The rare earth market entered 2025 strongly, with both prices and investor sentiment at high levels, driven by increasing demand for permanent magnets.
However, the initial optimism was quickly quashed by rising geopolitical risks as US-China trade tensions returned rare earths to the center of global supply chain concerns.
During the first quarter of 2025, uncertainty around tariffs and the possibility of tighter Chinese controls weighed heavily on downstream industries and reinforced the strategic value of rare earths.
These risks became clear in early April, when China issued Declaration 18, a comprehensive export control regime covering a range of medium and heavy rare earths – including terbium, dysprosium, samarium and yttrium – as well as related oxides, alloys, compounds and permanent magnet technologies.
The policy, framed by Beijing as a national security and nonproliferation measure, added a new layer of regulatory friction to the supply chains underpinning electric vehicles, defense systems, clean energy and advanced manufacturing.
The reaction was intense. In Washington, the Trump administration reassessed the security of America’s critical minerals, highlighting rare earths as a strategic vulnerability for the country.
“Overdependence on foreign critical minerals and their derivative products could jeopardize U.S. defense capabilities, infrastructure development, and technological innovation.” The White House said A statement at the time underlined the shift from a market-driven concern to a national security imperative.
For John Haykavy, chairman and chief executive of Stormcrow Capital, the Trump administration’s rare earth ambitions, as well as market savvy, emerged as the most influential trends of 2025.
“By far the biggest impact was the implication of US President Donald Trump’s re-election that rare earths and other critical materials found in Ukraine or Greenland or Canada or anywhere are the most important things ever found,” he said. But the veteran market analyst also questioned the administration’s broader goals.
“The important materials for me are those that are necessary to ensure that important projects can be completed,” he said.
“But President Trump has also decided that climate change is a scam, electrified vehicles and wind power are terrible and coal and oil are where they are,” Hikavy explained to Investing News Network.
“For that matter, whether or not Trump even has the concept of a plan about what rare earths actually are, and he’s not using ‘rare earths’ as a catch-all phrase for ‘strange metals’ that I don’t know how to write, so rare earths or lithium are not critical materials as far as the United States should be concerned: If you don’t need them, they’re not critical.”
China’s rare earth chokehold exposes supply chain dysfunction
By mid-year, the impact of China’s controls was being felt most acutely in the automotive sector. European suppliers warned of production shutdowns as licensing delays are disrupting integrated supply chains.
The Asian nation controls about 70 percent of global rare earth mine production, as well as 85 percent of refining capacity and about 90 percent of magnet manufacturing.
When Beijing increased sanctions again in October, expanding export controls to cover a total of 12 rare earths and related permanent magnets, that concentration left markets highly exposed.
Although some measures were later put on hold until November 2026, the dual-use ban remained in place at first, reinforcing the perception that rare earths are now a tool of geopolitical leverage.
“Fundamentally, China has shown a greater willingness to use its dominance in critical minerals to advance its trade and geopolitical influence, potentially causing significant disruption to global supply chains for industries such as automotive, aerospace, defense and electronics,” the S&P Global Energy report said.
Against that backdrop, efforts to diversify supply gained momentum.
In the US, government support moved from rhetoric to capital. The Defense Department has pledged US$400 million to MP Materials (NYSE: MP) to expand processing at Mountain Pass and build a second domestic magnet plant to secure a US-based source of permanent magnets for defense applications.
A few days later, Apple (NASDAQ:AAPL) announced a US$500 million agreement with MP to supply recycled rare earth magnets for millions of devices starting in 2027, linking supply chain security to sustainability.
As Hykawi explained, these developments are setting the stage for ex-China supply:
“We are completely at the beginning of the production, processing and use of rare earths in the supply chain outside China. There is nothing except time and money that prevents us from building that Western supply chain. Rare earth reserves of all types, including the relatively cheap production of ionic clays and their heavy rare earths, are readily available outside China.”
He said there is a misconception about the impacts of rare earth production, and a lack of investment and expertise has prevented rapid construction.
“There is a media saying that rare earth mining and processing is far more destructive to the environment than other types of mining, but this is also completely false,” Haykawi said.
“Unfortunately, building that supply chain will take money and especially time, because we need people who know how to do it all, and there is no substitute for the time required to give them the experience they need.”
Rare Earth Supply Security and Growing Demand
As global demand for rare earths grows and supply chain risks increase, experts believe the sector will continue to grow in importance on the global stage.
During a Benchmark Week presentation, Michael Finch of Benchmark Mineral Intelligence explained that rare earths “have become far more strategic in nature” in recent years, with applications spanning electric vehicles, consumer electronics, wind energy, robotics and modern military systems.
While permanent magnets remain a major driver, non-magnetic uses now account for a larger share of total demand, underscoring the broader industrial importance of rare earths.
Demand projections for rare earths point to strong growth, underpinned by key segment expansion.
According to Finch data, an average 100 kW electric vehicle traction motor contains about 5 kg of neodymium-praseodymium and about 1 kg of dysprosium oxide, which shows how electrification is increasing fuel consumption. Permanent magnet applications are projected to grow at an 8.5 percent compound annual rate through 2030, with magnetic and non-magnetic uses expected to reach parity over the next decade.
Military demand is also an important driver of rare earth demand.
“There are 418 kilograms of rare earths going into the F35 Type II fighter (jet), 2.6 metric tons going into the Type 51 (Navy) destroyer, and 4.6 metric tons going into the Virginia-class submarine,” Finch said.
That said, supply is heavily concentrated in China, which controls 91 percent of the total supply chain from mining to permanent magnets. Finch emphasized that this concentration creates single-country risk, saying, “When a country has such a large share of the supply chain, it is easy to use it as a bargaining chip.”
The global rare earth supply chain is gradually diversifying. With North America and Africa emerging as key growth regions, these projects are expected to significantly increase non-sugar production in the coming decade.
Finch pointed to Africa, which could contribute up to 7 percent of global supply after 2030 due to low capital intensity and favorable mining costs. Despite this progress, he cautioned that full self-sufficiency outside China remains a distant prospect, and stressed the need for rapid investment and strategic coordination to secure supplies.
Rare earth investments boosted by government support
In addition to the Department of Defense’s MP material investment, the U.S. government has established a price floor for neodymium-praseodymium oxide, the high-value rare earth component inside permanent magnets.
During a heated exchange at Benchmark Week, MP Materials CFO Ryan Corbett explained the impact of price levels on support for growing US supply chains. He told the audience the deal was “absolutely transformational”, and pointed to China’s ability to control pricing by flooding or starving the market. “What is the point of investing billions of dollars if prices go from US$170 to US$45 as soon as you start your refinery?” Corbett said.
In October, the Trump administration announced another strategic investment aimed at reinvigorating critical supply chains through a US$1.4 billion public-private partnership with Vulcan Elements and ReElement Technologies.
Under the agreement, the Commerce Department will provide US$50 million in CHIPS Act incentives for neodymium-iron-boron magnet production in exchange for an equity stake, as well as up to US$700 million in conditional loans from the Department of Defense to support facilities targeted at up to 10,000 metric tons of annual production.
On the private investment side, rare earth developer Pensana (LSE:PRE,OTCPL:PNSPF) secured a US$100 million strategic investment to advance its mine-to-magnet ambitions in the US in late 2025.
Although several million-dollar deals were struck in the rare earth sector in 2025, exploration capital remains scarce.
According to Paul Manalo, senior principal analyst, mining studies and mine economics at S&P Global Energy, rare earths account for 1 percent of the global exploration budget; However, that number has improved in recent years.
“For the sixth consecutive year, the budget for rare earths reaches US$155 million in 2025; this is the highest level since 2012,” he said during the firm’s Market Intelligence 2026 Corporate Exploration Strategies webinar.
Although exploration budgets are growing, the expert said 80 percent of that capital is being deployed in just four countries: Australia, Brazil, the US and Canada. “Like other minor metals, juniors are the primary driver of rare earth exploration, with only a few major players in it,” Manalo told the audience. He added, “There are few rare earth mines outside China, so most of the pending exploration is for late-stage projects.”
The government funding and strategic reserves proposal was acknowledged as a good starting point by Stormcrow Capital’s Hayakawi, who also cautioned that they may not be as meaningful as the market anticipates.
He said, “I give the efforts so far an ‘A’ for enthusiasm and a ‘C-‘ for effectiveness. From what I have seen, forces are converging to create a supply chain that can provide what the world is demanding today.”
“Unfortunately, many of their efforts may not bear fruit for five years or more, and none of these agencies have considered it appropriate to try and evaluate what will be needed in five or 10 years.”
More long-term vision is needed.
“Technology gives, but technology also takes away, and although no one can be sure what the technology-driven need will be in five or 10 years, we should at least try to incorporate it into planning,” Haykawi said.
“If the wrong projects are being supported, in five or 10 years the economics of that manufacturer or processor will not be good, and the money and time will be completely wasted.”
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Securities Disclosure: I, Georgia Williams, do not have any direct investment interest in any of the companies mentioned in this article.
Editorial Disclosure: Investing News Network does not guarantee the accuracy or completeness of information provided in interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of Investment News Network and do not constitute investment advice. All readers are encouraged to do their due diligence.
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