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.
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, Montana, Wyoming, and Kazakhstan.
Finding rare earths is only half the job. The real bottleneck is turning rare earths into separated oxides and then to commercially qualified metals. North America largely lost that capability. REalloys is trying to bring it back.
In March, the Defense Logistics Agency awarded the company a contract worth up to $1.7 million to develop modular heavy rare earth metallization technology. Within days, REalloys unveiled plans for what it says could become the largest heavy rare earth metallization facility outside China, capable of producing roughly 30 tonnes of dysprosium metal and 15 tonnes of terbium metal annually. The plant will be commissioned with the Saskatchewan Research Council before moving to Ohio, where it will support downstream alloy production and permanent magnet manufacturing.
Producing the metal still doesn't solve the problem. Until it becomes a permanent magnet, it never reaches a missile, fighter aircraft, robot, or electric motor. In July, REalloys took that final step, partnering with JS Link to integrate alloy production and permanent magnet manufacturing into its growing North American platform, completing the manufacturing chain from feedstock to finished magnets.
And in June, REalloys closed an approximately $100 million institutional private placement to accelerate construction of its vertically integrated platform, moving beyond supply agreements and pilot projects toward commercial-scale manufacturing.
REalloys' manufacturing platform is no longer confined to its own facilities. The company is now in exclusive negotiations with the U.S. Army to build and operate commercial heavy rare earth processing facilities at Tooele Army Depot in Utah. If finalized, the project would establish what REalloys says would become the first commercial critical minerals processing operation on a U.S. military installation, supplying both government and commercial customers.
America is already getting a preview of what a wider cutoff would look like. China supplied roughly 70% of direct U.S. yttrium imports between 2021 and 2024, while the United States produced no commercial-scale primary yttrium in 2025 and remained 100% net-import reliant. After Beijing tightened export controls, aerospace coating suppliers began rationing material, some temporarily halted production, and manufacturers started reviving older coating technologies to keep turbine components moving.
Rare earths, however, are only one part of a much larger critical-minerals challenge. Copper, lithium and scandium are also essential to the industries Washington is trying to protect. Beyond specialized companies such as REalloys, three mining and materials giants illustrate the scale of the broader supply-chain race.
Rio Tinto (NYSE: RIO) is expanding its footprint across several strategically important minerals, particularly copper and lithium. Its $2.5 billion Rincón lithium project in Argentina is designed to produce approximately 60,000 tonnes of battery-grade lithium carbonate annually following optimization, while its Quebec operations are developing commercial scandium production for aerospace applications and advanced aluminum alloys. With plans to expand scandium oxide capacity to as much as 12 tonnes annually, Rio Tinto is positioning itself as an important supplier of materials needed for electrification and advanced manufacturing.
BHP Group (NYSE: BHP) occupies an equally important position through copper, a metal indispensable to power grids, data centers, electric vehicles and military infrastructure. The company operates Chile's Escondida, the world's largest copper mine, and produced approximately 1.95 million tonnes of copper in fiscal 2026. Its copper division generated roughly $18.2 billion in underlying EBITDA, accounting for more than half of group underlying EBITDA for the first time. With further growth opportunities in Chile, Australia and Argentina, BHP is increasingly exposed to the world's expanding demand for strategic industrial metals.
Albemarle (NYSE: ALB) is one of the world's leading lithium producers, supplying a critical ingredient for electric vehicle batteries and energy storage systems. Its operations span Chile, Australia and the United States, with activities extending from mineral extraction to battery-grade lithium processing. However, its February 2026 decision to idle the remaining operating train at Australia's Kemerton lithium hydroxide facility highlights a central challenge facing Western mineral independence: securing raw materials is one thing, but maintaining commercially viable processing capacity is another.
Together, these companies illustrate how far the critical-minerals challenge extends beyond rare earths. Yet the immediate vulnerability is especially acute in heavy rare earths, where China's dominance of processing and metallization threatens to leave American defense contractors competing directly with civilian manufacturers for limited supplies.
With boots on the ground on the frontline of the critical metals battlefield, REalloys recognizes what it could look like when the Pentagon ban hits and if Taiwan ends up being the red line that prompts Beijing to cut rare earths exports to zero. “That is what a rare-earth supply shock looks like before a full embargo: First the price spikes, then material gets rationed, then engineers start redesigning around whatever they can still obtain,” REalloys Chief Growth Officer Anupam Ghildyal told Oilprice.com. “And very quickly, we could have the Pentagon and civilian industry competing for the same limited supply.”
