Nearly six months ago, China sent an unmistakable message about its grip on critical supply chains. Its leaders suspended exports of powerful rare earth magnets that many industries around the world can’t live without.
The move gave renewed urgency to efforts begun in recent years to develop alternatives. In the United States, four factories to make rare earth magnets are finishing construction or starting to produce magnets. An especially large factory has just opened in Eastern Europe.
But the scramble since April has served only to underline the lead that China has after three decades of heavy investment, and how hard it will be for the rest of the world to catch up quickly.
China has used its chokehold on rare earth magnet supplies to gain leverage in trade negotiations with President Trump and with the European Union. Since the initial cutoff, Beijing has allowed some rare earth exports but now keeps tighter reins on them. As a result, Mr. Trump has been more cautious about raising tariffs on China than on countries like India and Brazil, which were not original targets for his tariffs.
China has also restricted rare earth magnet exports to Europe to pressure the European Union to reconsider tariffs on Chinese electric cars.
“Many companies are still encountering significant challenges, with some even threatened by or already experiencing production stoppages” for lack of rare earth magnets, said Jens Eskelund, president of the European Chamber of Commerce in China. Automakers and defense contractors have been the hardest hit in Europe and the United States.
Concern over China’s dominance in rare earths began to bubble up several years ago in agencies of the U.S. government and European Union. Several of the projects now approaching completion were helped along by government financial incentives.
On Friday, the Canadian company Neo Performance Materials opened a factory in Narva, Estonia, that in one fell swoop has nearly doubled the available capacity of Europe and the United States to make magnets. Neo has also installed much of the equipment needed to more than double its factory’s output over the next several years.
Still, the gap with China is large.
North America and Europe together buy nearly 40,000 tons of rare earth magnets annually for cars, robots, drones and other products, almost all of it purchased from China, according to Adamas Intelligence, a firm in Toronto that tracks the industry.
Countries outside Asia have been manufacturing fewer than 2,000 tons of rare earth magnets a year, mainly in Germany and Finland. Japanese companies have been making an additional 25,000 tons annually in Japan and Vietnam, primarily for automakers and other customers in Japan and South Korea.
China, by contrast, produces more than 200,000 tons of rare earth magnets a year. Many of the magnets go into motors and other devices made in Chinese factories as part of China’s vast exports of manufactured goods
A global game of catch-up
Companies working to increase production outside China are making progress, but it’s slow.
VAC Group of Germany, which has been Europe’s main rare earth magnet manufacturer, plans to commission a factory in Sumter, S.C., next month with a capacity of nearly 2,000 tons a year, said Erik Eschen, the company’s chief executive.
Using American workers who did up to 18 months of training at VAC’s factories in Germany, the company expects to run the South Carolina facility at full capacity by the end of March, he said. It could nearly double capacity in 18 months, he added.
MP Materials, which owns the Mountain Pass rare earths mine on the California-Nevada border, is finishing a 1,000-ton factory in Texas. It will initially supply General Motors. MP Materials intends an expansion and a second factory to bring total annual production to 10,000 tons within a few years. The company got a boost this summer when the Defense Department agreed to invest $400 million.
A third company, USA Rare Earths, has built a factory in Stillwater, Okla. The factory is expected to be producing at an annual pace of 600 tons at the end of next year and twice that by early 2027, said David Bushi, the company’s senior vice president of manufacturing. A fourth company, Noveon Magnetics, has built a factory near Austin, Texas.
But these are optimistic forecasts, industry executives said. Building a rare earth magnet factory is easier than running one, and it can take as long as three years to ramp up fully. Quality standards are exacting and require the work of experienced technicians.
A factory needs to be able to make dozens of different kinds of rare earth magnets. One gasoline-powered car can use more than 40 rare earth magnets, often weighing a third of an ounce or less, for the motors in the seats, brakes, side mirrors and other systems. Electric cars need additional magnets.
One reason China is so far ahead in magnets is its near total control over the processing of ore to extract rare earth minerals. Chinese refineries produce over 99 percent of the world’s supply of three kinds of rare earths crucial to making magnets that can resist heat. Many mines in other countries, including the United States, have long shipped their ore to China to be refined.
China’s reach in rare earths extends into other countries. Shenghe Resources, which is partly owned by the Chinese government, has invested in or signed contracts with many of the new rare earth mines and refineries.
Most of the world’s rare earth processing equipment is made by China, which has begun restricting equipment exports. China employs nearly all the world’s technicians working in the refineries, and the government has recently barred most of them from leaving the country.
“It’s not easy to find technical people outside of China,” said Ramón Barúa Costa, the chief executive of Aclara Resources, which is building a rare earths mine in Brazil.
In Estonia, a town with fifth-generation technicians
For companies and countries trying to wean themselves off China’s rare earth magnets, a lot is riding on Neo’s operations in easternmost Estonia. Sillamae, where Neo refines rare earths, became a center of shale oil production in the 1920s and rare metals production in the 1980s. Narva, where Neo has built its magnet factory, is on a river bend that juts into Russia.
So close to Russia, Narva seems a peculiar location for a European initiative toward achieving greater self-reliance for critical minerals. In 2022, four months after his invasion of Ukraine, President Vladimir V. Putin of Russia noted the strategic importance of Narva to Russia. Many in Estonia, formerly part of the Soviet Union and now a member of the European Union, were alarmed at his remarks.
In a written reply to questions, Prime Minister Kristen Michal of Estonia said: “Our defense investments, combined with the firm commitments of our allies to the security of our region, are strong guarantees for continued economic prosperity in this part of the world.”
Neo itself has a deep lineage in rare earths. It owns Magnequench, a former General Motors subsidiary that invented applications for rare earth magnets in the 1980s and 1990s. In recent years Neo has shifted part of its rare earths production from China to Sillamae.
Neo’s new magnet factory in Narva has an initial capacity of 2,000 tons, and parts of the factory have already been built for 5,000 tons.
But even ramping up production to 2,000 tons may take three years because of the complexities of running a magnet factory, said Rahim Suleman, Neo’s chief executive, who questioned whether other companies could move faster.
“If you have not done it before,” he said, “you just don’t know.”
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He lived and reported in mainland China through the pandemic.
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