Has America’s largest rare earth project collapsed? The factory has just been completed, yet a U.S. industrial giant has abruptly terminated its 10-year supply contract?

The policy pendulum swung rapidly with the presidential election. After Trump took office, EV subsidies were canceled, emissions regulations relaxed, and policy priorities shifted back toward traditional energy. With subsidies phased out, U.S. consumers’ enthusiasm for electric vehicles clearly waned—compounded by insufficient charging infrastructure and rising usage costs—causing General Motors (GM) to scale back both EV sales targets and production plans. Originally projected to require 1,800 tons annually of custom-designed permanent magnets, GM’s actual demand has now shrunk to just a few hundred tons. There’s another critical detail: these permanent magnets were specially engineered to match GM’s motor specifications, involving extensive prior compatibility testing, validation, and certification. Such highly customized magnets are extremely difficult to resell to other automakers. If GM were to rigidly honor the contract, it would be forced to purchase large volumes of products it neither needs nor can offload—leading to sustained, heavy losses. From a commercial standpoint, GM weighed ongoing losses against contractual penalties—and chose termination as the more rational path to limit damage. VAC, meanwhile, found itself in an even more vulnerable position. In planning the project, it had allocated 90% of its production capacity exclusively to GM—a dangerously concentrated business model in capital-intensive manufacturing. Rare-earth magnet factories require massive investment and long construction timelines; their production lines are purpose-built around major customers’ specifications. Once that anchor order vanished, the entire production line’s value plummeted. Even the company previously planning to acquire VAC began reassessing the acquisition price due to the lost contract. Today, the factory sits idle, burdened by debt—effectively stalling America’s domestic rare-earth self-sufficiency initiative. Many ask: Why has China’s rare-earth industry remained stable for decades, while America’s heavily funded projects falter so quickly? The answer lies not in insufficient U.S. capital or technical capability—but in the absence of the supporting ecosystem required for long-term industrial operation. First, industrial policy continuity differs markedly. Rare earths, permanent magnets, and new-energy sectors are all long-cycle industries: building plants, refining processes, and achieving stable profitability typically take five to ten years. Yet U.S. presidential elections occur every four years—each transition potentially bringing subsidy rollbacks or policy cooling. Long-term corporate investments made under one administration risk being derailed by the next. In contrast, China’s industrial policies have maintained remarkable consistency, providing upstream and downstream enterprises with stable expectations—enabling sustained investment and strategic long-term planning. Second, the real barrier to entering the rare-earth industry has never been merely mining the ore. Many mistakenly assume that possessing rare-earth deposits automatically enables magnet production. In reality, the value chain—from ore selection and separation/purification, through alloy preparation, magnet forming, and post-processing—is tightly interlinked and sequential. China has spent decades iteratively optimizing this entire chain, leveraging its comprehensive manufacturing system to gradually achieve high yields, cost efficiency, and environmentally sound processing. Meanwhile, China’s massive domestic markets—spanning new-energy vehicles, wind power, and industrial motors—provide abundant, continuous opportunities for iteration. Close feedback loops across the supply chain continuously drive down costs. For decades, the U.S. outsourced smelting and high-value-added downstream processing—leaving its rare-earth industry fragmented. Rebuilding a fully integrated chain from scratch incurs inherently higher costs and lacks sufficient downstream customers to share risk.

U.S. media: How does China dominate the global rare-earth industry? In the U.S., it could take a lifetime to bring a single mine into operation.

China has recently developed its own magnet industry and no longer exports raw materials to Japanese magnet factories. Beijing has invested heavily in advanced magnet manufacturing facilities near Longnan, in Ganzhou City, Jiangxi Province. Currently, China produces 90% of the world’s permanent magnets. Last week, the two largest magnet factories in Ganzhou were still undergoing expansion. In 2020, the Chinese government stated that ensuring Western supply chains’ dependence on China is vital to national security. China must strengthen its capabilities and consolidate its international leadership in sectors where it holds competitive advantages—and deepen global industrial supply chains’ reliance on China, thereby building robust resilience against deliberate foreign supply cutoffs. After Japan’s 2010 rare-earth export restrictions, Japanese manufacturers responded with measures far exceeding expectations: they began stockpiling enough rare-earth inventory to meet two years of internal demand and actively sought alternative overseas sources. With financial support from the Japanese government, Sumitomo Corporation helped develop Australia-based Lynas Corporation. Lynas mines and refines 60% of Japan’s light rare earths—which are blended with small amounts of heavy rare earths to produce rare-earth magnets. The company plans to begin refining heavy rare earths for Japanese manufacturers in Malaysia this summer, though initial output will be minimal. Japan’s three largest magnet manufacturers—Proterial (formerly Hitachi Metals), Shin-Etsu Chemical, and TDK—have relocated part of their production to China to secure reliable rare-earth supplies. Nevertheless, they retain substantial production capacity within Japan. America’s rare-earth magnet industry originated in the 1980s at a General Motors subsidiary in northern Indiana—but the plant later closed and operations moved to China and Singapore. Following the 2010 export restrictions, Hitachi Metals (renamed Proterial in 2023) built a rare-earth magnet factory in North Carolina between 2011 and 2013, responding to concerns raised by the Obama administration. Hitachi Metals’ facility employed only dozens of workers—and its production costs significantly exceeded those of the massive new complexes now under construction in Ganzhou, China. U.S. companies proved unwilling to pay premium prices for domestically manufactured magnets, opting instead for Chinese suppliers. Hitachi shut down the plant in 2020; its equipment remains sealed and unused. Today, the only operating rare-earth mine in the U.S. is Mountain Pass in California. Its operator, MP Materials, plans to launch commercial rare-earth magnet production at a Texas facility by year-end. Yet even at full capacity, this facility’s annual output would equal only one day’s production in China. Chinese factories supply tens of thousands of tons of rare-earth magnets annually to domestic EV and offshore wind turbine manufacturers—two sectors heavily criticized by Trump. Like magnet manufacturing, America’s rare-earth mining sector has experienced dramatic ups and downs. From 1965 to 1995, the Mountain Pass mine supplied most of the world’s rare earths—until China flooded global markets with low-cost exports. The mine closed in 2002, partly due to increasingly stringent environmental regulations in California. A $1.5 billion modernization plan launched in 2010 did not resume mining until 2017—and even then, ore still had to be shipped to low-cost Chinese refineries for processing.

Business Watch: Upstate New York gets big rare earth facility, and more

4 days ago

BASF has reportedly raised its acquisition offer for Evonik Industries to €11.2 billion, promising to preserve regional jobs until 2032 and optimize raw material sourcing to improve cost competitiveness.

cen

2026-09-28

Evonik rejects $11.7 billion BASF takeover bid, FT reports

2026-09-29

BASF Merger with Evonik Could Create Integrated Regional Leader

2026-09-29

Evonik Rejects BASF Takeover Bid

2026-10-01

CW75 Stock Performance: Wednesday, September 30, 2026

2026-10-05

Europe Top Stories: Weekly Summary