China’s ongoing weaponization of rare earths, which has now been bolstered to include measures to keep individuals with sensitive technological knowledge from leaving the country, gives it leverage over a $1.5 trillion U.S. civilian economy that depends on permanent magnets.
The Pentagon has spent years preparing for life without Chinese rare earths, but the civilian economy hasn't. IMF researchers identified 34 sectors of the U.S. economy with direct exposure to rare earth supply disruptions, while the International Energy Agency (IEA) estimates a complete Chinese cutoff could put roughly $6.5 trillion of downstream industrial production outside China at risk.
The Defense Department’s January 1, 2027 sourcing rules are designed to eliminate Chinese-origin rare earth magnets from Pentagon procurement, but DoW accounts for less than 0.1% of global rare earth demand, according to the U.S. Government Accountability Office.
The civilian economy is quite a different story, and its dependence is matched by an equally stark supply gap. Reuters reported that the United States consumed about 48,000 tonnes of rare earth permanent magnets in 2025 but produced only about 300 tonnes domestically.
If Beijing ever banned exports in totality, automakers, industrial equipment manufacturers, robotics companies, electronics producers, data centers and medical device manufacturers would all be competing for the same limited domestic supply.
That leaves a simple question: who is building enough capacity to help replace China?
REalloys (NASDAQ: ALOY) is attempting one of the industry's most ambitious answers, constructing what it says will become the largest heavy rare earth metallization facility outside China and the Western Hemisphere's first commercial-scale heavy rare earth metallization platform.
Building For A World Without China
Heavy rare earth supply chains take years to assemble, which explains the pace of REalloys' dealmaking over the past two years.
REalloys secured long-term access to separated heavy rare earth feedstock through an exclusive commercial agreement with the Saskatchewan Research Council (SRC), followed by a 15-year definitive offtake agreement covering 15% of Phase 1 production from Critical Metals' Tanbreez Project in Greenland, one of the world's largest rare earth deposits outside China. Additional agreements in Brazil, Montana, Wyoming and Kazakhstan expanded that supply network across multiple allied jurisdictions.
In March, the Defense Logistics Agency awarded REalloys a contract worth up to $1.7 million to develop modular heavy rare earth metallization technology. Days later, the company announced plans for what it says will become the largest heavy rare earth metallization facility outside China, designed to produce approximately 30 tonnes of dysprosium metal and 15 tonnes of terbium metal annually.
The buildout continued with a letter of intent for a strategic partnership with JS Link to integrate alloy production and permanent magnet manufacturing into a single North American platform. In June, REalloys completed an approximately $100 million institutional private placement to accelerate commercial construction and entered exclusive negotiations with the U.S. Army to build and operate commercial heavy rare earth processing facilities at Tooele Army Depot in Utah.
The final product? The first commercial critical minerals processing operation on a U.S. military installation, supplying both government and commercial customers.
The Window Is Narrowing
The supply outlook is worsening, with the IEA projecting demand for magnet rare earths outside China will increase by roughly 50% by 2035. Even if every announced project comes online, non-Chinese supply chains would satisfy only about 50% of expected mining demand, roughly 25% of refining demand and less than 20% of permanent magnet demand. Metallization and magnet manufacturing remain the largest bottlenecks.
Expanding supply outside China now means reproducing industrial capabilities that Beijing is determined, more than ever, to keep at home.
Last October, China expanded its export control regime to cover technologies used in mining, separation, metallization, alloy production, magnet manufacturing and recycling. The rules also broadened licensing requirements for technical assistance, giving Beijing greater control over the industrial know-how needed to replicate those capabilities.
Protecting technology is no longer enough. Beijing has now paired export controls on sensitive technologies with broader legal authority to stop people connected to those technologies from leaving the country through its new September 15 State Council regulations.
That timeline helps explain the motivation behind REalloys’ (NASDAQ: ALOY) recent moves. The company appointed former Saskatchewan Research Council rare earth executive Dr. Muhammad Imran as chief operating officer, placing the engineer who led SRC's commercial rare earth processing program in charge of its next phase of development.
According to the same operational update, REalloys is targeting approximately 150 tonnes per year of NdPr metallization capacity in early 2027, followed later that year by integrated production from monazite concentrate through separated rare earth products and metals.
In its February 2026 investor presentation, REalloys estimated its planned processing platform could eventually supply roughly 10% of ex-China demand for dysprosium and terbium oxides, directly addressing one of the supply gaps the IEA expects to widen over the next decade. That estimate illustrates the scale of the challenge. Even one of the most ambitious projects now under development would satisfy only a fraction of the demand China currently serves.
The stakes extend far beyond rare earth miners and processors. America's largest defense and aerospace manufacturers depend on specialized materials for missiles, aircraft, radar systems and precision electronics. As China tightens its grip on critical supply chains, four industry giants illustrate just how much industrial activity ultimately depends on reliable access to these materials.
RTX Corporation (NYSE: RTX) sits at the heart of America's missile and aerospace industries, producing Tomahawk cruise missiles, advanced air-defense systems and aircraft engines. High-performance rare earth magnets are used in the guidance, actuation and radar technologies that underpin many modern defense systems, making secure material supplies a critical industry-wide concern. Demand is accelerating: RTX reported third-quarter 2026 sales of $25 billion, up 11% year-over-year, while its order backlog reached a record $340 billion, including $164 billion in defense contracts. The company also secured new multiyear production commitments for Tomahawk and AMRAAM missiles.
Lockheed Martin (NYSE: LMT) is another major defense manufacturer exposed to rare earth supply-chain vulnerabilities. Its F-35 fighter aircraft, missile systems and advanced military technologies depend on sophisticated electronics, motors and magnetic components. The risks are already documented: the U.S. Government Accountability Office reported that Chinese-made magnets were discovered in the F-35 supply chain, prompting production pauses and efforts to qualify alternative suppliers. Meanwhile, Lockheed reported third-quarter sales of $20.7 billion, up 11%, with its backlog reaching a record $292 billion, supported by growing demand for missile-defense systems, including PAC-3 interceptors.
L3Harris Technologies (NYSE: LHX) supplies advanced sensors, precision navigation equipment, electronic systems and missile propulsion technology to the U.S. military. Its exposure to complex defense electronics places it within an industrial supply chain where qualified magnetic components and specialty materials are increasingly important. The company is also expanding manufacturing aggressively, securing a $6 billion THAAD propulsion contract and opening a new Arkansas facility designed to double solid rocket motor production capacity. In its latest reported quarter, L3Harris generated $5.9 billion in revenue, up 8%, while its backlog reached a record $42 billion.
GE Aerospace (NYSE: GE) is a leading supplier of commercial and military jet engines and aircraft systems, including electrical power generation equipment and permanent-magnet generators through its Unison business. Its broader aerospace supply chain also relies on rare earth materials used in high-temperature turbine coatings, illustrating how China's mineral dominance extends beyond permanent magnets. GE Aerospace reported third-quarter revenue of $14.1 billion, up 16%, while orders surged 49% to $19 billion. With aircraft production and engine deliveries increasing, securing reliable supplies of specialized materials remains an important manufacturing priority.
Now that it's been proven that a non-Chinese supply chain can exist, the next step is building one at a scale capable of supporting an industrial economy that still depends overwhelmingly on China. That race has already begun, and the companies that reach commercial scale first are likely to define the next generation of the rare earth industry.
By. Tom Kool
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