Why Are Critical Minerals Now Central to Economic Security?
The global economy has entered an era where certain minerals and elements have become as strategically important as oil was in the 20th century. These critical minerals, particularly rare earth elements, now form the foundation of modern technological advancement and national security infrastructure.
The Foundation of Modern Technology
Critical minerals serve as the essential building blocks for key industries including defense, renewable energy, telecommunications, and transportation. These elements aren't just useful commodities—they're irreplaceable components in technologies that define modern life.
Rare earth elements like neodymium, dysprosium, and praseodymium may not be household names, but they power everything from smartphones to missile guidance systems. The magnets made from these materials enable the miniaturization of electronics while maintaining powerful performance characteristics that simply cannot be achieved through alternative materials.
In renewable energy applications, these materials have become indispensable. Wind turbines require approximately 600 kg of rare earth elements per megawatt of capacity, while electric vehicles use significant amounts in their motors and battery systems. The clean energy transition has dramatically accelerated demand for these specialized materials, with some projections indicating a 300-400% increase in rare earth demand by 2040.
"You can think of minerals as the building blocks for all modern technologies—from electric vehicles to fighter jets. These materials power the technologies that shape our lives and define national security," notes Ryan Saha, Senior Counsel at Pillsbury and former adviser to the US Department of Commerce and White House National Security Council.
Strategic Vulnerability in Global Supply Chains
The concentration of critical minerals supply chains has created profound strategic vulnerabilities for advanced economies. While rare earth elements aren't particularly rare in the Earth's crust, economically viable deposits with sufficient concentration are much less common. More importantly, the processing capabilities required to transform raw materials into usable components are highly specialized and geographically concentrated.
China currently dominates multiple stages of the critical minerals energy security value chain, controlling approximately 85% of global rare earth processing capacity. This concentration creates an inherent vulnerability in global supply chains that has become increasingly apparent as geopolitical tensions rise.
Recent export restrictions implemented by China on gallium, germanium, and graphite have highlighted the precarious nature of these supply dependencies. When a single nation controls such a significant portion of materials essential to advanced manufacturing, telecommunications, and defense systems, other nations face substantial economic and security risks.
The vulnerability extends beyond just the raw materials. China has strategically developed capabilities across the entire value chain—from mining to magnet production—creating multiple potential chokepoints in global technology supply networks.
Nations that have traditionally focused on just-in-time supply chains and cost optimization are now confronting the reality that mineral security equals national security in the modern technological landscape.
How Has China Established Dominance in Rare Earth Supply Chains?
China's current dominance in critical minerals didn't happen by accident—it represents the culmination of decades of strategic planning and coordinated policy implementation that has given the country exceptional leverage in global technology markets.
Decades of Strategic Development
China's strategic approach to rare earth elements began in the 1980s with a coordinated national strategy spearheaded by paramount leader Deng Xiaoping, who famously remarked: "The Middle East has oil, China has rare earths." This statement reflected not just an acknowledgment of resource endowment but a vision for leveraging these resources for national development.
"One of the things we worked on during my time at Commerce was analyzing non-market policies and practices impacting mineral markets," explains Saha. "China has developed its supply chain through decades of very coordinated efforts starting in the 1980s."
These efforts included:
- Substantial government subsidies for mining and processing operations
- Targeted acquisition of foreign technology and expertise
- Implementation of export quotas and licensing requirements
- Environmental regulation structures that favored domestic production
- Strategic investments in research and development for processing technologies
- Vertical integration of supply chains from extraction to finished products
The result of these coordinated policies was a gradual but systematic consolidation of global rare earth production. In the 1990s, China's share of global rare earth production rose from 27% to over 90%, while previously dominant producers like the United States saw their production collapse under price pressures.
By the early 2000s, China had established near-complete control over certain segments of the supply chain, particularly in processing capabilities that convert raw materials into oxides, metals, alloys, and finally, high-performance components like permanent magnets.
Recent Export Control Measures
In recent years, China has begun leveraging its dominant position more explicitly through formal export control mechanisms. The most notable of these came in July 2023, when China announced new restrictions on gallium and germanium exports, followed by similar controls on graphite in October of the same year.
These China rare earth export controls weren't outright bans, but rather the implementation of permit systems requiring exporters to disclose considerable information about end users and applications. The strategic timing and selective nature of these controls demonstrated China's sophisticated understanding of supply chain vulnerabilities.
The targeted materials share three key characteristics:
- They're essential for advanced technology manufacturing
- China controls a dominant share of global production
- Substitutes or alternative suppliers cannot be quickly developed
"China has implemented export restrictions on a number of these minerals that are used in important applications such as electronics, energy applications, and defense," notes Saha. These measures represent a more explicit phase of China's long-term strategy to leverage its mineral dominance for geopolitical advantage.
Beyond export controls, China has also been steadily increasing domestic utilization of critical minerals for high-value manufacturing rather than exporting raw materials. This "value-added" approach aims to capture more of the economic benefits from the supply chain by producing finished components rather than just supplying raw materials.
The strategic positioning across multiple supply chain segments creates a complex dependency that cannot be quickly unwound by competing nations, even with substantial investment and policy support.
What Steps Is the US Taking to Secure Its Critical Mineral Supply?
Confronted with growing recognition of supply chain vulnerabilities, the United States has begun implementing a multi-faceted approach to reduce dependency on foreign sources of critical minerals, particularly those dominated by China.
Defense Production Act Mobilization
One of the most significant tools deployed by the U.S. government has been the Defense Production Act (DPA), a Cold War-era authority that allows the federal government to direct industrial production for national security purposes.
"The DPA has been used by both the Biden administration and previously by Trump's critical minerals order to support domestic mineral production," explains Saha. "It's definitely an important tool with many provisions, including funding and other authorities."
In March 2022, President Biden invoked the DPA specifically to accelerate domestic production of critical minerals essential for large-capacity batteries. This action authorized the Department of Defense to:
- Provide direct financial assistance to companies developing mining and processing capabilities
- Support feasibility studies for new projects
- Establish purchase guarantees to reduce market risk for producers
- Fund workforce development programs in specialized processing technologies
- Support research and development of new extraction and processing methods
The Pentagon has utilized these authorities to back specific companies with supply agreements. For example, in February 2023, the Department of Defense awarded a $35 million contract to MP Materials to establish domestic processing capabilities for heavy rare earth elements at its Mountain Pass facility in California.
These investments follow similar actions taken under the previous administration, which also recognized the strategic importance of critical minerals. In 2020, the Trump administration issued Executive Order 13953, declaring a national emergency with respect to the critical minerals supply chain and authorizing similar support mechanisms.
Government-Private Sector Collaboration Challenges
Despite increased government attention and financial support, significant challenges remain in aligning public sector strategic priorities with private sector investment criteria.
"Private capital does want to invest in minerals," notes Saha, "but they may not be exactly looking at the same factors when making investment decisions as the government is. That's one area where I think there could be more cooperation between government and private capital."
This misalignment stems from several factors:
- Government focuses on long-term security concerns, while private investors prioritize near-term returns
- Public sector values supply chain resilience, while private capital seeks cost efficiency
- National security considerations often don't translate directly to market signals
- Private investment follows established commercial paths of least resistance
To address these gaps, the Department of Defense has established the Office of Strategic Capital, which aims to build bridges between private capital markets and defense technology needs. This office works to create incentives that attract investment to strategically important projects that might otherwise struggle to secure private funding.
Other collaborative mechanisms include:
- Public-private partnerships for research and development
- Loan guarantee programs to reduce investment risk
- Coordinated permitting assistance for priority projects
- Long-term offtake agreements to provide market certainty
- Tax incentives for domestic production and processing
Despite these efforts, significant coordination challenges remain, particularly in establishing the business case for investments that may not be immediately competitive with established foreign suppliers in the absence of continued government support.
Can the US Realistically Build a Complete Rare Earth Supply Chain?
The ambition to establish a complete, domestic rare earth supply chain represents one of the most significant industrial challenges the United States has faced in decades. The feasibility of this goal depends on realistic assessment of current capabilities, development timelines, and regulatory constraints.
Current Capabilities and Development Timeline
The United States currently has significant gaps across all major segments of the rare earth value chain, though progress is being made in certain areas. A complete supply chain requires capabilities in mining, processing, separation, metal and alloy production, and finally, magnet manufacturing.
"There are different stages here—mining, processing, magnet production. We are working on all of these," Saha explains. "These things do take time, and we're behind in terms of building up this capability, but that doesn't mean I'm not optimistic that we can do it. There is momentum and will."
Current capabilities and development status across the value chain include:
Mining: The Mountain Pass mine in California, operated by MP Materials, currently produces approximately 15% of global rare earth concentrate. However, almost all of this material is shipped to China for processing.
Processing: Limited domestic processing capabilities exist, though several projects are under development with government support. Converting ore concentrate to separated rare earth oxides remains a significant gap.
Metal & Alloy Production: Minimal domestic capabilities exist for converting oxides to metals and alloys, though companies like MP Materials are developing these capabilities with government backing.
Magnet Production: The U.S. has very limited capacity to produce rare earth permanent magnets, with only a handful of small-scale producers. This represents perhaps the most critical gap in the supply chain.
The realistic timeline for establishing a complete supply chain spans 5-10 years under the most optimistic scenarios. Mining projects typically require 7-10 years from discovery to production, while processing facilities need 3-5 years to design, permit, and construct. Even with accelerated timelines, the technical complexity of these operations requires substantial development periods.
A significant challenge is the chicken-and-egg problem of simultaneously developing upstream and downstream capabilities. Magnet manufacturers need reliable sources of metals and alloys, while producers of these materials need guaranteed markets for their output.
Permitting and Regulatory Hurdles
Perhaps the most significant constraint on developing domestic capabilities is the complex and time-consuming permitting process required for new mining and processing facilities.
"It could take 10 years. I've seen longer in some cases," notes Saha. "In other countries with similar environmental standards, the timeframe is much more condensed. So it is a particular challenge."
The U.S. regulatory framework includes multiple layers of approval at federal, state, and local levels. Key mining permitting challenges include:
- Environmental Impact Statements under the National Environmental Policy Act (NEPA)
- Clean Water Act and Clean Air Act permits
- Resource Conservation and Recovery Act compliance for waste management
- Endangered Species Act consultations
- State-level mining permits and environmental approvals
- Local zoning and land use approvals
This multi-layered approach creates a process that can extend project timelines up to 10 years or more, compared to 2-3 years in countries like Australia and Canada that maintain similar environmental standards.
Recent efforts to accelerate permitting include the designation of critical mineral projects for streamlined review under the FAST-41 program (Fixing America's Surface Transportation Act, Title 41). This designation doesn't bypass environmental requirements but does establish coordinated timelines and single-point-of-contact project management across agencies.
The Supreme Court has also recently issued decisions narrowing the scope of review under NEPA, which could streamline some environmental impact assessments. However, these changes are incremental rather than transformative for overall project timelines.
The permitting challenge represents perhaps the most significant constraint on developing a complete domestic supply chain in a timeframe that addresses near-term strategic vulnerabilities.
What Policy Reforms Could Accelerate Domestic Production?
Addressing the challenges of establishing secure critical mineral supply chains will require significant policy reforms that balance environmental protection with strategic resource development. Several key areas have emerged as priorities for potential reform.
Streamlining Environmental Reviews
The environmental review process for new mining and processing facilities represents one of the most significant bottlenecks in developing domestic capabilities. While environmental protection remains essential, the current process contains inefficiencies that could be addressed without compromising standards.
Potential reforms to the review process could include:
- Concurrent rather than sequential reviews by different agencies
- Standardized data requirements across federal and state agencies
- Established timelines for agency decisions with default approvals if deadlines are missed
- Expanded categorical exclusions for projects with well-understood impacts
- Improved agency staffing and resources to handle complex technical reviews
- Simplified assessment requirements for brownfield sites and expansions of existing operations
"The Trump administration made some efforts in terms of putting some of these projects up for streamlined permitting through FAST-41," notes Saha. This program establishes coordinated timelines and accountability mechanisms for major infrastructure projects, including critical mineral developments.
A recent Supreme Court decision has narrowed the scope of review under NEPA, which "would streamline some of the environmental impact assessments," according to Saha. This decision limits the consideration of indirect effects, potentially reducing the complexity and timeframe of environmental reviews.
However, these changes represent incremental improvements rather than fundamental reforms of the permitting system. More comprehensive changes would require legislative action rather than just administrative measures.
International best practices from countries like Australia and Canada demonstrate that robust environmental protection can coexist with more efficient permitting processes. These countries maintain high environmental standards while processing permits in approximately one-third the time required in the United States.
Legislative Action Requirements
Meaningful permitting reform would likely require congressional action to address fundamental aspects of the approval process that cannot be changed through administrative action alone.
Key legislative priorities could include:
- Statutory timelines for permit processing with consequences for missed deadlines
- Limitations on the scope of judicial review for approved projects
- Defined parameters for environmental baseline studies and impact assessments
- Consolidated permitting processes that integrate federal and state requirements
- Designated critical mineral corridors with pre-approved environmental baselines
- Funding mechanisms for accelerated agency review of priority projects
Securing bipartisan support for such measures has proven challenging, as environmental concerns and economic development priorities often break along partisan lines. However, the strategic importance of critical minerals has begun to create some consensus around targeted reforms.
A comprehensive mineral security strategy would also need to address other policy dimensions beyond permitting, including:
- Tax incentives for domestic production and processing
- Research and development funding for more efficient extraction and processing technologies
- Workforce development programs for specialized technical skills
- Trade policies that address unfair competition from subsidized foreign producers
- Strategic stockpile development for the most critical materials
The interconnected nature of these policy challenges requires a coordinated approach across multiple federal agencies and legislative committees, which has historically been difficult to achieve.
Recent legislative efforts like the CHIPS and Science Act have demonstrated the potential for bipartisan support for strategic industrial policy, potentially creating a model for similar cooperation on critical mineral security.
How Are International Partnerships Reshaping Mineral Supply Chains?
Recognizing that complete domestic self-sufficiency is neither practical nor necessary, the United States has increasingly focused on developing international partnerships to create more resilient and diversified supply chains for critical minerals.
Allied Nation Cooperation
The United States has been systematically developing mineral security partnerships with like-minded countries that share concerns about supply chain vulnerabilities and dependence on potentially adversarial nations.
These efforts include formal agreements with:
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Australia: The U.S.-Australia Critical Minerals Partnership focuses on joint development of resources, processing capabilities, and research initiatives. Australia's minerals reserve possesses significant rare earth deposits and has more advanced processing capabilities than the United States.
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Canada: The U.S.-Canada Critical Minerals Action Plan leverages Canada's extensive mining expertise and substantial resource endowment. Integration of North American supply chains creates natural synergies given the countries' shared border and regulatory frameworks.
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European Union: The U.S.-EU Trade and Technology Council includes significant focus on critical mineral supply chains, with particular emphasis on coordinating investment strategies and developing joint research initiatives for processing and recycling technologies.
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Japan: Longstanding technology partnerships between U.S. and Japanese companies focus on developing alternative materials and recycling capabilities, building on Japan's leadership in material science and efficient resource utilization.
These partnerships extend beyond government-to-government agreements to include joint ventures between private companies, shared research initiatives between universities, and coordinated policy approaches to address common challenges.
The goal is to create interdependent networks of trusted suppliers rather than attempting to replicate every capability domestically. This approach recognizes the global nature of modern supply chains while reducing dependency on potentially unreliable sources.
Creating Resilient Supply Networks
The shift from dependency to interdependency among allied nations represents a fundamental reimagining of critical mineral supply chains. Rather than each country attempting to develop complete vertical integration, complementary capabilities are being developed across friendly nations.
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