Rare Earths

G7 leaders have formed a strategic alliance to break China’s dominance over the critical minerals supply chain, a move designed to secure the materials necessary for defense, automotive, and clean energy technologies. By coordinating industrial capacity and establishing stockpiles, member nations aim to mitigate the risks of economic coercion and arbitrary export restrictions that currently threaten global supply chain resilience, according to the official G7 declaration issued at the summit in Evian, France.

Why is the G7 targeting China’s control of critical minerals?

The G7’s strategic pivot is a direct response to what the International Energy Agency (IEA) describes as a dangerously high concentration of supply. China currently controls the refining of 19 out of 20 critical minerals analyzed by the agency, holding an average market share of approximately 70%. For rare earths, the concentration is even more severe: China accounted for 59% of mining, 91% of refining, and 94% of magnet manufacturing last year, according to IEA data.

Did you know? Two decades ago, China produced roughly 50% of the world’s sintered permanent magnets. Today, that figure has climbed to 94%, effectively giving Beijing control over the components essential for electric vehicle motors, wind turbines, and defense systems.

How will the new G7 alliance reduce dependencies?

The G7 nations have committed to a multi-pronged approach that includes diversifying processing capacities and sharing data on market stress. According to the summit declaration, the alliance intends to coordinate efforts with partner countries to build industrial capacity outside of China. A key component of this strategy involves the U.S. pitching a price-floor mechanism to allies, which aims to shield markets from what the U.S. Congress’ Select Committee on China characterizes as state-led market manipulation.

The role of market manipulation and price controls

In a bipartisan investigation released in November, the U.S. Congress alleged that Beijing uses a legal framework to force mineral price reporting that aligns with government interests. The committee report stated that this framework makes it effectively illegal for firms to publish prices that deviate from the Chinese Communist Party’s objectives. By moving toward a coordinated price-floor, the U.S. and its allies hope to prevent Beijing from using its dominant position to weaponize supply chain dependencies.

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What are the primary risks to this supply chain shift?

Transitioning away from a Chinese-dominated supply chain faces significant hurdles, including high capital requirements and existing market volatility. The IEA identifies three primary risk areas: supply chain concentration, price volatility, and dependency on by-products. While Western governments are providing subsidies to boost domestic production, analysts note that China’s market share has actually increased over the past several years despite these efforts. Breaking this grip will require long-term financing and sustained industrial policy coordination that extends well beyond the current summit commitments.

Pro Tip: Monitor the International Energy Agency (IEA) reports on mineral supply chains to track if Western domestic production capacity is successfully gaining market share against established Chinese refineries.

Frequently Asked Questions

Why is China’s control of rare earths a concern? Rare earths are essential for permanent magnets used in advanced defense systems, electric vehicles, and renewable energy infrastructure. A single point of failure in the supply chain creates a national security risk.
What is a price-floor mechanism? It is a proposed policy to prevent market prices for critical minerals from dropping to levels that force Western competitors out of the market, which the U.S. claims is a tactic used by China to maintain dominance.
Are G7 countries building their own mines? Yes, the declaration emphasizes the development of processing and industrial capacities, though building these facilities involves significant time and capital compared to existing Chinese infrastructure.

Are you concerned about how supply chain shifts will impact the cost of clean energy technologies? Share your thoughts in the comments below or subscribe to our newsletter for the latest updates on global energy policy.

The landscape of modern warfare is undergoing a tectonic shift. We are moving away from traditional, heavy-armor engagements and toward a future defined by swarms of autonomous, intelligent, and inexpensive unmanned systems. The Pentagon has recognized this shift, signaling a massive pivot in defense strategy with a multi-billion dollar commitment to drone technology.

However, beneath the high-tech surface of AI-driven targeting and advanced flight controllers lies a primitive and fragile vulnerability: the magnet. Without a secure supply of rare earth elements, the most advanced drone programs in the world could be grounded by a single geopolitical move from Beijing.

The Drone Surge: From Thousands to Hundreds of Thousands

The scale of the current U.S. Drone procurement is unprecedented. Recent orders for tens of thousands of one-way attack drones are merely the opening salvo. Strategic plans suggest a massive scaling effort, with the goal of deploying over 300,000 autonomous platforms by the late 2020s.

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This isn’t just about numbers; it’s about a fundamental change in combat doctrine. As seen in recent global conflicts, drones have become the “new machine gun”—low-cost, high-impact tools that can reshape a battlefield in hours. To maintain “drone dominance,” the U.S. Is allocating billions toward autonomous systems, but there is a massive logistical bottleneck that money alone cannot fix.

Did you know?
Ukraine produced over 1.2 million drones in 2024 alone. This massive scale of production highlighted a critical weakness: nearly every single one relied on magnets manufactured in China.

The Magnet Dilemma: Why “Consumer-Grade” Isn’t Enough

When people discuss the “rare earth crisis,” they often focus on the general scarcity of these elements. But for the defense industry, the problem is much more specific. It isn’t just about having magnets; it is about having the right kind of magnets.

Most global magnet production focuses on “light” rare earths, such as neodymium and praseodymium. These are excellent for consumer electronics and electric vehicle motors. However, military-grade hardware requires “heavy” rare earths, specifically dysprosium and terbium.

The Heat Factor in Combat

In a combat environment, drone motors and jet engines operate under extreme thermal stress. Standard magnets lose their magnetic strength as they heat up, leading to catastrophic failure. Heavy rare earths act as stabilizers, allowing magnets to maintain their integrity at the blistering temperatures found in high-performance military hardware.

Currently, roughly 98% of the world’s magnet manufacturing is controlled by China. This creates a “single point of failure” for Western defense contractors. If the supply of heavy rare earths is cut off, the production of everything from F-35 components to Virginia-class submarines could grind to a halt.

Pro Tip for Industry Analysts:
When evaluating defense tech companies, look beyond the software. The true “moat” in modern defense often lies in the physical supply chain—specifically the ability to secure non-Chinese metallurgical inputs.

The 2027 Deadline: A Ticking Clock for Defense Contractors

The U.S. Government is no longer just expressing concern; it is taking regulatory action. A looming deadline is forcing the hand of major defense primes like Lockheed Martin and Northrop Grumman.

China Controls 90% of the World’s Drones

By 2027, new procurement rules are expected to effectively ban Chinese-origin rare earths from the U.S. Defense supply chain. This mandate covers the entire lifecycle—from the initial mining and processing to the finished magnet. This means contractors must be able to trace and certify every gram of material to ensure it is “clean” of Chinese influence.

For companies that haven’t secured a domestic or allied supply chain, this deadline represents an existential threat to their government contracts. The race is on to build “mine-to-magnet” capabilities that operate entirely outside of Beijing’s orbit.

Breaking the Monopoly: The Rise of Domestic Metallurgy

Solving the rare earth crisis requires more than just digging holes in the ground. You cannot simply buy Chinese processing technology to start a Western plant; Beijing has already blocked the sale of the necessary equipment and specialized know-how to outside nations.

The solution lies in homegrown innovation. We are seeing a new breed of companies investing heavily in proprietary separation chemistry and custom-designed furnaces. For example, companies like REalloys (NASDAQ: ALOY) are building vertically integrated supply chains that bypass Chinese technology altogether. By utilizing facilities like the Saskatchewan Research Council’s processing plant and establishing metallization facilities in the U.S., these players are creating a “non-Chinese” loop.

This shift is moving from the “light” rare earth side (consumer-focused) to the “heavy” rare earth side, which is the true frontier of national security.

Frequently Asked Questions (FAQ)

Q: Why can’t the U.S. Just buy more magnets from China?
A: Dependence on a single geopolitical rival for critical military components is a major national security risk. Future regulations will actively ban Chinese-sourced materials from the defense supply chain.

Q: What is the difference between light and heavy rare earths?
A: Light rare earths (neodymium) are used in most consumer electronics. Heavy rare earths (dysprosium, terbium) are essential for military-grade magnets because they remain stable at extremely high temperatures.

Q: How many rare earth materials are in an F-35?
A: An F-35 fighter jet contains more than 900 pounds of rare earth materials, highlighting the massive scale of the dependency.

Q: What happens if the 2027 deadline is missed?
A: Defense contractors who cannot certify a non-Chinese supply chain risk losing their ability to fulfill government contracts and participating in major defense programs.

What do you think? Is the U.S. Moving fast enough to secure its technological sovereignty, or is the dependency on China too deeply ingrained to fix? Let us know in the comments below.

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G7 Targets China’s Dominance in Critical Minerals