As Washington races to reduce U.S. dependence on China for critical minerals, the conversation around rare earths is evolving. For years, policymakers and investors focused primarily on mining. But the real bottleneck in the supply chain has increasingly become clear: processing.
Rare earth elements are essential to a wide range of modern technologies, from electric vehicles and wind turbines to missiles, fighter jets, satellites, radar systems, and advanced manufacturing equipment. While deposits of rare earths exist across North America and allied jurisdictions, the industrial capacity to convert rare earth oxides into usable metals, alloys, and magnets remains heavily concentrated in China. That imbalance is now forcing a strategic rethink across the U.S. defense and industrial base.
Rare earths are not especially rare in the ground. The challenge lies in what happens after extraction. Before these materials can be used in high-performance magnets or defense systems, they must be separated into purified oxides and then converted into metals and alloys with exacting chemical tolerances. That metallization and alloying step has become one of the weakest links in the Western supply chain.
The Center for Strategic and International Studies has identified rare earth metallization as one of the hardest capabilities to rebuild outside China, largely because it depends on years of operational expertise rather than on capital spending alone. Mines can be developed on a timeline. Metallurgical know-how is much harder to accelerate.
That is why a growing share of attention is moving downstream toward companies with existing processing capabilities. Among the companies drawing attention in this space is REalloys, which is operating in a segment of the rare earth chain that remains scarce in North America. The company’s facility in Euclid, Ohio, is designed to process separated rare earth oxides, converting them into specialty metals and alloys suitable for magnet production. This includes heavy rare-earth materials such as dysprosium and terbium, which are critical for magnets used in high-temperature, high-stress applications such as missile systems, aerospace platforms, and advanced industrial equipment.
That positioning could become increasingly important as new U.S. defense procurement rules take effect in 2027, restricting the use of Chinese-origin rare earth materials across the defense supply chain. According to the company, REalloys is already delivering qualified materials under U.S. Department of Defense contracts, placing it in an unusual position relative to many Western peers that are still focused on exploration, early-stage development, or pilot-scale separation.
The Pentagon has also awarded a Defense Logistics Agency contract to Terves LLC, now part of the REalloys platform, to advance metallothermal production of samarium and gadolinium. The contract includes engineering design work for a modular production facility with potential capacity of roughly 300 tons per year. Samarium is used in samarium-cobalt permanent magnets, which can maintain performance at extreme temperatures, making them useful in jet engines, missiles, and aerospace systems. Gadolinium has applications in radar, optics, and nuclear-related technologies.
The timing is a major factor. Beginning in 2027, tighter U.S. sourcing rules are expected to increase pressure on defense contractors to secure non-Chinese rare earth inputs. That means the ability to produce compliant metals and alloys domestically could become a strategic advantage.
Heavy rare earths are particularly important in this context. Dysprosium and terbium are added to magnet alloys to preserve magnetic strength under high heat and vibration, characteristics essential for advanced military and aerospace systems. Without these inputs, magnet performance can fail under extreme operating conditions.
China still controls the vast majority of global rare earth processing and metallization capacity, giving it significant leverage over industries dependent on these materials. That issue has already begun influencing policy and procurement decisions. U.S. officials increasingly view rare earth supply as not just an economic issue but a national security priority.
The concern extends well beyond defense. Rare earth magnets are also essential to EV drivetrains, robotics, industrial motors, renewable energy systems, consumer electronics, and advanced computing infrastructure. The greater the demand across these sectors, the more vulnerable Western supply chains become if they remain dependent on a single dominant processing hub.
America’s rare earth challenge is increasingly being understood as a processing problem, not a mining problem. That distinction matters. As the U.S. moves to tighten sourcing rules and reduce dependence on Chinese supply chains, the companies best positioned may not be those with the largest deposits in the ground, but those with the ability to convert rare earth materials into qualified metals, alloys, and, eventually, magnets.
With the 2027 procurement deadline approaching, downstream processing capacity is becoming one of the most strategically important pieces of the puzzle. For investors and policymakers alike, the race to rebuild a domestic rare earth supply chain may now hinge less on finding minerals and more on restoring the industrial capabilities to make them usable.