When Lynas Rare Earths reported its first-ever break-even fiscal year in October 2025, investors didn’t cheer just for the numbers—they cheered for survival. China’s sudden, sweeping export bans on rare earth magnets and processed materials had turned the global tech and defense supply chain into a ticking bomb. And Lynas, with its Mount Weld mine in Australia, was one of the few companies standing between Western automakers and a production halt. The China Ministry of Commerce’s Announcement No. 61 of 2025Beijing didn’t just tighten rules—it rewrote the rules of global industrial power.
How China Weaponized Rare Earths
It wasn’t a surprise that China would use rare earths as leverage. The country controls roughly 85% of global refining capacity for these critical minerals. What stunned analysts was how fast and how deep the 2025 crackdown went. On April 4, 2025, Beijing restricted exports of seven specific rare earth elements—neodymium, praseodymium, dysprosium, terbium, and others—used in everything from electric vehicle motors to fighter jet guidance systems. By May, the impact was real: Ford Motor Company shut down its Chicago assembly plant for two weeks after a critical magnet supplier ran dry. No magnets. No EVs. No trucks. Just idle conveyor belts and frustrated workers.
Then came December 1, 2025. Under Announcement No. 61, any magnet containing as little as 0.1% of Chinese-origin rare earths—no matter where it was assembled—now required explicit Chinese government approval to export. And if your company had even a remote tie to a foreign military? Forget it. The Ministry of Commerce made it clear: any request for military use will be automatically rejected. This wasn’t just economic policy. It was a strategic chokehold on U.S. defense contractors, NATO allies, and Japan’s electronics giants.
The Ripple Effect Across Industries
Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies, called it "the most consequential escalation since the 2010 rare earth dispute." Back then, China briefly halted exports to Japan over a fishing dispute. This time, it’s permanent. And it’s targeted.
Automakers are scrambling. Tesla, General Motors, and BMW have all quietly shifted procurement away from suppliers using Chinese-processed magnets. The problem? There aren’t enough alternatives. Even if a company sources ore from the U.S. or Australia, it still needs China’s refining tech to turn it into usable alloys. That’s why MP Materials—despite being the only major rare earth miner in the U.S.—still lost money in 2025. Its Mountain Pass mine produces ore, but it can’t yet refine it at scale. Lynas, by contrast, has built full processing lines in Malaysia and Australia. It’s the only non-Chinese player with end-to-end capability.
Who’s Winning? Who’s Losing?
Stock markets reacted fast. By October 2025, Lynas Rare Earths shares had jumped over 210% year-to-date. MP Materials rose too—but only 42%. Why the gap? Investors aren’t betting on mining. They’re betting on processing. And Lynas is the only one outside China doing it at commercial scale.
"It’s not just supply and demand anymore," said Katherine Ogundiya, thematic investing analyst at Barclays. "It’s a security premium. Every time Beijing makes a move, Western companies panic-buy. That drives prices up—and rewards the few who can deliver." Ryan Pfingst at B. Riley Securities added: "There’s deal speculation everywhere. Private equity firms are circling. Governments are offering subsidies. It’s the new gold rush—but with dysprosium instead of nuggets."
Meanwhile, the U.S. Department of Defense has pumped over $1.2 billion into Lynas and MP Materials since 2023. Australia signed a 10-year rare earth supply deal with Japan. The European Union launched its Critical Raw Materials Act, aiming for 10% domestic supply by 2030. But here’s the catch: even if every Western mine operated at full capacity tomorrow, it would take five to seven years to match China’s current refining output. That’s not a gap. It’s a canyon.
Why Timing Matters
The December 1, 2025, rollout wasn’t random. It came just before President Donald Trump’s planned meeting with Chinese President Xi Jinping in South Korea—their first face-to-face since 2019. Beijing didn’t just want to punish tariffs. It wanted to enter negotiations with a loaded gun. By threatening to cut off magnets for U.S. F-35 jets, Navy sonar systems, and missile guidance units, China forced Washington to reconsider its entire industrial strategy. Suddenly, the "decoupling" debate wasn’t theoretical. It was happening in real time—in factory shutdowns, in stock charts, in defense briefings.
Even the smallest automakers felt the pressure. A Wisconsin-based EV startup had to delay its 2026 launch after its magnet supplier lost its export license. "We thought we were diversified," said the CEO. "Turns out, we were just one step away from China."
What Comes Next?
Western governments are racing to build new refining plants. The U.S. is fast-tracking permits for three new facilities in Texas, Nevada, and North Carolina. Australia is expanding its Lynas-linked refinery in Western Australia. But capital costs are staggering—over $2 billion per facility—and permitting alone takes years. Meanwhile, China is quietly investing in AI-driven recycling tech to extract rare earths from old electronics and EV batteries, further tightening its grip.
For now, Lynas is the beneficiary. But it’s not immune. The Australian government has begun reviewing its environmental permits for Mount Weld, under pressure from Indigenous groups. And if Beijing ever decides to cut off raw ore exports to Australia? That’s the next crisis.
The lesson? Rare earths aren’t just minerals. They’re geopolitical weapons. And the world is waking up too late.
Frequently Asked Questions
Why is Lynas Rare Earths the only non-Chinese company breaking even?
Lynas is the only company outside China with fully integrated rare earth processing—from mining to magnet-grade separation—operating at commercial scale. While U.S. firms like MP Materials mine ore, they still rely on Chinese facilities for refining. Lynas’s facilities in Australia and Malaysia handle the entire chain, making it uniquely positioned to meet Western demand under China’s export bans. Its break-even status in 2025 reflects both operational efficiency and soaring demand from automakers and defense contractors.
How do China’s new export rules affect U.S. defense contractors?
Under Announcement No. 61 of 2025, any company affiliated with foreign militaries—including U.S. firms like Lockheed Martin or Raytheon—is automatically denied export licenses for magnets containing even trace amounts of Chinese-origin rare earths. This blocks critical components for F-35 fighters, submarines, and missile systems. Defense contractors are now forced to either redesign systems using non-Chinese materials (a multi-year process) or stockpile existing magnets at great cost.
What’s the significance of the 0.1% threshold in China’s magnet export rules?
The 0.1% threshold is a legal trap. Even if a magnet is assembled in Germany or Canada using mostly non-Chinese materials, if it contains a fraction of rare earths originally mined or processed in China, it’s still subject to Beijing’s control. This gives China de facto jurisdiction over global magnet supply chains, regardless of where final production occurs. It’s a masterstroke of regulatory overreach designed to force dependency.
Why haven’t Western countries built more rare earth refineries yet?
Building a rare earth refinery costs $1.5–$2.5 billion and takes 7–10 years from permitting to operation. Environmental regulations, labor shortages, and technical complexity have slowed progress. China spent decades perfecting its low-cost, high-volume processing. Western efforts are fragmented and underfunded. Even with Pentagon subsidies, it’ll take until 2032–2035 to approach China’s output. The window for action is closing fast.
How did the Ford shutdown in May 2025 expose supply chain weaknesses?
Ford’s Chicago plant halted production because a key supplier couldn’t get permanent magnets needed for electric powertrains. The supplier had sourced raw materials from the U.S., but relied on a Chinese refinery to process them into usable alloys. Once China restricted exports, the entire chain collapsed—even though the ore wasn’t Chinese. It proved that global supply chains are only as strong as their weakest, most hidden link: refining capacity.
Is the EU’s Critical Raw Materials Act enough to counter China’s dominance?
The EU’s goal of securing 10% domestic supply by 2030 is symbolic, not sufficient. China produces over 150,000 metric tons of rare earth oxides annually. Even if the EU hits its target, it would still rely on China for 90% of its needs. The Act helps by funding recycling and diversification, but without massive investment in refining infrastructure, it’s a Band-Aid on a hemorrhage. Real independence requires decades of commitment—and political will that’s currently lacking.