By Roxana Tiron
(Bloomberg Government) – A single drone motor contains between 12 and 60 magnets made from rare-earth metals—and drones have as many as eight motors.
A nuclear submarine has more than 9,000 pounds of rare- earth materials. An F-35 jet fighter has about 900 pounds, according to Defense Department data.
And about 90 percent of the global supply of finished rare earths come from the adversary the Pentagon is preparing to fight in the future: China.
The US dependence on rare-earth minerals, for autos and data centers as well as defense equipment, was exposed as a key vulnerability when Beijing cut off supplies this spring in retaliation for President Donald Trump’s tariffs. Under the 2021 National Defense Authorization Act, during Trump’s first term, weapons systems can’t be made with magnets containing “material mined, refined, separated, melted” by China starting in 2027.
That’s forcing a domestic industry that has struggled for decades with high costs and the brutal competition from China to raise money quickly to take on the technologically tough work of producing rare earths from mine to magnet. The Pentagon requires 3,000 to 4,000 tons of highly specialized magnets annually, and projects demand of up to 10,000 tons by 2030, according to the Commerce Department.
“China only mines 55% of the world’s rare earths. They manufacture almost 95% of the magnets. And if they do that, they also make almost 100% of the manufacturing equipment,” said John Maslin of the Durham, N.C.-based startup Vulcan Elements, which has received several federal contracts. “If you have one piece of Chinese equipment in your production line, China has a kill switch and can cut a few lines of code and really shut down operations for a good amount of time.”
Last month, Deputy Defense Secretary Steve Feinberg, a private equity billionaire, placed a $400 million bet on the US’s only miner of rare-earth elements, MP Materials Corp. The deal, which comes alongside $1 billion in financing from JP Morgan Chase & Co. and Goldman Sachs Group Inc., is intended to help MP handle the entire process from mining to magnet manufacturing.
Vulcan Elements opened a facility in March to produce neodymium iron boron (NdFeB) magnets that convert electricity into motion, making them required components in robotics, drones, satellites, and semiconductor production.
The company is raising capital in a Series A round and is planning to expand to a second facility, said Maslin, 30, former financial manager for the US Navy’s nuclear propulsion program. He started Vulcan with electrical engineer Piotr Kulik in 2023 while studying at Harvard Business School.
The Senate Armed Services Committee, in its version of the fiscal 2026 defense policy bill, included a $4 million authorization to buy rare-earth magnets manufactured in Durham. Vulcan’s federal contracts include one last year for $1.2 million to make the transition from development to production.
“We’ve proven very quickly that we can do this outside of China,” Maslin said. “We have the skill sets, we have the manufacturing ecosystem.”
The Pentagon has invested almost $540 million to support the critical mineral supply chain, a spokeswoman said. “DoD is looking forward to continue working with companies across the REE supply chain to ensure that DoD, and the nation, have the secure and resilient supply chains necessary to secure national and economic security for generations to come.”
China’s Dominance
The process of making permanent magnets starts with mining and extraction, but depends heavily on then separating the rare- earth elements and chemically treating them to transform salts into high-purity metals. Those metals can be combined with other elements to produce a variety of rare-earth alloys. Finally, rare-earth magnets are typically produced from alloys that are sintered, or bonded, into magnet block and then cut and coated. While the mining part is competitive, China has effectively controlled the rest of the process.
“Rare earth magnets are the foundation of modern defense systems, clean energy, and advanced manufacturing,” Pat Harrigan (R-N.C.), a member of the House Armed Services Committee and Vulcan Elements backer, said in a statement to Bloomberg Government. “Yet the United States remains dangerously reliant on China, which dominates global production and processing.” “Vulcan Elements is changing that by building a fully domestic supply chain with no exposure to the Chinese Communist Party,” he said.
The Pentagon, in 2024 during the Biden administration, spurred a five-year rare-earth investment strategy to build “mine-to-magnet” domestic capacity at all critical nodes of the rare-earth supply chain. Several companies received funding: Noveon in San Marcos, Texas; TDA Magnetics in Rancho Dominguez, Calif., and E-VAC Magnetics in Sumter, S.C. Until early 2024, the US was shipping most of its domestically mined rare-earth elements to China for processing, wrote Gracelin Baskaran and Meredith Schwartz in an analysis for the Center for Strategic and International Studies. “No single country currently possesses the financial resources or technical capabilities to independently outpace China’s dominance.” Phoenix Tailings operates a 40-ton-per-year commercial processing facility for rare-earth metals in Woburn, Mass. The company serves the critical step of metallization, said CEO and co-founder Nick Myers. The company also received a $76 million Series B funding round and is about to open a new facility in Exeter, N.H., which will begin with 200 tons per year and can go up to 800 tons, Myers said in an interview. The company gets the oxide powder it turns into metal from the US, Australia, Canada, South America, and Malaysia, he said. Phoenix Tailings is also searching for locations to work on rare-earth separation.
While the Pentagon and emerging industries are taking steps to eliminate dependence on China, some US lawmakers say it isn’t happening quickly enough.
The House Armed Services Committee, in its fiscal 2026 defense policy legislation, wrote that the panel “remains concerned that America’s substantial dependence on China (PRC) for neodymium iron boron magnets poses significant risks to economic competitiveness and military readiness.”
“The committee recognizes and supports ongoing efforts by the Department to mitigate dependencies on the PRC for rare earth magnets by investing in domestic magnet manufacturing capabilities,” the lawmakers wrote in the bill report. The panel “remains concerned that the Department’s need for rare earth magnets still far exceeds the domestic capacity that may be brought online as a result of initiatives to date.”
Under the measure, the defense secretary must brief the committee by Dec. 1 on current and planned investments in neodymium iron boron magnet production in the US or by allies. The House and Senate still have to consider their respective bills on the floor and negotiate a compromise.
“There’s an exceptional amount of seriousness about what we’re doing,” Maslin said. “We are building for America in the interest of Americans. That’s why this company exists.”
— With assistance from Joe Deaux in New York at [email protected]
To contact the reporter on this story: Roxana Tiron in Washington at [email protected]
To contact the editors responsible for this story: Bernie Kohn at [email protected]; Robin Meszoly at [email protected]
