Rare Earths and Geopolitical Tensions: The U.S. Race to Secure Critical Minerals

The United States’ reliance on a single rare earths mine—MP Materials’ Mountain Pass facility in California—has become a stark symbol of its vulnerability in a world where China dominates 80% of global rare earth production. As China tightens export controls to leverage its mineral dominance, U.S. policymakers and investors are scrambling to diversify supply chains for elements essential to everything from electric vehicles (EVs) to missile guidance systems. This article examines the geopolitical stakes, economic challenges, and investment opportunities in America’s push to rebuild its rare earths industry.

The Geopolitical Tightrope

Rare earth elements (REEs) are the unsung heroes of modern technology. Neodymium and dysprosium, for instance, are critical for magnets in EV motors and wind turbines, while erbium is vital for fiber-optic cables. China’s near-monopoly on REE refining and processing——has long been a strategic pressure point. In 2020, Beijing imposed export quotas on REEs to Japan during a territorial dispute, and in 2023, it restricted exports of gallium and germanium, semiconductors for which the U.S. relies on Chinese supply chains. These moves underscore the risks of relying on an adversary for critical materials.

The Biden administration’s Inflation Reduction Act (IRA) allocated $3 billion to boost domestic production of critical minerals, with rare earths at the forefront. Yet progress remains slow: the Mountain Pass mine, which reopened in 2012 after a 2002 shutdown, now supplies just 5% of global REEs. New projects, such as USA Rare Earth’s planned Texas facility, face permitting delays and environmental hurdles.

The Economics of Mining Rare Earths

Establishing a rare earth mine is a capital-intensive, decade-long process. Environmental regulations—particularly around radioactive byproducts like thorium—add to the complexity. reveals that U.S. projects cost 2–3 times more per ton of REEs than Chinese equivalents, due to stricter regulations and higher labor costs. This gap, combined with the long lead times (7–10 years from discovery to production), creates significant barriers for investors.

Yet the market potential is undeniable. The global rare earth market is projected to grow from $7.5 billion in 2023 to $12 billion by 2030, driven by EV adoption and renewable energy infrastructure. show how geopolitical events can spike prices: neodymium prices surged 600% during China’s 2010 embargo. Today, with U.S.-China trade tensions escalating, similar volatility looms.

Investment Considerations

For investors, the rare earths sector offers both high risk and high reward.

1. MP Materials (MP): The sole U.S. rare earth producer, MP’s stock has risen 150% since 2020, fueled by IRA subsidies and partnerships with Toyota and Ford. However, its profitability hinges on China’s export policies and global demand for EVs.

2. Exploration Plays: Smaller firms like USA Rare Earth and Texas Rare Earth Industries are advancing projects but lack proven production records. Their success depends on regulatory approvals and capital raises.

3. Recycling and Substitutes: Investors should also consider companies like Apple and Tesla, which are accelerating REE recycling efforts, and firms developing substitute materials for rare earth magnets.

Conclusion: A Long Game with Strategic Value

The U.S. rare earths sector is at a pivotal juncture. While China’s dominance and the high costs of domestic production pose significant hurdles, the strategic imperative to secure supply chains cannot be understated. The IRA’s funding and bipartisan support for critical minerals legislation provide a foundation, but execution will determine success.

Investors should approach the sector with a long-term lens. The Mountain Pass mine’s expansion and new projects could reduce reliance on China by 2030, but returns will require patience. Meanwhile, the geopolitical stakes are clear: as shows, $3 billion in public investment is a down payment on energy independence. For those willing to endure the volatility, rare earths may prove a cornerstone of 21st-century economic resilience.