How China beat out the US to become the top player in rare-earths refining

But even if the Trump administration secures more mines for American companies through agreements like the mineral-rights deal being discussed with Ukraine, it may have to send much of the minerals to China—its main geopolitical rival—to be processed.

A prime example of this conundrum is rare earths, a group of minerals used for defense systems that President Trump has said is the focus of his dealmaking in Ukraine.

“We very much need rare earth. They have great rare earth," Trump said ahead of a recent cabinet meeting.

In truth, the U.S. already has abundant supplies of rare earths, but it relies on China to refine them. That is because the U.S. has lost much of its capacity to process minerals, while China has become the world’s dominant refiner of rare earths, cobalt, copper and many other metals.

“Drill baby drill is not the right focus," said John Ormerod, a consultant for the rare-earth industry.

The Wall Street Journal reported that the Democratic Republic of Congo has offered the U.S. access to a trove of minerals, including cobalt and copper, in exchange for helping it defeat a rebel force in the country. But such a deal raises questions about where these minerals would be processed.

During a joint address to Congress earlier this month, Trump said he planned “historic action to dramatically expand production of critical minerals and rare earths" in the U.S. Last week he signed an executive order to streamline permitting and boost government financing for new domestic mineral projects, including processing facilities.

“President Trump been long committed to unleashing all of America’s God-given natural resources, including critical minerals," said White House deputy press secretary Anna Kelly.

The loss of American refining capacity to China is just one example of how the deindustrialization of the U.S. has ended up favoring its main geopolitical rival. The U.S. has all but stopped manufacturing key products, including containerships, certain pharmaceutical ingredients and some machine tools, as they became cheaper and more efficient to produce abroad, particularly in China.

In the case of rare earths, the U.S. mines around 12% of the world’s supply, putting it only behind China, according to the United States Geological Survey. Most of the bounty comes from a massive deposit in the Mountain Pass mine in California.

But the U.S. exports about two-thirds of its rare earths to China. It has little choice: China is responsible for around 85% of the world’s rare earth refining. Chinese companies then turn the ore into the final product—rare-earth magnets—and export the magnets back to the U.S.

Similarly, the U.S. sends a chunk of its substantial supplies of copper to China for processing. Even America’s lone nickel mine sends its nickel concentrate abroad to Canada for smelting.

“That so-called midstream piece of processing and refining of ores into chemicals and metals is really important and dominated by China," said Morgan Bazilian, director of the Payne Institute at the Colorado School of Mines. Given the pace of China’s expanding efforts, “I don’t see it becoming undominated," he said.

President Trump has talked about buying Greenland, which is rich in rare-earth minerals.

Until the 1990s, the U.S. was a major refiner of minerals and metals. But then China emerged as the dominant player, powered by its cheap labor force and looser environmental regulations of a sector that can be highly polluting. The voracious need of Chinese manufacturers for raw materials during the country’s years of explosive growth was also a boon for Chinese refiners.

Today, the sheer scale of China’s refining industry makes it difficult for others to compete. According to industry estimates, the cost of building a refinery plant in China is a third of the cost than in the U.S.

China’s dominance has grown even further in just the past few years. The world’s top six cobalt refiners are all Chinese and the country’s share of the world’s refined cobalt—needed for defense equipment and batteries—grew from 65% in 2018 to 83% in 2024, according to Darton Commodities, a cobalt trading company. Similarly, Chinese companies now dominate nickel processing after setting up huge plants in Indonesia, the world’s top nickel miner.

The Trump administration recently said U.S. refining capacity for copper lags behind China and launched an investigation into how imports of the metal threaten U.S. national security.

Rare-earth elements are critical for the production of military equipment, including the F-35 jet fighter.

Under former President Joe Biden, the U.S. granted hundreds of millions of dollars in financing to U.S.-based companies to encourage the processing of critical minerals. But many projects have been held back by environmental and permitting issues, as well as the difficulty of competing with cut-price Chinese minerals.

A nickel processing plant that was intended to be built in Minnesota, near a nickel mine under development, was moved to North Dakota due to local objections about the plant’s environmental impact.

Although the U.S. government pledged $114 million in 2022 to get the North Dakota plant up and running, neither the plant nor the Minnesota mine has begun construction. Meanwhile, a surge in Chinese nickel production in Indonesia has tanked the price of metal, hurting the prospects for new projects.

A spokesman for Talon Metals, the company developing the mine and processing plant, said both projects are moving through permitting, and he was hopeful that Trump’s new executive order could speed things up.

Rare earths

A major focus of the U.S. government in recent years has been rare earths, which are needed for the production of F-35 jet fighters, drones and nuclear submarines. The U.S. was a top player in this industry before Chinese competition hollowed out the sector. Over the past five years, the U.S. government has announced hundreds of millions of dollars in funding to rebuild rare-earth processing plants and factories that make rare-earth magnets.

In one of the more ambitious efforts, Lynas Rare Earths, an Australian company, received $258 million in Pentagon financing in 2023 to build a rare earth processing facility in Texas.

Nearly two years later, the project has yet to begin construction, delayed in part by permitting issues related to wastewater treatment. The company may have to redesign the plant to secure the permits.

MP Materials, the Las Vegas-based company that has operated the Mountain Pass mine since 2017, is gradually weaning itself off Chinese refining. Over the past few years, the company has built processing facilities, including a Pentagon-supported plant that does the complex work of sifting out the most valuable minerals to be used in magnets.

In January, the company said it had cracked another crucial step, beginning commercial production of rare earth metals.

The next step for the company is to manufacture the final product—rare-earth magnets—at a commercial scale. It hopes to do so by year’s end, when it would begin sending the magnets to General Motors as part of a supply agreement. While around two-thirds of the company’s rare earth concentrate is still shipped to China, the company is steadily ramping up processing at home.

Write to Jon Emont at jonathan.emont@wsj.com