Rare earths from companies supported by Washington are heading to Japan and South Korea because the US still has too little magnet manufacturing to absorb the output, according to the Financial Times.
MP Materials, Energy Fuels and Phoenix Tailings have received or lined up billions of dollars in US government backing as the Trump administration tries to build a domestic rare earths supply chain. The immediate buyers, though, are often in Asia, where companies already make the magnets that turn rare earths into useful industrial parts.
The gap is awkward but predictable. Mining and refining capacity can be funded faster than a full manufacturing base can be rebuilt. Rare earths are processed into oxides, then metals and alloys, then magnets. Those magnets go into cars, fighter jets, semiconductor equipment and other hardware where “critical minerals” stop being a slogan and start being a bill of materials.
China’s dominance over rare earths and critical minerals has become a security concern for the US and other Western governments after Beijing began restricting access to some materials. But replacing China is not just a matter of opening mines. The downstream factories have to exist, and for now much of that capacity is outside the US.
Asia still has the magnet factories
Thomas Kruemmer, who writes the Rare Earth Observer blog, told the Financial Times that neodymium iron boron magnets are produced at scale in two countries: Japan, where the technology originated, and China. The magnets are widely used across industrial and defense supply chains.
John Ormerod, a rare earths consultant at JOC LLC, estimated that China is the largest producer of those magnets. Outside China, he put Japan’s annual production at 10,000 to 15,000 tonnes, South Korea’s at 2,000 to 3,000 tonnes, and US output at 1,000 tonnes or less. Europe also has some production, he said.
Nick Myers, chief executive of Phoenix Tailings, told the Financial Times that Japanese customers were pressing for the rare earth metals Phoenix produces after China sharply cut exports this year. He said the startup’s customers were mainly in Korea and Japan and warned that, unless US defense contractors move fast, Phoenix’s output will be bought by others willing to pay more quickly.
Phoenix is backed by IQT, the CIA-funded venture capital firm. The company won conditional US government support of $500 million in June and says that funding will help it expand production of metals and oxides. It does not disclose sales figures and is not yet a large producer.
MP and Energy Fuels look beyond the US
MP Materials, based in Nevada, is the largest US rare earths producer by a wide margin. Its latest quarterly earnings show that sales of neodymium-praseodymium oxide and metal, its biggest division by revenue, came primarily through an agreement with Sumitomo Corporation of Americas, which supplies Japanese customers.
MP also sells some material to an unnamed US technology and industrial company under a deal signed in the first quarter of 2026. A year earlier, its biggest revenue segment was mined material sold to China’s Shenghe Resources, but MP has stopped those sales as part of its agreement with the US government.
MP plans to make finished magnets at scale, which would require it to use much of its own rare earth output. The company has signed supply agreements with General Motors and Apple, and said in May that it expected to start shipping finished magnets to GM this year.
Energy Fuels, which received $725 million in conditional government funding in June, is also preparing Asian shipments. Chief executive Ross Bhappu told the Financial Times that the company would send oxides to Korea in the near term. Last year, a major South Korean manufacturer used a small amount of Energy Fuels’ neodymium-praseodymium to make magnets.
Energy Fuels is buying Australian Strategic Materials, which owns a rare earths metal plant in South Korea. It also announced a $1.9 billion agreement in June to buy German magnet maker Vacuumschmelze. Bhappu said that deal would send more of Energy Fuels’ products to Vacuumschmelze’s US operations.
US policy is already affecting the companies’ accounts. MP’s recent earnings have benefited from its government agreement, which guarantees a floor price for some products and covers the gap when third-party buyers pay less.
This story draws on original reporting from Ars Technica.
