Strategic Mineral Supply Challenges
Washington tends to approach strategic issues as if they were simply procurement problems. I often wish the permitting process moved along quicker. And maybe if more investment came in, we could see things improve. Ideally, if we got those elements right, the market might take over.
But that’s unlikely. We don’t really have a free market operating here, where anything can happen.
The global trade involving critical minerals rarely unfolds in a manner that economists would advocate. Typically, there’s deliberate overproduction and dumping, which aims to undermine competitors before they can grow. When competition falters, prices bounce back, dependence builds, and the Chinese government often gains more control. It’s a logical conclusion for private investors to decide that competing against state-supported producers is generally a losing game—and they’re probably right.
Yet, something seems to be shifting. China’s strategy appears to have gone beyond simple price manipulation; they are now methodically reducing raw material exports.
This shift makes a lot of sense. For instance, selling one kilogram of dysprosium powder can bring in several hundred dollars in profit, but that same kilogram integrated into an electric vehicle motor links to a $40,000 car sale. Countries focused on export revenue will typically sell raw materials, while those aiming for industrial strength will sell finished products.
On April 4, 2025, Beijing implemented compulsory export licenses for seven heavy rare earth elements—terbium, dysprosium, yttrium, and three others. This resulted in several automakers needing to adjust their production shortly thereafter.
By October, China extended regulations to five additional elements, and the industry was on high alert during a partial shutdown announced in November. There was no indication of reverting back to the previous system established in April; rather, the October expansion suspension was the focus. Items like terbium and dysprosium still need separate approvals from the Commerce Department for each shipment, and very few of these are okay for defense purposes.
“The situation isn’t resolved yet,” noted defense aerospace consultant Kevin Michaels, as discussed in Politico’s NatSec Daily. “Yttrium is critical in almost all jet engines, and while manufacturers are finding alternative sources here and there, none have started receiving yttrium from China.” Similarly, RAND’s Bradley Martin pointed out, “If there’s a delay, it’s more a signal than just a glitch.”
Mark Smith, CEO of NioCorp Developments, which is focused on launching rare earth mines in Nebraska, observes this trend clearly. Evidence suggests that the Chinese government is positioning itself to reserve critical minerals for its own manufacturing instead of continuing to supply Western industries. “Some Western leaders still misinterpret China’s new export restrictions as mere bargaining tactics,” Smith remarked. “That perspective misses the essence of what’s happening. Restrictions are not leverage; they signify closed doors.”
With their “Made in China 2025” initiative, the government explicitly aims to own the entire supply chain and has spent considerable time establishing that capability.
The pricing reflects this situation as well. Early 2026 saw dysprosium oxide move for about $191 per kilogram domestically in China, while exports fetch around $317. For terbium, it’s $803 in China versus $1,182 overseas. This discrepancy is less about tariff inefficiencies and more about a consciously disjointed market framework.
China’s heavy rare earth deposits have been sparse for over a decade now. To cover domestic needs, Beijing has relied on imports from Myanmar, but instability and disruptions there have created uncertainty. A nation that tightens export restrictions as its reserves diminish isn’t acting like a typical commercial exporter; rather, this resembles a rationing approach.
The military’s demand for these minerals is becoming increasingly significant. Dysprosium and terbium may constitute a small fraction of the total weight of finished magnets, yet they are essential for maintaining strength even under high-temperature conditions. Without these materials, as Smith emphasizes, “modern weapons and nearly all EVs would degrade or simply fail.” Defense manufacturers are facing urgency to restock depleting ammunition and meet new program needs, like the “Golden Dome” anti-missile initiative, all while struggling to secure necessary resources.
The Department of Defense plans to prohibit the use of Chinese magnets by January 2027, covering about 78 percent of America’s weaponry programs, including F-35 jets and nuclear submarines. This clearly indicates it’s more than just a trade challenge; it’s about readiness, and time is not on our side.
The Trump administration is advocating for expedited permits, funding for mining projects, and proposals for a trade framework featuring enforceable pricing mechanisms. Congress is also bringing forth bipartisan amendments, such as the Critical Mineral Investment Tax Modernization Act, aimed at increasing the depreciable percentage of rare earths from 14% to 22%. In capital-heavy mining operations, after-tax returns are vital in determining project viability.
None of these changes will address the gap immediately. But hoping for the Chinese government to reopen its markets—markets that it has systematically closed—is a sign of denial.
For over two decades, U.S. policymakers have assumed that access to critical minerals is mainly about supply. China’s approach suggests that meaningful competition ceases where value creation begins. Countries that extract dysprosium hold importance, but far more crucial are those that transform it into magnets, motors, aircraft components, and military technology. The Chinese government is strategically focused on that distinction, while the U.S. continues to view this as merely a supply chain dilemma.
