A single F-35 fighter jet carries roughly 435 kilograms of rare earth materials. Every guided missile, every drone motor, every satellite actuator depends on magnets made from elements that China processes, refines, and manufactures at a scale no Western nation comes close to matching. And starting January 1, 2027, the Pentagon will ban Chinese-sourced materials from every step of the defense supply chain, from the mine to the finished magnet.
The question nobody in Washington has answered convincingly: where will those magnets come from?
An analysis published by Oilprice.com lays out the scope of the problem. Roughly 90% of all rare earth processing takes place in China. The magnet manufacturing share is even higher, 93%. The rare earth magnet market itself sits at about $20 billion today and is projected to reach $30 billion by 2030. McKinsey projects global demand for the rare earths used in magnets will nearly triple by 2035. The International Energy Agency expects a 50, 60% jump in total rare earth demand by 2040, driven by electric vehicles and wind power.
Those numbers describe a bottleneck that touches everything from consumer electronics to the most sensitive weapons systems the United States fields. And the bottleneck has a single chokepoint: Beijing.
The vulnerability stopped being theoretical in 2025. When China tightened export controls on rare earths that year, the consequences hit fast. Ford had to shut down production of the Explorer because it could not get the magnets it needed. Ford CEO Jim Farley described the company's magnet supply situation as "day to day" and "hand to mouth."
European automakers fared no better. CLEPA, the European automotive suppliers' association, reported factory lines going dark across the continent for the same reason.
This was not a wartime blockade. It was a policy adjustment by a single government, and it was enough to idle assembly lines on two continents. The broader fragility of global auto industry supply lines has been a recurring theme, but rare earth magnets represent a uniquely concentrated risk.
For the defense sector, the stakes go beyond production delays. The Pentagon's DFARS rules, set to take effect January 1, 2027, will require defense contractors to prove where every rare earth input comes from. Chinese-sourced materials will be banned at every step, from ore extraction through finished magnet production. Any contractor that cannot demonstrate a clean, non-Chinese supply chain risks losing its contracts.
That deadline is less than nine months away. The defense industrial base has had years of warning. Yet the underlying market structure has barely changed. China still dominates processing and manufacturing at percentages that would be called a monopoly in any other context.
Andy Sherman, head of R&D at REalloys, a company traded on NASDAQ under the ticker ALOY, framed the risk plainly in a recent interview:
"If alloy supply is disrupted, production lines do not slow gracefully. They stop. Substitutions are rarely possible, requalification takes years, and readiness gaps appear immediately."
Sherman also pointed to a distinction that policymakers have been slow to grasp. Having rare earth minerals in the ground is not the same as having a supply chain.
"You can have rock in the ground and still be dependent if you don't control what happens after extraction."
The Oilprice.com analysis identifies REalloys as assembling what it describes as the only non-Chinese rare earth magnet supply chain currently in the pipeline. The company acquired PMT Critical Metals, which operated a metallization facility in Euclid, Ohio, and had nearly a decade of rare earth and magnet research and development work with both the U.S. Department of Defense and the U.S. Department of Energy.
REalloys has also locked in an exclusive offtake agreement covering 80% of production from the Saskatchewan Research Council's Rare Earth Processing Facility in Saskatchewan, Canada. The analysis describes that facility as the only operational, fully non-Chinese processing plant in North America.
Feedstock for the operation is stated to come from sources in North America, Brazil, Kazakhstan, and Greenland, all outside Chinese control. The Saskatchewan plant is expected to start at roughly 400 tonnes of refined rare earth metals per year when it reaches full production in 2027, scaling to 600 tonnes by late 2028. A Phase 2 expansion targets 20,000 tonnes per year of heavy rare earth permanent magnets.
Efforts to develop domestic rare earth resources have drawn attention at the state level as well. Texas officials have promoted a major West Texas rare earth deposit as part of the broader push to reduce dependence on foreign processing.
The Pentagon and major aerospace manufacturers require finished metals and alloys with exact, repeatable specifications. Testing and certification can take years. The analysis states that REalloys has already cleared a barrier that takes others three to seven years to even attempt, owing to the PMT Critical Metals acquisition and its existing defense-sector R&D history.
But the broader picture remains grim. Major mining companies like Rio Tinto and Vale move massive volumes of iron, nickel, and other commodities. Both are scrambling to expand their critical mineral portfolios to include lithium and copper for the energy transition. Yet the specialized rare earth magnet supply chain, the part that turns processed metals into the components that go inside jet engines, missile guidance systems, EV motors, and data center hardware, remains overwhelmingly concentrated in China.
That concentration did not happen by accident. China invested decades in building processing capacity while Western governments treated rare earths as a niche commodity concern. The result is a dependency that now touches a tech sector valued in the trillions and a defense industrial base responsible for projecting American power worldwide.
A note of caution is warranted. Oilprice.com disclosed that the site's owner holds shares and/or stock options in REalloys and has a financial incentive to see the company's stock perform well. The analysis reads in part as a sponsored-style piece, and several of its core claims, that REalloys operates "the only" non-Chinese supply chain, that the Saskatchewan facility is the sole non-Chinese processing plant in North America, are presented without independent verification in the same piece.
The exact terms of the exclusive offtake agreement, the precise date and venue of the Andy Sherman interview, and the specific primary documents supporting the "only" claims are not detailed. Readers and investors should weigh those gaps.
What is not in dispute is the structural problem. China's dominance of rare earth processing and magnet manufacturing is well documented across government and industry sources. The DFARS deadline is real. The Ford production shutdown happened. The European factory shutdowns happened. The demand projections from McKinsey and the IEA point in one direction.
For decades, American policymakers talked about supply chain resilience while doing almost nothing to build it in the rare earth sector. Administrations of both parties allowed China to consolidate a near-monopoly on the materials that power the country's most advanced weapons and its fastest-growing industries. The private sector followed the cheapest path, and the cheapest path ran through China.
Now the deadline approaches. Defense contractors face a January 2027 cutoff with a supply chain that still routes overwhelmingly through a strategic competitor. The commercial sector faces demand curves that are accelerating while Western processing capacity remains a fraction of what is needed.
Whether REalloys or any other company can fill that gap in time is an open question. What is not open to debate is that the gap exists, that it was foreseeable, and that the people responsible for closing it, in Congress, in the Pentagon, in the agencies that were supposed to plan for this, let it widen for years.
You cannot project strength abroad when a rival government can shut down your assembly lines with a policy memo. That is the position the United States finds itself in today, and the clock is running.