the construction cost of Australian rare earth refineries almost five times that of Asian regions. To stimulate the development of the rare earth industry, the Australian government provides subsidies for related projects, such as providing strong support for the Iluka Resources refinery project in Western Australia, investing 1.8 billion Australian dollars. However, whether these subsidies are enough to make Australian rare earth products competitive with China remains a big question mark.
The report also mentioned that after the U.S. and Australia signed the agreement, the stock prices of some Australian mining companies rose sharply, but some small enterprises still found it difficult to obtain financing. And the reason for this is still investors' concerns that they cannot compete with the mature and powerful Chinese rare earth industry.
Marina Zhang, a researcher in critical minerals at the University of Technology Sydney in Australia, candidly stated, "Even if the U.S. and all its allies take rare earth processing as a national project, I would say that it will take at least five years to catch up with China."
She mentioned that although the U.S. and other countries are heavily investing in developing alternative rare earth supply solutions outside of China, they still have a long way to go to achieve this goal. For many years, China has cultivated a vast talent pool in the rare earth field, and its R&D network is ahead of its competitors by several years.
Philip Ivanov, an Australian geopolitical scholar and founder of the "Geopolitical Risk and Strategic Practice" consulting company, also agreed, saying that the U.S.-Australia critical minerals agreement lacks details, and the two countries may need decades to compete with China.
He is more concerned that China has the capability to take "punitive" measures, including direct shipment of Australian iron ore.
"Pricing will also be a key issue, and China will not sit idly by while the U.S. and Australia disrupt its current competitive market position," Ivanov added.
Regarding the U.S.-Australia critical minerals agreement, the spokesperson of the Chinese Ministry of Foreign Affairs, Guo Jia Kun, responded on the 21st, pointing out that the formation of the global production and supply chain is the result of market and enterprise choices. Countries with critical mineral resources should play an active role in ensuring the safety and stability of the industrial chain and supply chain, and ensure normal trade and cooperation.
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