US ramps up rare earth magnet production, invests $50 million in Vulcan Elements amid China's global dominance

The Commerce Department and the Pentagon pledged on Monday to provide funding and possibly acquire equity in a US manufacturer of rare-earth magnets, a key issue in the ongoing trade conflict with China, the world's leading supplier.

The department issued a non-binding, preliminary letter of intent to allocate $50 million from the 2022 CHIPS Act to Vulcan Elements. This funding aims to help purchase equipment for producing permanent magnets used in fighter jets, wind turbines, and various other essential products, Bloomberg reported.

US-based rare earths company Vulcan Elements announced it is securing a $620 million direct loan from the Pentagon’s Office of Strategic Capital, along with $550 million in private funding, to develop a facility in the US capable of producing 10,000 metric tons of magnets.

Its partner, ReElement Technologies Corp, a rare earths company, also received an $80 million direct loan from the Pentagon office to enhance its recycling and processing capabilities, with this amount matched by private investment.

“It’s a dream come true,” the report quoted Vulcan Elements Chief Executive John Maslin. “This is all about ramping up the existing production that we have and getting to a scale that is meaningful to the country," he said.

The announcements represent the most recent steps by the federal government to support the supply chain of permanent magnet production, an industry mainly controlled by China. They also highlight the Trump administration’s commitment to developing a rare-earth and magnet market independent of China’s influence, which could eventually help the US and its allies reduce reliance on the world’s second-largest economy.

The Pentagon confirmed the arrangement details to Bloomberg, adding that the funding for the conditional loans was sourced from the One Big Beautiful Bill Act signed in July. This act grants $100 billion in lending authority for critical minerals production and related industries projects.

“These agreements will support the production of advanced rare earth element separation, metallization, and magnet manufacturing capabilities in the U.S.,” the statement said.

Commerce Secretary Howard Lutnick, earlier this year, converted funds from the CHIPS Act into equity in the struggling US chipmaker Intel Corp. The possibility of taking a similar stake in Vulcan, a supplier of magnets in the US for defence and commercial applications, demonstrates Lutnick's willingness to leverage significant influence to impact the semiconductor industry while also aiming to generate a return for the US government.

“Our investment in Vulcan Elements will accelerate US production of rare-earth magnets for American manufacturers,” Lutnick said in a statement by Vulcan Elements. “We are laser-focused on bringing critical mineral and rare earth manufacturing back home.”

The partnership involves the Pentagon obtaining warrants in Vulcan Elements and ReElement, though the value of these warrants remains unspecified. These warrants give the Pentagon the option to purchase shares in the privately held companies at a later date.

What is the issue with rare earth minerals?

The latest investment by the US follows reports that China has imposed new controls on rare earth mineral exports, which are vital for high-tech industries across the globe. Trump had previously threatened to respond with “a massive increase” in tariffs on Chinese imports in retaliation for Beijing’s trade restrictions.

Meanwhile, China will effectively suspend implementation of additional export controls on rare earth metals following US President Donald Trump's meeting with Xi Jinping in South Korea last week.