Washington Should Lower Rare-Earth Refining Costs, Not Buy Into Refiners

Ford idled its Chicago Explorer plant for a week^[1] in May for lack of rare-earth materials, after Beijing began requiring export permits for seven rare earths^[2] in April. “It’s hand-to-mouth right now,” Jim Farley, Ford’s chief executive, said in June. The name is “a historical misnomer,” the U.S. Geological Survey^[3] says; the more common rare earths are about as plentiful in the crust as copper or nickel. The scarcity is man-made, and it sits in the unglamorous middle of the chain, where plants turn ore into oxides and magnets. Washington should start by making those plants cheaper to build and run here, through simpler rules and cleaner chemistry, not by buying stakes in producers and guaranteeing their prices.

On October 9, China’s Commerce Ministry announced^[4] that from December 1, certain magnets made outside China, and parts containing them, will need its export license if listed Chinese-origin rare-earth inputs make up at least 0.1% of their value. Those magnets are samarium-cobalt, or neodymium-iron-boron with terbium or dysprosium. Applications for overseas military users will in principle be refused. Ore is not the bottleneck. In 2024 we dug ore yielding an estimated 45,000 metric tons of rare-earth oxide in concentrates,^[5] exported an estimated 43,000 tons of oxide equivalent in ores and compounds, and relied on net imports for 80% of the compounds and metals we used. For the four magnet rare earths, the International Energy Agency^[2] puts China’s 2024 share at 60% of mining, 91% of refining and 94% of sintered magnets, the kind in electric vehicles and wind turbines.

China's share of magnet rare earth output by supply-chain stage, 2024

From 1965 through the mid-1980s, California’s Mountain Pass mine was the dominant source of rare earths and the United States was largely self-sufficient, the survey recounts.^[3] Then the mine’s separation plant shut after environmental and regulatory problems with its wastewater pipeline, and cheap Chinese supply squeezed what remained. Buying that cheap oxide was sensible. The mistake was leaving the dirty step to others instead of learning to do it cleanly. The pollution moved: as China shut mines at home, Global Witness^[6] traced “the outsourcing of this highly toxic industry” into Myanmar.

The strongest objection is the realist’s, and I feel its pull: when a rival holds that much of the chain, ideology is a luxury. In the realist’s telling, no one will finance an American refinery that Beijing can bankrupt by cutting prices. Molycorp, then Mountain Pass’s owner, filed for bankruptcy in 2015^[7] after prices fell when China loosened its export controls, AFP reported. So in July the Pentagon agreed, MP Materials^[8] disclosed, to buy $400 million of MP preferred stock, to make up for 10 years any shortfall below $110 a kilogram in a benchmark price for the neodymium-praseodymium MP produces, and to buy for a decade a planned magnet factory’s output that MP does not sell elsewhere. MP says the floor reduces its “vulnerability to non-market forces,”^[9] and it reports $1 billion in committed bank financing for the factory. That is faster than anything I propose. I would still start elsewhere and accept the risk that leaves. A floor protects one producer without making the next one cheaper to build, and its cost rises as the benchmark falls, in a market China dominates. Stakes lack a stopping rule. Since then, Lithium Americas^[10] announced a nonbinding agreement in principle to give the Energy Department warrants for a 5% stake, and Trilogy Metals, an Alaska explorer, announced^[11] a binding letter of intent, subject to closing conditions, under which the Pentagon would hold about 10%. Why one miner and not its rivals, and why not toolmakers next?

My alternative is duller. Simplify the rules so private companies can make mining and refining pay here. S&P Global,^[12] in a study supported by the National Mining Association, puts the average for 13 U.S. mines at almost 29 years from discovery to production, and calls permitting “a key reason.” Ten of the 13 are not yet producing, so the average leans on projected start dates, with 2030 assumed where none exists. Fund research into cleaner separation chemistry, the step that shut down at Mountain Pass. A trade war with the main supplier is a poor bet, yet on October 10 President Trump threatened an extra 100% tariff on Chinese imports.^[13] None of this will refine a kilogram next quarter, or guarantee that an American refinery survives a Chinese price cut. Lower costs shrink that risk: the cheaper a refinery is to run, the deeper Beijing must cut to break it, and the more each cut costs its own refiners. If refining pays in America only with a tariff, a price floor or a federal shareholder, that is a confession about American costs, not a strategy. Until those costs fall, a shortage of metals that were never rare can stop American assembly lines, as it did in Chicago.