How does China’s rare-earth processing capacity compare to global needs and what would it take for the U.S. to build domestic refining?
Executive summary
China dominates the midstream rare-earth processing market—commonly estimated at roughly 85–90% of global separation and refining capacity—creating a strategic choke point for magnets, batteries and defense applications [1] [2] [3]. Building a resilient U.S. refining chain will require sustained capital, technology transfer and time—measured in years to decades—plus allied cooperation, demand-side policy and environmental permitting reforms to bridge the capability gap [4] [5] [6].
1. How dominant is China’s processing capacity in practice?
Multiple industry and policy reports converge on a stark figure: China processes the overwhelming majority of the world’s rare-earth elements, with most sources citing a range between about 85% and 91% of global refining and separation capacity, and roughly 90% of magnet production—figures that underline China’s effective control over the midstream segment of the supply chain [3] [7] [2] [8]. That dominance reflects decades of coordinated industrial policy, technology acquisition and looser environmental constraints that enabled China to scale solvent-extraction and downstream magnet manufacture to industrial levels [9] [10].
2. What are global needs and how fast will demand grow?
Demand for neodymium, dysprosium and other REEs is projected to rise sharply as electric vehicles, wind turbines, defense standoff systems and other high-tech items scale up; analysts project annualized demand growth in some critical REEs in the high single digits to double digits through 2030, which risks outpacing currently announced non-Chinese refining capacity coming online [5] [11] [12]. Several commentators warn that even with new projects in Australia, Canada and Europe, refining additions will not immediately close the gap and could leave China’s share high unless investment accelerates substantially [9] [13].
3. Where is the U.S. starting from?
The United States has some upstream capacity—most notably MP Materials’ Mountain Pass mine—but historically has lacked large-scale domestic separation and magnet production, with much concentrate still exported for final processing [12] [4]. Recent moves include DoD and DOE funding to jumpstart domestic midstream capacity, and allied projects such as Australia’s Eneabba refinery and a Saskatchewan plant that aim to produce separated oxides outside China, but near-term volumes remain small relative to Chinese output [4] [9].
4. What it would take financially and technically to build U.S. refining at scale
Scaling midstream refining requires heavy capital—hundreds of millions to billions per large plant—advanced solvent-extraction and separation expertise, and downstream magnet-manufacturing cells, all coupled with long lead times for construction, commissioning and process optimization [4] [6]. Policymakers and industry must underwrite higher costs via loans, offtake guarantees and public procurement to bridge the price gap with China; Iluka’s $1.25 billion-backed Eneabba refinery shows how state-backed finance and offtake can mobilize projects, but even that is only one node in a much larger buildout [4] [9].
5. Non-financial obstacles: permitting, environment and workforce
Domestic permitting, stricter environmental rules, and local opposition slow projects—timeline estimates for new sources often run 8–15 years from discovery through optimized operations—so speed requires regulatory streamlining, community engagement and investments in greener processing R&D to reduce the environmental tradeoffs that historically advantaged China [5] [6] [14]. Building not only plants but also skilled process-engineering talent and supply agreements for feedstock and recycled sources is essential to reach meaningful scale [4] [6].
6. Strategic pathway: alliances, recycling and demand policy
Realistic decoupling is not purely domestic; analysts recommend hub-and-partner strategies that combine U.S. finance and standards with allied processing nodes, offtake deals and coordinated procurement to rapidly de-risk reliance on China [4] [2] [11]. Complementary measures—accelerating recycling, standardizing magnet design to reduce rare-earth intensity, and underwriting early domestic offtake for defense and clean-energy projects—will shorten timelines and lower net cost, but none eliminate the multi-year gap to parity with China [4] [6].
Limitations of this synthesis include varying public estimates of China’s precise market share and future-capacity forecasts; reporting and policy pieces cited here provide the best-available, consistent picture but differ in exact percentages and timelines [1] [13].