How Bad Would It Get If China Blocks Rare Earths to America? | OilPrice.com
Tom Kool
Tom majored in International Business at Amsterdam’s Higher School of Economics and later completed an Executive MBA in Energy Transition at the University of Groningen.…
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By Tom Kool – Oct 20, 2026, 7:00 PM CDT
Taiwan is the next pressure point that will test China’s weaponization of rare earth metals.
When Japan indicated it would not remain neutral in a Taiwan conflict, Beijing responded by sharply restricting exports of several heavy rare earth materials, including dysprosium and terbium.
Japan was the test case. With U.S.-China tensions escalating, a confrontation could likely lead to an immediate blockade of Chinese rare earths to American markets, pressuring U.S. defense without firing a single shot.
From a defense perspective, it would be disastrous for a Pentagon that is busy rebuilding the $28 billion worth of weapons depleted so far in the ongoing war with Iran. However, in theory, that shouldn’t matter because Washington has already set a deadline of 1 January 2027 for a ban on all Chinese-origin rare earths in American weapons systems.
While the deadline is still in place, it remains controversial, with defense manufacturers warning that a new supply chain won’t be ready in time.
REalloys (NASDAQ: ALOY) the company building what could be the largest heavy rare earth metallization facility outside China and the Western Hemisphere’s first commercial-scale heavy rare earth metallization platform, is a key party in this race against time, bringing commercial metallization capacity online in early 2027 to meet the Pentagon’s January 1, 2027 sourcing deadline.
The 2027 ban doesn’t affect the civilian economy. Rare earth permanent magnets power industries worth an estimated $1.5 trillion annually in the United States alone, from automobiles and industrial machinery to electronics, medical equipment and data centers. According to the IMF, in the United States, rare earth permanent magnets drive about 70% of value added at risk (VAAR) from a hypothetical severe rare earth supply disruption. A Chinese export cutoff wouldn’t create separate defense and civilian shortages. It would force both into the same market, competing for a domestic supply chain that remains in its infancy. Related: Copper Needs $332 Billion in New Mines to Avoid Deficit, BloombergNEF Says
What if China suddenly decides to pull the plug on rare earths exports to the U.S.?
Who runs out of dysprosium or terbium first? Recent disruptions in Japan and Europe showed that once inventories ran down, manufacturers began rationing materials, redesigning products and, in some cases, temporarily suspending production.
As inventories dwindled in Japan, Shin-Etsu Chemical, the world’s largest producer of rare earth permanent magnets outside China, stopped accepting new orders for some dysprosium-containing magnets, according to Reuters. Electronics components manufacturer TDK said sourcing rare earths had become “extremely difficult,” forcing it to rely on inventories while accelerating efforts to redesign products that use less rare earth material. Reuters later reported that the shortages had spread beyond magnet manufacturers as Japanese companies across multiple industries warned investors that critical minerals were becoming increasingly difficult to obtain.
In the U.S., the first failures would occur among manufacturers with the thinnest private inventories and the greatest exposure to high-performance NdFeB magnets, particularly automotive suppliers, industrial motor manufacturers, robotics, aerospace components and other users of dysprosium- and terbium-doped magnets.
Reuters reported last year that Hyundai had accumulated roughly a year’s worth of rare earth inventories, giving it more flexibility than competitors including Ford and BMW, whose production or supplier networks had already been affected by China’s export restrictions. Most manufacturers do not disclose inventory levels, making it impossible to determine publicly who would exhaust supplies first.
A rare earth supply chain doesn’t begin with a magnet. It begins with feedstock, then oxides, metals, alloys, and finally permanent magnets. REalloys (NASDAQ: ALOY) has been assembling each of those industrial steps into a single North American manufacturing platform.
It starts with feedstock. A metallization plant is only as secure as the material flowing into it, and China still dominates much of the world’s heavy rare earth supply. REalloys responded by assembling multiple sources instead of depending on a single mine. It secured long-term access to separated heavy rare earth feedstock through the Saskatchewan Research Council, signed a 15-year offtake agreement covering 15% of Phase 1 production from Critical Metals’ Tanbreez Project in Greenland, and expanded future supply through agreements in Brazil, <a href="https://realloys.com/realloys-press-rel
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