Supply Chain Risks of Replacing Rare Earth Suppliers

While No One Was Watching, China Took Control of the 21st Century. #China’s latest move to license the export of processed and enriched rare earth metals went almost unnoticed in the West. Yet it quietly redefines the global balance of technological power. #Beijing has just struck where it hurts most — in the heart of the #US defence-industrial complex. All companies involved in military technology will be unable to obtain licenses for rare earth metals. In one stroke, China has turned the “supply chain” into a pressure chain. Let’s be clear: China’s power doesn’t come from having the largest reserves. Others — #Brazil, #India, #Australia, #Russia — also sit on mountains of ore. The real weapon is processing capacity. China mines about 70% of all rare earth metals on Earth and processes around 90%. Even when the ore is dug elsewhere, it’s refined and separated in China. In other words, if you want clean material, you go through Beijing. Western analysts call this “discriminatory.” But let’s flip the question. If the #US or #EU had a 90% processing monopoly, what would they do in a geopolitical confrontation? Exactly the same thing. So why is there surprise when Beijing plays by the rules of power that the West itself wrote? “You shouldn’t pull a lion by the balls for too long,” as the saying goes — it will cost you dearly. Trump’s economic blackmail campaign against China — from chips to tariffs — has now met its mirror image. Beijing has learned the game and is playing it better. Who gets hit first? The defence industry. Advanced weapons need hundreds of kilograms of rare earths per unit. Then come the AI giants, the #EV manufacturers, and wind turbine producers — all sectors where rare earths are the lifeblood of innovation. Prices have already jumped 10–15%, and stocks of mining companies are soaring. But that’s the surface story. The more profound shift is strategic dependency. #Washington and #Brussels may dream of “de-risking,” but let’s be realistic: building a processing chain outside China takes a decade or more. Even the Swedish Arctic deposit will take 10–15 years to come online. Meanwhile, Beijing dictates the rhythm of technological progress. What’s happening now is a reversal of the 20th-century logic: it’s not oil, not gas, but rare earth metals that determine who dominates tomorrow’s economy — and tomorrow’s wars. China has just shown that the real battlefield isn’t #Ukraine or #Taiwan — it’s the invisible layer of supply chains that make the world’s smartest machines possible. The US fired the first shot in the chip war. Now Beijing has responded in kind — not with bombs or tariffs, but with licenses. A subtler, smarter weapon. And this time, the West is learning what “strategic vulnerability” really feels like. #RareEarths #Geopolitics #TradeWar #Technology #DefenseIndustry #USChina #GlobalSupplyChains #StrategicAutonomy

Energy Transition is not anymore an exclusive question of clean energy. Grip on Critical Minerals and Critical Components is also critical. Let´s focus on China’s Grip on Critical Minerals and Why Reducing Dependency might be a priority for Western Countries´Economies. If you care about clean energy, EVs, grids—or simply keeping inflation in check—you must pay attention to the materials behind them. Today, China dominates refining and key components across many transition minerals (rare earths, graphite, lithium, cobalt, nickel midstream) and that could be a single point of failure for global decarbonization and household costs. What Western economies can do to mitigate the dependancy? ✅ Permitting with deadlines: Fast, predictable approvals for mines, refineries, magnet plants, and recyclers. ✅ Make projects bankable: Long-term offtakes, credit guarantees, and co-funding to unlock non-China supply and midstream capacity. ✅ Friend-shore at scale: Partner with resource nations (Australia, Canada, Chile, Brazil, Namibia, DRC) with strong ESG and transparency. ✅ Rebuild the midstream: Stand up rare-earth separation, magnet manufacturing, lithium/cobalt refining, and graphite anode plants across the U.S./EU/allies. ✅ Use less scarce stuff: Shift to LFP and high-manganese chemistries; design motors and wind turbines that need fewer heavy rare earths; substitute materials where possible. ✅ Recycle by design: Close loops for batteries and magnets—design products for recovery from day one. ✅ Lock in rules & traceability: Align incentives via CRMA/IRA-style policies, due-diligence standards, and <65% single-country dependence thresholds. Building parallel, cleaner supply chains may raise costs in the short term, but resilience beats the far larger economic shock of future disruptions. The lowest-cost system is the one that doesn’t fail. If you’re in policy, energy, auto, or finance, this is your execution moment. Diversify supply, rebuild midstream, and de-risk the transition—now. #CriticalMinerals #SupplyChainSecurity #EnergyTransition #Decarbonization #EVs #Batteries #EnergySecurity #ResilientSupplyChains #Inflation #CostOfLiving

In January 2026, China blocked rare earth exports to Japanese firms over Taiwan. In 2025, Ford shut down a US factory for weeks over magnet shortages. The AI boom's biggest vulnerability isn't software — it's geology. Every AI query runs on physical infrastructure that depends on rare-earth elements. The permanent magnets in data center cooling systems, hard drives, and precision servos all require neodymium and dysprosium — materials sourced from a supply chain controlled almost entirely by one country. China accounts for over 90% of global rare-earth processing and 94% of permanent magnet manufacturing. In 2025, Beijing imposed escalating export controls — first on seven elements, then on twelve, and then on extraterritorial licensing covering products made anywhere that use Chinese-sourced materials. A sub-$7 billion market is holding trillions of dollars of technology infrastructure hostage. That's not a market — it's a chokepoint. The response has been fast and expensive. The US announced Project Vault — a $10 billion EXIM loan to build a domestic critical minerals reserve — alongside an $8.5 billion rare-earth framework with Australia and a $400 million DoD investment in MP Materials. India approved a $860M scheme to build 6,000 metric tonnes of annual capacity for the manufacture of rare-earth magnets. These are serious commitments, but they're all playing catch-up on a supply chain China spent decades locking down. Which raises a different question: what if you could skip the rare earth dependency entirely? This is exactly what our portfolio company Conifer is doing. Founded by former Apple and Lucid Motors engineers, they've developed powertrain solutions that use ferrite (iron-based) magnets instead of rare earth materials. Iron — one of the most abundant elements on Earth — sourced domestically, tariff-free, with none of the geopolitical strings attached. Their patented design delivers up to 30% higher efficiency, a 50% reduction in weight and size, and costs that beat rare-earth alternatives. The applications span EV mobility, data center cooling, industrial automation, robotics, and agricultural equipment. At MFV Partners, we back companies that engineer around structural constraints rather than build alternative supply chains for the same vulnerable materials. Diversifying supply is necessary. But eliminating the dependency? That's the durable bet. The AI revolution runs on atoms, not just bits. The companies rethinking those atoms will define the next decade. 📎 S&P Global: Rare earth supply bottlenecks set to persist in 2026 — https://lnkd.in/gnt-ksdy Ankit Somani Yateendra Deshpande Rohit Sharma Michael Palank Leonardo Banchik

If your supply chain depends on “approved exports” from China, you don’t have a supply chain. The Wall Street Journal just confirmed what many in our industry have felt for months: China is tightening the screws. Manufacturers are now required to submit detailed product images, production-line photos, and end-use documentation to access critical minerals like samarium and gallium. Some U.S. defense contractors are seeing wait times stretch into months—and paying 60x markups just to keep production moving. This is a preview of what happens when strategic materials are treated as geopolitical levers. At 𝗣𝗵𝗼𝗲𝗻𝗶𝘅 𝗧𝗮𝗶𝗹𝗶𝗻𝗴𝘀, we’ve always believed that rare earth metals aren’t just industrial inputs—they’re national assets. And the only real resilience comes from building capacity that can’t be turned off by a foreign regulator. So what does that look like? - Domestic production with full traceability - Partnerships with allied nations who share democratic values - Long-term demand commitments that make investment viable The question isn’t 𝘪𝘧 China will weaponize its position. It’s how much of our economy—and national defense—we’re willing to leave exposed when it does.

China’s expansion of export controls on rare earths is accelerating. In a move mirroring the U.S. Foreign Direct Product Rule, Beijing has introduced new regulations requiring foreign companies to obtain licenses to export magnets if they contain more than 0.1% of Chinese-sourced heavy rare-earth materials—or if they were produced using Chinese extraction, refining, or magnet-making technology. This marks another step in China’s bid to assert dominance over the rare-earth supply chain and to tighten control over critical technologies and expertise—following recent restrictions on lithium battery technologies. It's also another move towards growing extraterritoriality in China’s economic statecraft. Yet Beijing preserves the hallmark of its approach: informality and discretion. Licensing decisions for semiconductor manufacturers will be decided on a case-by-case basis. The timing of this expansion is certainly strategic, coinciding with the next round of US-China negotiations. Last month, Meia Nouwens 温玫雅, Erik Green 林艾力, and I published a report for Global Security and Innovation Summit | GSIS on China’s use of export controls on rare earths and critical minerals. Since then, new developments have only reinforced our conclusion: "China’s rare-earth and critical-mineral export controls are no longer ad hoc measures. They have evolved into a flexible, scalable, and highly targeted geopolitical tool. By blending legal, bureaucratic, and technical mechanisms—from licensing delays to testing bottlenecks—Beijing can exert sustained pressure on foreign industries while retaining plausible deniability and policy reversibility." "For the United States and its allies, the challenge goes far beyond replacing Chinese supply. The real task is to build a parallel ecosystem of extraction, processing, and manufacturing capacity under non-Chinese control. Achieving this will demand sustained public investment, long-term procurement guarantees, and deep coordination among like-minded partners. Without such measures, Western economies will remain vulnerable to one of Beijing’s most potent tools of economic statecraft."

Beijing Drops a Bombshell! China just expanded export controls on rare earths—the metals vital for EVs, chips, and defense systems. Under new rules, even products with trace amounts of Chinese materials now require export licenses. This isn’t trade policy. It’s leverage. China already dominates mining, refining, and magnet production, and this move tightens its grip on the supply chain that powers modern technology. The U.S. responded with 100% tariffs starting Nov 1, but tariffs can’t rebuild supply chains overnight. ⸻ What’s Being Done 🔹 MP Materials is building a full U.S. “mine-to-magnet” chain. 🔹 Apple invested $500M to buy U.S.-made recycled magnets by 2027. 🔹 General Motors partnered with Noveon Magnetics for domestic magnet supply. 🔹 Lynas Rare Earths Ltd (Australia) is expanding refining for allied markets. 🔹 Modal Motors and others are developing rare-earth-free motors that can be robot-assembled. ⸻ Experts say the U.S. may meet defense needs by 2027, yet full freedom from China’s rare-earth dominance could take well into the 2030s. China’s message: control the materials, control the future. Ours must be clearer: rebuild the capability to make them ourselves. #rareearth #manufacturing

Deutsche Bank's Research Institute recently dropped a detailed report on critical minerals, and the central argument cuts through a lot of the crap that's passed around. The US and EU aren't vulnerable because they lack reserves. They're vulnerable because they gave away the processing stack. China controls roughly 90% of rare earth refining capacity and 93% of magnet manufacturing. The US imports 100% of its heavy rare earths from China. The EU is at 71% import reliance on gallium, 76% on magnesium. The report uses a sharp historical framing: "Mineral Fordism." Just as the US built geopolitical hegemony through vertically integrated mass production in the 20th century, China has done the same with critical mineral processing in the 21st. The analogy holds true and the uncomfortable implication is the same late developers face enormous structural disadvantage trying to replicate what took decades and state-subsidised losses to build. Stockpiling won't solve it. The binding constraint is midstream. Without refining capacity, raw ore stockpiles are inert. Ford Motor Company's CEO called it a "hand-to-mouth situation" when the export controls hit in 2025. T The most likely scenario Deutsche Bank maps out for 2026–2035 is one where minerals are used as explicit geopolitical leverage. State-led, fragmenting supply chains, with China maintaining refining dominance and the West still years away from closing the processing gap. A typical rare earth project runs nine years from exploration to production. Bessent said 18–24 months. Those two numbers don't reconcile. The capital question for the next decade isn't who holds the resource. It's who can build the processing infrastructure and what that's actually worth once the market prices in strategic scarcity rather than spot commodity risk. For more of my takes on the resource industry sign up to my weekly newsletter www.kamoacap.com #CriticalMinerals #RareEarths #Mining #Geopolitics #CapitalMarkets #EnergyTransition Source: Deutsche Bank Research Institute, "Chapter 2: Critical Minerals," March 3, 2026