Despite China’s dominant role in the supply of rare earth elements, Ahmad Ghahreman is optimistic about building a supply chain outside of the country’s control — as long as other countries invest in REE processing and manufacturing capacity. The CEO of rare earth recycler Cyclic Materials says that substantial deposits of rare earths are available outside of China, including in Brazil, India, and Australia. And as a result, companies are beginning to build an ex-China supply.
“Realistically, we do have the raw material outside China to process and produce magnets,” he told Shayle Kann, speaking on Catalyst. “It won’t happen within 24 hours, but if we really want it to happen and we spend money on it, it’ll eventually happen.”
Rare earth elements are essential components in permanent magnets used in EVs, drones, semiconductors, and other electronics.
But over the last 30 years China has built up control over the vast majority of the global supply chain, causing a bottleneck. It’s not a mining problem; it’s processing and manufacturing. Although 63% of current mining happens in China, 90% of processing and 93% of rare earth magnets manufacturing is happening in China. For one particularly important element, dysprosium, China processes over 99% of the world’s supply.
The country wielded this leverage in its trade war with the Trump administration. When the U.S. raised tariffs to record levels, China halted exports of REEs and magnets while it drafted a new regulatory system. U.S. officials specifically sought to remove those restrictions in trade talks this week. It’s a reminder of the industry’s need for alternative sources.
The problem of processing and manufacturing
Many countries have rare earth deposits but that’s where their supply chain stops: They can’t process or manufacture them. Much of the know-how for efficient processing and advanced manufacturing is tied up in Chinese patents and proprietary IP.
But several companies are trying to build their own capacity. For example, the Department of Defense awarded $94 million to VAC Magnetics, a subsidiary of German-based Vacuumschmelze, for a permanent-magnet manufacturing plant in South Carolina. MP Materials, meanwhile, is developing a processing plant in California. And Lynas Rare Earths, which operates an Australian mine and a Malaysian processing plant, is developing a new refinery in Texas.
Listen to Ahmad Ghahreman‘s whole interview on Catalyst:
The current leader isn’t taking this movement lying down. In fact, China is actively working to prevent the development of new processing capacity.
“Back in December of 2023, [China] enforced a ban on the export of equipment and technology related to processing and making magnets. That was really significant,” Ghahreman said. “This was not a ban on the export of rare earth elements or magnets. It was a ban on the export of technology and equipment related to separation, metalization, and magnet production.”
And for companies that came to rely on Chinese technology, it was a problem.
“We can develop our own technology outside China, but those technologies readily available in China are not for free,” he explained. “Some companies that relied on those technologies are now having challenges importing that equipment into the US and Europe. Their projects have been suffering.”
In short, companies need to develop their own process and equipment — and that is going to be harder than leveraging what’s existed in China for 30 years.
