- The US rare earth reserves can last two months, says a Chinese report.
- Chinese export restrictions reduced shipments and made supply chains worldwide tight
- Rare earths are used in military systems to boost weapon production
- US is finding alternative supply chains before 2027 restrictions
The US is under the increasing strain of decreasing reserves of rare earths that are vital to defense stockpile chains, with repercussions affecting world commodity markets.
Even designated stockpiles of heavy rare earth materials, which figure prominently in high-end weapons systems, would not go beyond two months in case supply disruptions by China become even more severe, according to a Chinese report.
The scarcity is occurring as U.S. military activities are escalating the use of precision-minded munitions and are putting further pressure on such materials as dysprosium, terbium, and neodymium as key components of missile and aeroplane guidance systems, radars, and stealth fighter craft.
The tightening of Chinese export controls has added to the problem. Chinese-made shipments to the United States declined by a general 22.5 percent year on year in early 2026, as the authorities introduced new regulations requiring government access to the exports of rare earth elements.
SC Weakness Fills Growing Military Demand
Military demand has driven pressure on supply chains to soar. The initial two days of recent American action in the Middle East resulted in an estimated $5.6 billion worth of high-end hardware, reports said, highlighting the sheer volume at which rare earth materials are being depleted.
The United States is still highly reliant on Chinese processing of rare earth elements into usable materials, even though domestically we have the capability of mining these elements. Although the Mountain Pass mine is the only one in California that mines rare earth in concentrates, most of the metallization and separation is still performed in China, which can serve the defense industry. This structural break, say industry analysts, has been decades in the making as manufacturing and refining capacity slowly moved offshore.
"America can cut China off from today's chips, but can make it immeasurably harder to manufacture tomorrow's chips and other high-tech devices by doing so," said Michael Froman, who was a U.S. trade ambassador and now president of the Council on Foreign Relations.
The unevenness is partly a manifestation of a more generalized geopolitical process in which possession of the material and processing infrastructure has become as attractive to management as possession of technologies at the end of the day.
Supply risks are responded to by Markets
The risk of lasting interruptions of supply has started to be priced in by financial markets.
Stocks of rare earth manufacturers have become more volatile. As Reuters statistics show, MP Materials and Australia-based Lynas Rare Earths have responded sharply to news in the area of export controls and supply restraint.
Prices of commodities have been soaring. In 2025, the price of neodymium-praseodymium oxide increased by 40 percent due to problems with supplies, which became a significant example of how swiftly any changes in the policy can be converted into price peaks.
Claimed tightness in global supply: After the introduction of export controls, the International Energy Agency has reported that rare earth prices in Europe have risen as much as six times the domestic prices in China.
Analysts say that the current pricing environment has built in a kind of geopolitical risk premium, especially since the existing suspension of Chinese export quotas is destined to be phased out in November 2026.
"One thing to always keep in mind is that supply is elastic. Even when it comes to keeping us alive, we will be able to overcome a lot of our challenges at a much quicker pace than the policy planners in Beijing, Brussels, and Washington have come to know," said Phil Ball, senior fellow at the Foundation of American Innovation.
Response Strategy Has Time Limits
The US has made efforts to solve the supply shortage, but time frames are a significant limitation.
A federal law that will become effective on January 1, 2027, will ban any use of Chinese-origin rare earth resources in American weapons systems. To address that need, defense contractors are striving to obtain alternative supply chains, building domestic processing capacity.
The U.S. government had declared plans to create strategic reserves of important minerals and broaden domestic refining abilities in February 2026. There has also been increased diplomatic work involving the involvement of over 50 countries by the State Department in efforts aimed at developing alternative supply channels.
But industry observers warn that it may take years to establish a complete rare earth supply chain, from mining to processing. This is also complicated by the fact that China is the major producer of heavy rare earths, supplying about 98 to 99 percent of the world's abundance of some elements like dysprosium and terbium.
On the one hand, the internal cost pressure China experiences when limiting exports applies to it as well; on the other, its control of the processing is a decisive lead in the short term.
Months ahead are likely to be critical as markets, policymakers, and defense planners review the prospects of bridging the gap, as per the current measures, between now and when regulatory deadlines come into effect.
