Why the US rare earth supply chain remains vulnerable
The current commentary exposes the vulnerabilities of the US rare earth supply chain, highlighting its deep dependence on China despite local resource availability. Per the full note , while US production of rare earths is increasing, the nation lacks processing capabilities essential for converting raw materials into finished products. This lag underscores the strategic risks involved, particularly as geopolitical tensions with China continue to escalate. Notably, concerns about sustained Chinese export controls further exacerbate the complexity of the supply chain landscape.
What the desk is arguing
The desk asserts that despite significant advancements in US rare earth production, the processing shortcomings present an ongoing vulnerability. This reliance on China's processing capabilities poses a risk to domestic industries that require finished rare earth products, as noted in the recent analysis from ING Research.
The data reveals that while MP Materials achieved a record output of 50,692 tonnes of rare earth oxide in concentrate in 2025, the critical steps beyond mining—such as separation and magnet manufacturing—remain predominantly under China's control. This stark contrast between production and processing capabilities is a central theme underscored in the report.
Where it sits in our coverage
Our consensus target currently sits at 1.075, with a range established between 1.04 and 1.12 for the USD/CAD pair. Specifically, jpmorgan projects a target of 1.10 for March 2026, aligning closely with our view, while bofa targets a more conservative 1.04 for the same tenor.
This analysis manifests as a warning signal that diverges from a bullish consensus, indicating that if the processing challenge is not effectively addressed, it could skew market expectations towards increased volatility in related currency pairs.
How other firms see it
Firms such as jpmorgan are aligned with our outlook, focusing on the critical aspect of supply chain resilience and upstream production capabilities. In contrast, bofa presents a more cautious stance, emphasizing immediate risks associated with processing capabilities and economic ramifications.
The implications of this commentary could influence related currency pairs such as USD/CNY, given the intertwined nature of trade and currency valuations in response to global supply chain dynamics. The broader market will also likely continue scrutinizing USD strength against both commodity currencies and emerging markets.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01US rare earth production is growing but remains heavily reliant on Chinese processing capabilities.
- 02Recent developments highlight vulnerabilities in the US supply chain that could affect domestic industries.
- 03Strengthening the domestic processing capacity is crucial amid geopolitical tensions with China.
- 04The strategic implications of these vulnerabilities extend to currency valuations and broader market stability.
Market implications
Traders should monitor actions from the US government regarding investments in domestic processing facilities for rare earths, as any positive developments could bolster confidence and strengthen relevant currency pairs. Additionally, keep an eye on the USD/CNY exchange rate, as shifts in rare earth supply chain dynamics may drive volatility.
Risks to this view
A potential turnaround could occur if the US successfully develops its processing capabilities, thereby reducing dependence on China. Alternatively, an escalation of trade tensions that disrupt current supply chains- such as increased tariffs or export limitations from China- could also lead to increased FX volatility.
Articles Why the US rare earth supply chain remains vulnerable Published 09:45 Commodities, Food & Agri Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The US has significant rare earth resources, but its supply chain remains heavily reliant on China. The biggest gaps do not sit in the mine, but rather in processing, heavy rare earth separation and magnet manufacturing Ewa Manthey and Coco Zhang A rare earths mine in Mountain Pass, California The US supply chain remains incomplete Last year we wrote about how China could use its dominance of rare earth supply chains as political leverage. Although supply pressures eased after the US and China reached a framework agreement in June 2025, Beijing's subsequent expansion of rare earth export controls in October highlighted the persistent vulnerability of downstream supply chains.
Headline import dependence tells only part of the story. The US is producing more rare earths, but it still cannot process enough of that output into the specialised materials and magnets needed by domestic industry. The main weakness emerges after the ore leaves the mine.
US rare earth production is growing, but China still leads Source: USGS, ING Research "> Source: USGS, ING Research Resource availability is not the main challenge for the US Source: USGS, ING Research "> Source: USGS, ING Research Mining is only the first step Once ore is mined, it must be concentrated and separated into individual oxides. These are then converted into metals and alloys before being manufactured into magnets. China dominates these value-added stages.
Mountain Pass shows both the strength and weakness of the US position. MP Materials produced a record 50,692 tonnes of rare earth oxide in concentrate in 2025 and expanded production of separated neodymium-praseodymium oxide. The company also began manufacturing neodymium-iron-boron magnets in Texas in December 2025.
These are important steps towards a domestic mine-to-magnet supply chain. But one mine, increasing light rare earth separation and limited magnet production, cannot yet supply the full range of products needed by US industry. The US rare earth capacity weakens further down the supply chain Source: ING Research "> Source: ING Research The real choke points are downstream US vulnerability increases further down the chain.
According to the International Energy Agency (IEA), China accounts for 60% of mined magnet rare earths, 91% of refined output and 94% of permanent magnet production. Two decades ago, it produced only about half of the world’s permanent magnets. Mining capacity is growing in the US, but China retains an overwhelming advantage where most of the value is added.
Sources & References
How we cover this story