China has long used its dominance over strategic metals to pressure the US, stepping up efforts in recent years.
Beijing first tightened export licenses for gallium and related materials in 2023, then effectively banned exports of gallium, germanium and antimony – all critical for semiconductors, defense systems and advanced electronics – to the US in December 2024 by denying licenses under the dual-use export control regime in most cases.
The move was widely seen as retaliation for U.S. export controls on Chinese high-tech goods, and underscored China’s influence over crucial mineral supply chains. The restrictions created shortages for U.S. buyers and forced some to source materials indirectly through third countries to keep production lines running.
However, in late 2025, China suspended its direct export ban on gallium and related metals to the US, part of an interim trade truce following high-level talks between US President Donald Trump and Chinese President Xi Jinping.
The suspension, which runs until the end of 2026, restores the possibility of exports but keeps the metals on China’s broader export control list, meaning shipments still require government permits.
Harvey Kaye, executive chairman of privately held US Critical Materials, says US vulnerability has become impossible to ignore after decades of Chinese dominance in rare earth mining and processing.
“About 15 to 20 years ago, China took a long-term view,” Kaye told the Investing News Network (INN), arguing that Beijing was deliberately undermining Western producers before consolidating control over global supply.
“They flooded the market, made it uneconomic for others and then locked up assets worldwide.”
Today, China controls about 98 percent of rare earth processing, a concentration that the U.S. government increasingly sees as unsustainable. Concerns increased last year when China restricted exports of gallium, a metal essential for advanced semiconductors, radar systems and military hardware.
“There are roughly 3,800 military applications for gallium alone,” Kaye said. “When China shut it down, the geopolitical reality became very real very quickly.” US Critical Materials believes it has a possible answer.
The company manages 339 claims at its Sheep Creek project in Montana, where recent sampling yielded an average total rare earth content of about 9 percent – significantly higher than most North American peers. More importantly, the deposit is rich in heavy rare earth elements and gallium, which are essential for magnets, chips and defense applications.
“What makes this deposit unique is not only the species, but also the heavy materials – dysprosium, terbium and gallium,” Kaye explained. “That puts us in a completely different strategic position.”
The company positions itself as a player in the field of raw materials and technology.
In collaboration with the Idaho National Laboratory, US Critical Materials has developed a closed-loop, environmentally friendly processing method called rock-to-dock technology.
“Our goal is to go from raw material to finished product without destroying the environment,” says Kaye. “No waste water, no waste – and, crucially, the processing takes place in the USA.”
He added that the company expects to see early production and revenues as early as 2026, aided by underground mining methods that avoid large open-pit mines and minimize surface disruption.
Federal interest is already increasing. Kaye confirmed discussions with multiple U.S. agencies, including the Department of Defense, and said the company is open to government investments and offtake agreements.
“Found in America, processed with American technology and available now – that changes everything,” he said.
Looking ahead, Kaye expects greater collaboration in the U.S. rare earths sector as policymakers push for supply chain resilience. “At this stage we are all Americans,” he said. “Competition is important, but cooperation is more important.”
Geopolitics, trade friction and the drive to rewire rare earth supply chains
Rising geopolitical tensions between China, the US and Europe are accelerating changes in global rare earth trade flows, with long-term implications for security of supply as 2026 approaches.
Jon Hykawy, president of Stormcrow Capital, told INN that the trend toward weakening trade ties with China is already changing industry expectations.
“Whether rare earths are really ‘critical’ for individual countries is almost irrelevant,” the expert said. “It appears that politically we have decided to weaken trade between the great powers. If we are going to do that with China, we must be prepared for continued instability in the supply of rare earths.”
That instability leaves Western economies with two broad options: rebuild China’s vertically integrated rare earth supply chain at home – at a higher cost – or completely reduce dependence on rare earths through new technologies.
“Either we recreate China’s retail supply chain and accept higher prices, or we innovate to get out of the problem,” Hykawy said. “That question is still very much open.”
Technological changes already offer potential opportunities. Hykawy pointed to advances in the design of electric motors, including axial flux motors developed by YASA, a subsidiary of Mercedes-Benz Group (ETR:MBG,OTCPL:MBGAF).
Unlike conventional cylindrical electric vehicle motors that rely heavily on rare earth permanent magnets, axial flux designs make more efficient use of magnets and can be replaced by electromagnets in some applications.
“These motors require better materials and more precise machining, but they use magnets much more efficiently,” he said. “In some cases, they can even eliminate the need for rare earth magnets altogether.”
The example highlights how innovation could mitigate demand growth for certain rare earths over time, although cost and scalability remain barriers. At the same time, Hykawy argued that Western efforts to localize rare earth mining, processing and production are realistic but will require patience.
“We are just at the beginning of building a rare earth supply chain entirely outside of China,” he said. “There is absolutely nothing stopping us from doing this other than time and money.”
Contrary to popular belief, Hykawy says rare earth mining is no more damaging to the environment than other forms of mining, noting that deposits – including ionic clays rich in heavy rare earths – exist well beyond China’s borders.
“The real limitation is the people,” he said. “We need experienced operators, engineers and processors, and there is no shortcut for the time it takes to build that expertise.”
With trade frictions continuing, Hykawy expects supply diversification to continue, but warned that near-term volatility will likely remain a defining feature of the rare earths market through 2026.
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Securities Disclosure: I, Georgia Williams, have no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to conduct their own due diligence.
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