Who got it, Who gets it, And Who Still Needs To Smell The Coffee
1. WHO GOT IT — CHINA’S 30-YEAR HEAD START
The story of how China came to dominate the global rare earth magnet industry does not begin with China. It begins in the laboratories of Japan and the United States in the late 1970s and early 1980s, when researchers at Sumitomo Special Metals in Osaka and General Motors in Indiana independently invented the neodymium-iron-boron (NdFeB) magnet. These were revolutionary technologies—one sintered, one bonded—that placed the West at the centre of a supply chain that would become foundational to electronics, automotive engineering, defence systems, and later the entire electrification economy. At that moment, it was unthinkable that China, then still industrially undeveloped, would one day control nearly every stage of this value chain.
What changed was not geology but a series of decisions, incentives, and industrial strategies that gradually shifted not just capacity, but capability—specifically IP and process knowledge—out of the West. The pivotal moment came with the sale of Magnequench, General Motors’ magnet subsidiary. Originally protected by conditions intended to keep production in the U.S., Magnequench was eventually bought by a consortium involving Chinese and Japanese interests. When those restrictions expired, the machinery, the people and the operational knowledge were relocated to Tianjin. The West did not merely lose a factory; it lost the tacit knowledge that underpins manufacturing: the “how”, not just the “what”. Magnequench was not the only example, but it was the most symbolic. It helped seed the first serious capabilities in China’s magnet industry.
Throughout the 1990s and 2000s, China’s approach to intellectual property followed a consistent pattern: IP was respected when convenient—and ignored when it created barriers to national industrial goals. Western companies entering the Chinese market often did so through joint ventures requiring technology transfer. IP enforcement was inconsistent, legal frameworks were still maturing, and the distinction between proprietary methods and broadly understood industrial practice blurred quickly. Magnet technology spread rapidly across Chinese plants through observation, replication and cumulative learning. Much of this happened long before Western patent holders mounted serious legal challenges.
Those challenges came, but too late. Hitachi Metals, which held hundreds of patents covering alloy compositions, sintering conditions, grain boundary diffusion and coercivity enhancement, eventually acted in China. The defining moment came when a lower Chinese court ruled that Hitachi’s patents were “monopolistic” and granted a compulsory licence allowing Chinese producers access to patented processes. Years later, China’s Supreme People’s Court overturned the decision—but by then most of the key patents had expired, and China had long since absorbed their value. The ruling was symbolic; the industrial outcome was already settled.
As these capabilities grew, China aligned them with deliberate industrial policy. Through the 1990s and 2000s, China expanded extraction, built vast solvent extraction complexes, developed metal and alloy production, and invested heavily in magnet-making cluster regions. Export quotas constrained the flow of rare earth materials to the rest of the world, protecting domestic industry. Subsidies and low environmental enforcement reduced costs. The strategy was simple: scale, integrate and undercut.
The moment the rest of the world finally recognised its vulnerability came in 2010, when a diplomatic dispute between China and Japan resulted in a temporary suspension of rare earth shipments to Japan. Prices spiked more than twenty-fold. Supply chains froze. Policymakers panicked. The U.S. attempted to rebuild its lost domestic industry through Molycorp, restarting the Mountain Pass mine and developing new processing operations. But Molycorp lacked modern midstream IP, lacked downstream alloy and magnet capability, and lacked the decades of accumulated operational experience China already possessed. When the WTO later forced China to remove export quotas, China responded by flooding the market with additional supply. Prices collapsed. Molycorp’s economics disintegrated. By 2015, the company was bankrupt. The West had lost the midstream a second time—first through IP migration, then through price warfare
2. WHO GETS IT — JAPAN, THE UNITED STATES, AND THE NEW STRATEGIC SUPPLIERS
Japan, meanwhile, drew a different conclusion. Determined never again to rely solely on China, and recognising the fragility of U.S. industrial capacity, Tokyo made a strategic investment in Lynas. JOGMEC and Sojitz provided financing, offtake guarantees and technical support. Lynas survived the price collapse because Japan treated rare earths as strategic. Molycorp failed because the United States did not. By the mid-2010s, Lynas had become the only major non-Chinese producer of separated rare earth oxides in the world.
Having achieved capability and dominance, China reversed its earlier openness. Advanced magnet-making technologies were reclassified as strategic. Export controls tightened. Technical information and talent became more restricted. Processes that had once been flexible to access became rigidly protected. China had completed the industrial cycle: open on the way up, closed once it arrived.
This is the landscape the United States re-entered in the 2020s—without domestic separation capacity, with minimal metallisation capability, with no large-scale magnet production and with defence supply chains fully dependent on China. The shift began not with markets but with policy. Section 1260H of the 2021 National Defense Authorization Act set a clear requirement: from 2027, the Department of Defense would be prohibited from procuring NdFeB magnets, SmCo magnets or components containing them if any stage of production originated in China. For the first time in four decades, the U.S. created a legal forcing mechanism to rebuild a non-Chinese supply chain.
Meeting the 2027 requirement required more than mining projects. It required IP. China’s advantage was built on 30 years of accumulated process knowledge. The U.S. could not simply “catch up” through investment. Instead, it began acquiring the IP it lacked.
ARA Partners’ acquisition of VACUUMSCHMELZE (VAC) brought one of the world’s most advanced magnet-making intellectual property bases—German, not Chinese—into the U.S. sphere. USA Rare Earth’s acquisition of Less Common Metals (LCM) in the UK brought Western strip-cast alloy IP under U.S. ownership. These two transactions recovered decades of lost capability.
The third pillar came not from acquisition but invention. ReElement Technologies developed a chromatographic separation and metallisation platform that reduces capex, slashes opex and avoids dependence on China’s large-scale solvent extraction complexes. Because ReElement’s process is new, American-owned and structurally different from legacy SX, it bypasses the IP bottleneck entirely. This offers the U.S. a genuinely alternative midstream technology—something it has not possessed in 30 years.
Upstream, projects aligned with U.S. strategic priorities began receiving EXIM and DFC funding: Serra Verde in Brazil, MP Materials in the U.S., and increasingly Pensana in Angola, which offers a non-Chinese, high-grade NdPr source backed by sovereign African capital. Pensana’s low strip ratio, renewable hydroelectric power, rail integration and proximity to port make it one of the most economically advantaged upstream projects in the world—synchronised with the 2027 timeline in a way few others are.
These developments represent the first coherent Western reconstruction of a rare earth magnet ecosystem since the 1980s. The strategy is fundamentally different from China’s, but based on the same principle: commercial capability, not rhetoric, determines industrial reality
3. WHO STILL NEEDS TO SMELL THE COFFEE — THE UK AND EUROPE
The UK and Europe have produced strategies, frameworks, risk assessments and declarations—everything except actual industrial capacity. While Japan wrote cheques and the U.S. wrote cheques and acquired IP, Europe issued press releases. The result is predictable: no large-scale separation plants, no metallisation, no magnet plants of consequence, and no cost-competitive alternative to China.
The UK’s Saltend project obtained planning permission but never funding. The EU launched the Critical Raw Materials Act yet still has no serious magnet capacity behind it. Across the continent, there remains a mismatch between political rhetoric and industrial execution. Committees form. Reports are written. But the factories, engineers and process IP simply do not exist.
In a market defined by cost, capability and learning curves—not declarations—Europe is becoming a spectator rather than a participant
4. THE REAL GAME — EXTRACTIVE ECONOMICS & MIDSTREAM INNOVATION
The West’s new supply chain blends reacquired IP (VAC, LCM), new IP (ReElement), advantaged resources (Pensana, Serra Verde, MP) and policy certainty (the 2027 DoD requirement). For the first time in decades, the pieces align.
Pensana demonstrates how a modern rare earth project can be built on fundamentally advantaged geology, low strip ratios, renewable power and integrated rail logistics—delivering feedstock at a cost base few competitors can match.
ReElement shows how new chemical engineering can reduce the capex and opex of separation and metallisation to levels that challenge the economic assumptions China has relied on for decades.
Together, these models create the first commercially credible route to produce rare earth products outside China at competitive cost.
5. CLOSING — IP AND INNOVATION TO NEUTRALISE CHINA’S ADVANTAGE
Ultimately, the only way to counter China’s dominance is through a combination of extractive economics upstream and innovation-driven efficiency downstream. Pensana demonstrates how a modern rare earth project can be built on fundamentally advantaged geology, low strip ratios, renewable power and integrated rail logistics — delivering feedstock at a cost base few competitors can match. But upstream advantage is only half the equation. The other half lies in technologies like ReElement’s, which reduce the capex and opex of separation and metallisation to levels that break the economic logic China has relied on for decades. Together, these approaches show the path forward: use resource quality and operational efficiency to drive costs down at the mine, then use new IP and new processes to drive costs down in the midstream. If the West can combine these two strengths — Pensana’s extractive economics and ReElement’s disruptive cost profile — it can finally begin producing rare earth products competitively enough to neutralise China’s advantage. In the end, this is what matters: IP and innovation deployed to deliver rare earths as economically as possible, turning strategic ambition into commercial reality.