Magnet Wars: The U.S. Strategy to Challenge China’s Dominance in Rare Earth Elements

The Race for Rare Earth Magnets: A New Geopolitical Battleground

Global competition for dominance is increasingly centered on one vital resource: rare earth magnets. These materials are crucial for the United States’ ability to manufacture military hardware at scale, rapidly replenish weapon inventories, and sustain industrial output in a multi-trillion-dollar economy.

America’s Strategic Challenge: Domestic Magnet Production

The United States’ success in this arena depends on establishing large-scale, homegrown production of magnet materials. While most Western companies are still in early development or planning stages, REalloys stands out as an operational leader, already processing rare earth metals domestically.

Located in Euclid, Ohio, REalloys (NASDAQ: ALOY) operates the only North American facility converting heavy rare earths into advanced metals and alloys for defense applications. By bridging the gap between raw materials and finished magnets, REalloys has established a reliable supply chain that directly supports U.S. manufacturing and defense programs.

The company has secured non-binding long-term supply agreements for feedstock from North America, Kazakhstan, Greenland, and Brazil, all processed within the U.S. This eliminates the need for overseas processing and ensures compliance with tightening Department of Defense sourcing rules, as outlined in their DoD contracts.

Meeting the Department of Defense’s Urgent Needs

The U.S. military is actively sourcing rare earth metals and alloys from REalloys for ongoing defense programs. The company’s domestic production meets stringent specifications already integrated into military supply chains. As regulations shift in 2027 to exclude Chinese materials, REalloys’ products will remain compliant without changes. No other North American supplier currently matches REalloys’ capability to produce qualified heavy rare earth metals and alloys at scale, and it is expected to remain this way for at least three more years.

The Critical Role of Heavy Rare Earths

Heavy rare earth elements are essential for advanced missile and aerospace systems, ensuring performance under extreme conditions. Elements like dysprosium and terbium are added to magnet alloys to maintain magnetic strength at high temperatures and under intense vibration, making them indispensable for precision-guided munitions and missile defense systems.

REalloys’ Position in the Rare Earth Supply Chain

While many U.S. rare earth ventures remain focused on mining and early-stage processing, REalloys operates further downstream—where supply chains are either realized or disrupted. The company’s operational focus is on delivering finished metals and alloys, not just raw materials or theoretical plans.

Strategic Partnerships and Expansion

REalloys has entered a commercial processing and long-term offtake agreement with the Saskatchewan Research Council (SRC), securing 80% of the upgraded facility’s annual output. Production of heavy rare earths from this site is expected to begin in early 2027, positioning REalloys as North America’s only commercial-scale supplier of dysprosium and terbium oxides.

The company is investing approximately US$21 million to expand capacity, aiming to triple heavy rare earth processing and boost light rare earth (NdPr) output by 50%. The expanded facility will produce up to 30 tonnes of dysprosium oxide, 15 tonnes of terbium oxide, and 400 tonnes of high-purity NdPr metal annually, increasing to 600 tonnes after the upgrade.

Feedstock agreements are in place with partners in Kazakhstan, Brazil, and Greenland. In Kazakhstan, REalloys has secured a long-term supply deal with AltynGroup for rare earth feedstock containing both light and heavy elements. In Brazil, a memorandum with St George Mining grants access to up to 40% of the Araxá project’s output, and in Greenland, a 10-year agreement is expected to provide up to 15% of Tanbreez project production.

Advanced Processing at Euclid, Ohio

At its Ohio facility, REalloys separates rare earth oxides, reduces them to metal under controlled conditions, and alloys them into magnet-grade materials. Both light and heavy rare earths, including dysprosium and terbium, are processed within a single workflow, producing pre-alloyed metals with precise chemistry for qualified magnet manufacturing. This facility serves as the critical link between separation and final magnet production, supplying material directly to the Department of Defense.

America’s Rare Earth Supply Chain Revival

The United States is rebuilding its rare earth supply chain for the first time in decades, facing direct pressure from China, which dominates processed materials essential for defense and industry. Few entities outside China can reliably convert rare earth oxides into finished metals at industrial scale—a step where most Western supply chains faltered years ago.

The Center for Strategic and International Studies (CSIS) identifies rare earth metallization and alloying as the most challenging and least developed capabilities to restore outside China. Achieving stable, magnet-grade output requires years of operational experience, not just investment or construction. While most Western efforts stop at oxide production, REalloys is already converting oxides to metals and alloys at its Euclid facility, meeting downstream specifications for defense applications.

This expertise is rare, as the U.S. abandoned it decades ago, and it cannot be quickly rebuilt. REalloys’ operational history and technical know-how are now feeding American supply chains with usable materials, not just intermediates, setting the boundaries for U.S. industrial and defense capacity.

Key Companies Dependent on Heavy Rare Earths

• Microsoft (NASDAQ: MSFT)
  Microsoft is leading the development of a "Circular Rare Earth Economy," focusing on large-scale urban mining rather than traditional extraction. In 2025, the company launched a commercial Rare Earth Material Capture Program with Western Digital, recycling over 50,000 pounds of end-of-life hard drives to recover more than 90% of the neodymium and praseodymium used in magnets. This initiative transforms Microsoft’s data centers into a domestic resource, cutting processing emissions by about 95%. Microsoft also supports AI-driven mineral exploration through KoBold Metals, leveraging advanced computing to discover new critical mineral deposits and stabilize supply chains.
• NVIDIA (NASDAQ: NVDA)
  NVIDIA is revolutionizing rare earth mining and processing with AI-powered technologies. Collaborating with Caterpillar, NVIDIA’s platforms enable autonomous mining fleets to extract minerals with high precision, reducing waste and resource consumption. The company’s Omniverse platform allows for digital simulation of rare earth refineries, optimizing chemical processes and achieving high-purity outputs for defense-grade magnets. NVIDIA’s "Magnets-for-Chips" policy prioritizes its advanced AI hardware for partners supporting the Western rare earth supply chain, reinforcing secure, non-Chinese material sourcing for the AI-driven economy.
• Alphabet (NASDAQ: GOOGL)
  Google, through DeepMind and Google Cloud, is pioneering AI-driven materials discovery and process automation. The GNoME 3.0 model predicts new crystal structures for high-performance, rare-earth-free magnets. Google Cloud’s AI manages chemical separation at the Saskatchewan Research Council’s facility, enabling efficient, high-purity output with minimal human intervention. Google’s machine learning tools also support mineral exploration, turning geological data into actionable targets for mining companies.
• Tesla, Inc. (NASDAQ: TSLA)
  Tesla’s innovations in electric vehicle and battery design significantly influence demand for rare earths and other critical minerals. The company’s manufacturing scale and supply agreements shape market trends, especially as it explores ways to reduce rare earth content while maintaining performance.
• General Motors Company (NYSE: GM)
  GM is securing upstream access to battery materials, including lithium, nickel, and cobalt, to support its electric vehicle ambitions. The company invests in mining projects and recycling partnerships to ensure a stable supply and reduce reliance on primary extraction.
• IperionX (NASDAQ: IPX)
  IperionX is reshaping the titanium industry in the U.S. with innovative, low-carbon production methods using recycled scrap. The company’s Virginia facility supplies lightweight titanium components for defense and automotive applications, reducing dependence on foreign sources. IperionX is also developing a major mineral resource in Tennessee to support its circular business model.
• Olin Corporation (NYSE: OLN)
  Olin is a critical supplier of chemicals needed for rare earth and lithium processing. Its infrastructure and supply agreements support the growing network of North American refineries. Olin’s ammunition division also provides steady revenue, making the company a key enabler of both green technology and defense supply chains.

Industry Insights and Market Trends

The rapid expansion of AI is fueling unprecedented demand for natural gas and electricity. Investors who recognize the energy needs of data centers are positioning themselves for significant gains as the industry adapts to power the trillion-dollar AI sector.

Disclosures and Important Notices

Forward-Looking Statements
This publication contains projections and expectations regarding the growth of featured companies and the industry. These statements involve risks and uncertainties, including regulatory changes, market conditions, and the ability of companies to execute their strategies. Actual results may differ from those anticipated.