Rare earth elements (REEs) have emerged as linchpins in modern industry, defense, and the green energy transition. As nations race to secure supply chains and maintain technological advantage, understanding the multifaceted value of REEs is more critical than ever.

From powering smartphones to equipping fighter jets, these 17 metals underpin a multitude of advanced applications. Yet, severe concentrations of production and processing capacity in a handful of countries have created vulnerabilities that demand strategic responses.

What Are Rare Earth Elements?

Rare earth elements comprise the 15 lanthanides plus scandium and yttrium. Geologically abundant, they occur at low concentrations and are rarely found in economically viable deposits.

Despite their name, REEs are not scarce; rather, extraction and refinement pose significant technical and environmental challenges. Their unique electronic, magnetic, and luminescent properties make them indispensable in cutting-edge applications.

Key Applications and Their Strategic Role

More than 200 products rely on REEs, spanning defense, energy, electronics, and industrial sectors. Their inclusion is often invisible but indispensable.

• Defense systems: permanent magnets in missile guidance and stealth technology
• Clean energy: high-performance generators in wind turbines and electric vehicle motors
• Consumer electronics: phosphors in displays, lasers, and high-end audio components
• Industrial processes: catalysts in petroleum refining and specialty glass production

In military hardware, REEs enable critical roles in advanced technologies such as radar arrays and targeting lasers. In the green energy sector, permanent magnets containing neodymium and dysprosium drive turbines and electric motors.

Current State of Global Production and Processing

Global production of rare earth oxides reached 390,000 metric tons in 2024, tripling output since 2017. Yet, capacity remains heavily skewed.

While China produces roughly 69% of global REEs, it also commands about 90% of processing capacity. This gives Beijing disproportionate control over refined REEs and the ability to influence downstream markets.

The United States, despite having significant untapped domestic reserves in Montana and Wyoming, processes only light REE oxides at Mountain Pass, California. Heavy REEs remain largely refined overseas, leaving strategic gaps in supply.

Geopolitical Risks and Supply Chain Vulnerability

China has periodically restricted rare earth exports since 2010, leveraging market dominance to exert geopolitical pressure. During trade tensions, supply curtailments threatened military and industrial programs.

The vulnerability arises not from ore scarcity but from a bottleneck in refining and separation technologies. A hypothetical six-month cutoff could cost the U.S. military an estimated $1.75 billion in delayed projects.

Other producers—Myanmar, Australia, Vietnam, Nigeria, India, and Russia—are scaling operations but remain far behind in refining capabilities. Their output growth is steady but insufficient to offset concentrated risk.

Government Strategies and Investment

Recognizing the strategic imperative, governments worldwide have launched investments and policies to diversify supply chains and expand capacity.

• United States Department of Defense: $439 million allocated for domestic production and processing
• Defense Production Act funding: $9.6 million for light REE separation, $35 million for heavy REE extraction
• Grants to Lynas Rare Earths: $150 million to establish U.S.-based refining facilities
• Tax incentives and regulatory streamlining to boost magnet manufacturing

International collaboration includes partnerships with Australia and Vietnam to develop alternate mining and processing hubs. The European Union similarly pursues strategic reserves and streamlined permitting to accelerate projects.

Recycling initiatives aim to recover up to 30% of future demand. Policymakers advocate for environmentally responsible supply chain practices to balance economic growth and ecological stewardship.

Sustainability and Recycling

Discarded electronics represent a growing urban mine. Effective recycling can reclaim neodymium, dysprosium, and other REEs for reintroduction into manufacturing.

Biomining technologies and green extraction methods offer promise. By leveraging microbes and innovative solvents, these approaches could reduce environmental footprints and processing costs.

Industry standards for product design—simplifying disassembly and material identification—are essential to unlocking the full potential of recycling. Robust collection systems and incentives will further enhance circular economy outcomes.

Outlook: Diversification, Innovation, and Strategic Cooperation

Looking ahead, nations must pursue a multi-pronged strategy. Diversifying supply through new mines, processing hubs, and recycling will mitigate concentration risks.

Research into alternative materials and magnet designs could reduce dependence on critical REEs. Advances in solid-state batteries, ferrite magnets, and novel composites may offer viable substitutes.

Strategic cooperation among allies is crucial. Joint research initiatives, shared stockpiles, and aligned trade policies can foster resilience against supply disruptions.

In an era defined by competition for technological supremacy, securing a secure reliable critical mineral supply is not merely an economic necessity but a cornerstone of national security.