U.S., Australia move to rebuild rare earth supply chain

April 27 (Asia Today) -- The United States and Australia have taken a major step toward rebuilding a non-China rare earth supply chain, with heavy rare earth separation restarting outside China for the first time in three decades, according to a report.

The U.S. Department of Defense has partnered with Lynas Rare Earths of Australia to begin heavy rare earth processing in Malaysia, the The Wall Street Journal reported Saturday.

The move comes after China's export restrictions disrupted Western automotive and defense supply chains, prompting Washington to accelerate efforts to secure independent sources of critical minerals ahead of a 2027 deadline to eliminate Chinese materials.

Experts cautioned, however, that the effort remains in its early stages and could take years before reaching full-scale production.

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Rare earth bottleneck shifts to refining

Lynas has begun producing purified oxides such as terbium and dysprosium at its plant in Kuantan, Malaysia, using ore mined in Western Australia.

While rare earth mining already occurs outside China, refining remains the key bottleneck. The separation process involves hundreds of stages using industrial acids, making it costly and technically complex.

For more than a decade, Lynas processed only light rare earths domestically while sending heavy rare earth materials to China for separation. The company said the current effort marks the first time in 30 years that heavy rare earths are being separated outside China.

Heavy rare earths are critical for high-performance magnets used in fighter jets, missiles and electric vehicles, enabling operation under extreme heat.

Pentagon deal targets critical defense materials

The Pentagon in March announced a preliminary $96 million agreement with Lynas to purchase rare earth materials.

The company recently achieved commercial production of samarium oxide, a heat-resistant magnet material used in advanced weapons systems. Samarium has historically been refined almost exclusively in China, and Beijing's export restrictions last year triggered disruptions among defense suppliers.

The U.S. Geological Survey has identified samarium as one of the minerals most at risk of supply disruption, warning shortages could cost U.S. industries billions of dollars.

Lynas Chief Executive Officer Amanda Lacaze said the company supplies non-Chinese rare earths to Japanese magnet manufacturers, which in turn supply U.S. defense contractors. Under U.S. policy, defense firms must remove Chinese rare earths from their supply chains by 2027.

Costs, demand remain key challenges

Despite progress, significant hurdles remain.

Lynas said its planned rare earth processing facility in Texas faces "material uncertainty," largely due to rising costs linked to wastewater treatment requirements. The project was backed by $258 million in Pentagon funding.

Instead, the company is expanding its Malaysian operations, with a second heavy rare earth facility targeted for completion in 2028.

Industry leaders say commercial demand will be critical to sustaining the supply chain. While military demand is relatively small, broader adoption by automakers and electronics manufacturers will be needed to support large-scale production.

U.S. expands global sourcing efforts

The U.S. government is also working to diversify supply sources beyond Australia.

The U.S. International Development Finance Corporation in February approved a $565 million loan to Brazilian miner Serra Verde.

Meanwhile, USA Rare Earth announced plans to acquire Serra Verde in a deal valued at about $2.8 billion, aiming to establish a stable supply chain to the United States.

MP Materials is also preparing to launch a heavy rare earth refining facility in Nevada later this year with support from the U.S. government.

Analysts say the initiatives reflect growing urgency in Washington to reduce reliance on China, which dominates global rare earth refining.

Gracelin Baskaran, who leads the critical minerals program at the Center for Strategic and International Studies, said 2025 served as a wake-up call for the United States to pursue more aggressive industrial policy.

"The momentum is real," she said, "but it will take years to turn these announcements into actual production."

-- Reported by Asia Today; translated by UPI

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Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260427010008335