Why the World's Strongest Magnets Run Through One Country
TL;DR
Magnets made from rare earths are critical for EVs, F-35s, Tomahawk missiles and wind turbines. And China produces 99% of the heavy rare earth elements these magnets need.
In April last year, China imposed export controls on some these elements and their oxides. Any company wanting to take them out of China now has to get a licence.
Chinese exports of the licence-controlled rare earths to the US - which include material critical for those magnets - are just 17% of pre-control levels. The US is now desperate to get out from under China's grip.
China wasn't always this dominant. 20 years ago, half of rare magnets were non-Chinese (that's only 6% today). But as demand grew, China invested in its infrastructure and vertically integrated production, while the rest of the world couldn't keep up with the Chinese unit economics.
Brazil holds the world's second-largest rare earth reserves - about 21 million tonnes, roughly a quarter of the global total. But it has no dedicated rare-earth separation plants and little downstream processing infrastructure. In 2025, it produced just 0.5% of the world's mine output, according to US Geological Survey (USGS) estimates.
China holds about 44 million tonnes, roughly half of global reserves. But reserves are the least of its advantages. China's grip tightens at every step downstream: it mines 69% of the world's rare earths (USGS), refines and separates about 91% of them (IEA), and manufactures 94% of the world's neodymium-iron-boron (NdFeB) permanent magnets (Congressional Research Service).
Brazil holds 23% of reserves but produces 0.5% of mine output — a 46-fold gap
Data Source: USGS Mineral Commodity Summaries 2026
China's hold on the raw material is dominant but not a monopoly - Brazil, India and Australia together control over a third of the world's rare earths in the ground. Its hold on the finished product, though, is close to absolute. Understanding how that happened, and why it is so hard to undo, starts with the product itself: a small magnet that the modern world cannot run without.
The strongest magnets in the world
NdFeB magnets are the strongest permanent magnets we have for commercial use. In an EV, they sit in the traction motor, converting electrical energy into the torque that turns the wheels. The same magnets move the flaps and fins of fighter jets, steer Tomahawk missiles, swing radar antennae and spin submarine propulsion motors.
Each magnet blends two kinds of rare earths. Light rare earths - neodymium and praseodymium - supply the raw magnetic strength. But they begin losing their grip as temperatures climb past 80–150°C, which is where EV motors and fighter-jet actuators operate. To counter this, small amounts of heavy rare earths - dysprosium and terbium - are added.
A typical EV motor magnet has roughly 115 grams of dysprosium and 15 grams of terbium alongside 360 grams of neodymium and 110 of praseodymium, according to one analysis. The heavies are about 5% of the magnet's mass, but they are what let it hold its field above 150°C and keep it reliable in critical systems.
The division of rare earth labour inside an EV motor
Data Source: UK Tech Metals Observatory
What makes the dependency on these magnets acute is how little of it does how much work. An EV needs only about 1.5–3 kg of finished magnet. An F-35 carries about 400kg (900 pounds) of rare earth materials and a Virginia-class submarine needs roughly four tonnes, according to the Department of War. In every case the magnets are a tiny fraction of the machine, and in every case the machine cannot be built without them.
And the world wants more of these machines every year. Global EV sales passed 17 million in 2024 and kept climbing; China's factories alone were turning out up to 1.8 million EVs a month into 2026, based on data from National Bureau of Statistics of China.
Militaries pull on the supply from the other side: defence spending is rising across every major power. China's rose about 69% between 2016 and 2025, the US's about 49% over the same window, according to data from World Bank and SIPRI. Every additional missile, radar, jet and submarine competes for the same dysprosium and terbium an EV needs.
What makes rare earths rare
Rare earths are not actually rare - they are common in the Earth's crust. They are, however, extremely hard to turn into useful material, and each step of that transformation is harder than the last. That cascade of difficulty is the real story of China's dominance.
Start with mining. Unlike copper or iron, which occur in concentrated ore bodies, rare earths are thinly dispersed, so producing them means processing massive volumes of ore. Hard, but doable: this is the stage where the rest of the world still participates.
Separation is harder. The elements bond tightly with surrounding minerals and are chemically near-identical to one another, so splitting them apart takes enormous energy and a long chain of chemical steps - solvent extraction, the primary industrial method, can run to a hundred mixer-settler stages or more. China spent three decades and billions of dollars in state investment mastering this process at scale; its share of the market jumps from 69% of mining to 91% of separation.
China's share climbs from 48.6% of reserves to 99% of heavy rare-earth separation
Data Source: USGS; IEA; Benchmark Mineral Intelligence
The last step is the least forgiving. Turning separated oxides into finished magnets that meet automotive and aerospace specifications - consistent, batch after batch - demands metallurgical expertise that exists almost nowhere else. China's share climbs to 94% here, and the handful of producers of scale elsewhere - Japan's Proterial, TDK and Shin-Etsu, and Germany's VAC - still rely partly on Chinese feedstock for their heavy rare-earth additions.
And that is where China's dominance truly peaks: the heavy rare earths. Dysprosium and terbium are geologically scarce, found in minable concentrations almost entirely in the ionic clays of southern China and northern Myanmar - and Myanmar's ore overwhelmingly flows to China, supplying about 70% of its heavy rare-earth feedstock. The result is that some 99% of the world's heavy rare earth separation happens in China, Benchmark Mineral Intelligence estimates.
China tightens the screw
In April 2025, China tightened its grip, imposing export controls on seven medium and heavy rare earth elements. The controls required exporters to apply for licenses, and approvals were slow and opaque - functioning, for some buyers, as a near-embargo. CSIS noted they were announced amid escalating US–China tariff actions, positioning rare earths as an explicit instrument of trade-war retaliation.
China's 2025 export controls targeted the seven heavy rare earths most critical to magnets and defense
Data Source: MOFCOM Announcement No. 18 of 2025 · IEA — Export controls on certain medium and heavy rare earth items
The effects reached automobile factory floors within weeks. In Japan, Suzuki halted output of one model from late May to early June 2025. Ford shut down production of an SUV at its Chicago plant for a week in May. "It's hand-to-mouth right now," CEO Jim Farley told Bloomberg. European automotive suppliers idled plants in early June.
The trade data shows why. China's magnet exports fell 52.9% in May 2025 from April, to the lowest level since February 2020, based on customs data. As of June, only about a quarter of export-license applications had been approved, according to European supplier association CLEPA. Over the following twelve months, exports of dysprosium oxide fell 65%, terbium oxide 59%, and yttrium oxide 53%.
Dysprosium and terbium traded outside China at four to five times pre-control levels, and yttrium spiked roughly 140-fold (Argus, via mining.com) over the year since April 2025. But cost was never the real threat. An EV's 1.5–3 kg of magnet works out to a few hundred dollars of rare-earth content even at 2026 prices (neodymium traded around $125 a kilogram in April 2026). What shut factories was availability. No license, no magnet, no motor.
The squeeze reached US defense systems and forced the White House to intervene. In March this year, Reuters reported that US aerospace suppliers had paused production due shortages of yttrium, which keeps engines and turbines from melting at high temperatures. Ahead of the Xi–Trump meeting in May this year, the White House stepped in to secure export approvals for a large US firm with defense and civilian units that was losing hundreds of millions of dollars a month waiting for a Chinese license.
Supply from the rest of the world
The Pentagon wants out entirely. From January 1, 2027, it requires that no magnet delivered to it contain Chinese rare earths at any stage - mining, refining, alloying or manufacturing. Rare earth market analysts believe a competitive alternative supply chain will realistically take 10–15 years of "sustained policy and investment momentum" to build.
The West has, in fact, diversified one before - and lost it. In 2010, China produced 97.7% of the world's mined rare earths. As Mountain Pass in California and Lynas in Australia came online over the following decade, China’s share fell to about 58% by 2020. Then it climbed back to 69% by 2024 as Chinese supply expanded faster than anyone else's (USGS). China's rare earth magnet production share rose from 50% in 2005 to 94% in 2024.
China's mining share fell from 98% to 58% between 2010 and 2020 — then rebounded to 69% as demand surged
Data Source: U.S. Geological Survey
Today the US punches above its weight in mining - about 2% of global reserves but 13% of world mine output in 2025 - yet almost all of it ships to China for separation. That is the real bottleneck: downstream processing.
Add up the capacity of major separation plants operating outside China plus planned projects, and non-China capacity comes to roughly 102,500 tonnes a year, much of it not yet realised. China's smelting and separation quota was 254,000 tonnes in 2024 - the most recent public figure. Even if every ongoing and planned project outside China delivers at its maximum theoretical capacity over the next few years, the rest of the world will be able to separate less than half of what China could two years ago.
China's 254kt/yr rare-earth separation quota is 5x the rest of the world's nameplate capacity, and 2.5x even if every announced plant is built
Data Source: IEA, company disclosures, trade press
Updated 16 Jun 2026The most critical gap is heavy rare earth processing. Dysprosium and terbium have no direct substitute in high-performance magnets. Though manufacturers have learned to need less of them: grain-boundary diffusion techniques, which concentrate the heavy elements at the edges of magnet grains instead of throughout, have cut dysprosium and terbium intensity by as much as 80% in some applications.
Western capacity to make any heavy rare earths is in its infancy. Lynas became the first commercial producer of separated dysprosium outside China in May 2025 at its Malaysian plant, adding terbium a month later - but produced just 8 tonnes of the two combined in the first quarter of 2026, against a target of roughly 300 tonnes a year.
MP Materials' planned facility at Mountain Pass targets 200 tonnes a year of the two elements by 2028 (backed by a $150 million DoW loan). Solvay's dysprosium-terbium line is scheduled to start by September 2026. Energy Fuels' White Mesa Mill in Utah is separating NdPr (up to 1,000 tonnes a year of capacity), produced 99.9%-pure dysprosium oxide in late 2025 and the first US-made terbium oxide in March 2026, and plans commercial heavy rare-earth circuits by Q4 2026 - with capacity for up to 48 tonnes of dysprosium and 14 tonnes of terbium a year. USA Rare Earth's Round Top project in Texas includes dysprosium processing, though its capacity beyond pilot scale is unknown.
Washington is paying to accelerate all of this: in July 2025 the Department of War took a $400 million equity stake in MP Materials and signed a ten-year offtake agreement for NdPr oxide with a $110/kg price floor, and Lynas received $258 million in DoW contracts to build a light rare earth refinery in Texas. An India–US critical minerals deal signed in 2025 aims to seed joint processing ventures. All of these are years from meaningful volume.
Engineering around the problem is possible but costly. Rare-earth-free motor designs exist, but life-cycle studies find these machines weigh more, run less efficiently, and must be built physically larger to deliver the same torque.
China controls the flow
In October 2025, China expanded the export control regime dramatically: foreign companies now needed Chinese government approval to re-export goods containing as little as 0.1% Chinese-origin rare-earth content, and had to declare intended end uses - an extraterritorial licensing system without precedent in the industry. That expansion was suspended for a year following the Trump–Xi meeting a few weeks later.
China resumed exports to the US three months later than the rest of the world. A year in, the US received only 17% of pre-control levels
Monthly exports of the 20 'fully-covered' controlled HS lines (Y, Dy, Tb, Lu, Sc metals + compounds), in tonnes: total (all partners) vs United States only
Data Source: General Administration of Customs of China (GACC)
Updated 16 Jun 2026This whiplash is the message: Beijing can throttle and release the valve at will. Global exports of yttrium, dysprosium, terbium, lutetium and scandium and their compounds crashed to near zero after the export controls were imposed, but began recovering in July. That’s not to say there has been a full recovery: in the year since April 2025, average monthly exports are down by 57%, compared to before the controls in January 2024 - March 2025.
The numbers are much more stark for the US though - it is receiving only a small fraction of what it previously did. Shipments of the export-controlled material to the US only resumed in October 2025 - three months after everyone else. On average, the US has received only 17% of previous levels, since the export controls were put in place.
The most recent Xi–Trump meeting, in Beijing in May 2026, extracted no real concessions. The original April 2025 controls remain in effect, and the truce on the October restrictions expires in November. For now, China’s hand is firmly on the valve.