Educational research only — not investment advice.
Rare earth stocks are attracting attention again as tensions between the United States and China expose a major weakness in global technology and defense supply chains.
Rare earth elements are used in everything from semiconductors and electric vehicles to radar systems, missiles and aircraft.
The problem is concentration.
China accounted for roughly 85% of global rare-earth refining in 2025, giving it enormous influence over how these materials reach global manufacturers.
That makes rare earths much more than a mining story.
They are increasingly a technology, defense and geopolitical supply-chain issue.
What Are Rare Earths?
Rare earths are a group of metallic elements with unusual magnetic, electrical and heat-resistant properties.
They are often used in very small quantities, but those small quantities can be essential.
Important examples include:
- neodymium
- dysprosium
- terbium
- yttrium
- samarium
Many are used to manufacture powerful permanent magnets or specialized components.
That means a relatively small disruption in supply can affect a much larger finished product.
Why Does China Matter So Much?
The main issue is not simply where rare-earth minerals are mined.
Processing and refining are even more important.
China has spent decades building expertise and industrial capacity across the rare-earth supply chain.
Even after new U.S. and Malaysian investment, China’s share of global rare-earth refining only fell from more than 90% in 2023 to around 85% in 2025. The International Energy Agency estimates that China could still control roughly 70%–73% of refining in 2035 even if planned global projects are completed.
That means diversification will take years.
Why Are U.S.–China Tensions Important?
Rare earths have increasingly become part of trade negotiations.
Some Chinese suppliers have recently refused to ship rare-earth materials to U.S. companies because they fear becoming caught between American and Chinese restrictions.
Reuters reports that U.S. companies in aerospace, semiconductors and other sensitive industries are still struggling to obtain some materials.
Rare-earth access is expected to be discussed when U.S. President Donald Trump meets Chinese President Xi Jinping in Washington on September 24.
The market risk is straightforward:
export restrictions → lower supply → higher prices → production delays
Why Tech Companies Care
Rare earths and related critical minerals appear throughout the technology supply chain.
They can be found in:
- advanced electronics
- semiconductor equipment
- data centers
- electric motors
- smartphones
- renewable-energy systems
Yttrium, for example, is used in semiconductor and aerospace applications, while rare-earth magnets are essential in many high-performance motors.
A shortage does not necessarily stop production immediately.
But companies may need to:
- pay higher prices
- hold larger inventories
- redesign products
- qualify alternative suppliers
All of those responses can raise costs.
Why Defense Stocks Are Especially Exposed
Defense supply chains have even less room for substitution.
Heavy rare earths such as dysprosium and terbium are used in high-performance magnets needed for applications including fighter aircraft, missile guidance and radar systems.
That makes supply security strategically important.
Lockheed Martin has already been exploring purchases of critical minerals from U.S. mines as Washington pushes defense contractors to reduce dependence on Chinese supply.
For defense companies, the issue is not simply the price of the raw material.
It is whether enough material is available to maintain production schedules.
Why Rare Earth Stocks Can Benefit
Supply concerns can create opportunities for producers outside China.
If governments and manufacturers want alternative sources, they may support new:
- mines
- processing facilities
- magnet plants
- long-term supply agreements
The U.S. government has invested directly in companies including MP Materials, USA Rare Earth and other critical-mineral projects as part of efforts to build domestic supply.
This creates potential demand for companies positioned to supply non-Chinese materials.
But investors should be careful.
Rare-earth projects can take years to permit, finance and build.
Why Higher Prices Are Not Always Good
A supply shortage can push rare-earth prices higher.
That may help existing producers.
But very high prices can also encourage:
new supply + recycling + substitution + product redesign
The sector is therefore still cyclical.
A company may appear extremely valuable during a shortage, only for prices to weaken once new production arrives.
This is why investors need to distinguish between:
temporary scarcity
and
sustainable competitive advantage
Can the U.S. Reduce Its Dependence on China?
Yes, but not quickly.
The United States is expanding domestic mining and processing, financing new projects and building strategic inventories.
However, refining remains a major bottleneck.
The IEA expects global demand for critical minerals to at least double by 2040, which means new supply must grow while demand is also rising.
That makes diversification harder.
The challenge is not simply replacing today’s Chinese supply.
It is building enough new supply for tomorrow’s larger market.
What Could Ease the Risk?
Several developments could reduce pressure:
Improved U.S.–China trade relations
More predictable export licences could improve supply.
New Western refining capacity
Additional processing outside China would reduce concentration.
Recycling
Recovering rare earths from existing products could supplement mining.
Material substitution
Companies may redesign products to use fewer constrained elements.
But all of these solutions require time.
What Should Investors Watch?
The most useful signals are Chinese export controls, rare-earth prices, U.S.–China negotiations, new mining projects, refining capacity and defense procurement.
The central issue is simple:
Rare earths are inexpensive compared with many finished products, but without them those products may be impossible to manufacture.
That gives relatively small parts of the global commodity market enormous strategic importance.
For technology and defense companies, supply security may therefore matter just as much as the price of the material itself.
And for rare earth stocks, the key question is whether global diversification creates sustainable demand for new producers—or simply a temporary investment boom.
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