US Defense Sector Races to Rebuild Rare Earth Supply Chains Amid Stockpile Strain and China Ban

A sharp rise in overseas military operations combined with sweeping federal restrictions on foreign critical minerals has pushed the U.S. defense industry into a rapid effort to rebuild domestic separation and refining capacity. With critical stockpiles of advanced munitions running low, military contractors face strict new deadlines to eliminate Chinese components from their supply chains entirely.

The strain on American military reserves has deepened as ongoing combat in the Middle East draws down advanced air defenses and precision weaponry. According to a warning published by the Center for Strategic and International Studies, it could take at least three years to replenish U.S. stockpiles of Tomahawk cruise missiles, Patriot interceptors, and Terminal High Altitude Area Defense (THAAD) missile systems. These precision weapons rely heavily on specialized rare earth metals and magnet alloys—materials whose processing has long been dominated by Beijing.

Washington has taken an increasingly uncompromising stance on foreign supply dependencies. A July 20 executive order issued by President Donald Trump sharply restricted defense contractors from incorporating Chinese-sourced critical minerals into military hardware. The directive also curtailed the Department of Defense’s authority to grant waivers when domestic alternatives are unavailable, penalizing contractors that fail to prioritize Western supply networks. Furthermore, the Pentagon has established a strict deadline of January 1, 2027, to eliminate reliance on Chinese tungsten, a key industrial metal where China controls roughly 80 percent of global mining output and an even larger share of downstream processing.

The central bottleneck in the Western supply chain lies not only in raw extraction, but in the complex chemical separation and metallization stages required to turn mined oxides into high-purity industrial metals. While rare earth elements account for a tiny fraction of a weapon system’s total value—often representing just $20,000 to $30,000 of a $150 million missile platform—their absence renders advanced fighter jets like the F-35, missile guidance packages, and radar arrays completely non-functional.

To close this operational gap, alternative processors are attempting to turn industrial byproduct and recycled hardware into defense-grade metals. In Exeter, New Hampshire, clean tech startup Phoenix Tailings is utilizing an electrochemical refining process to extract critical elements from mine waste, recycled magnets, and discarded hard drives. The Woburn, Massachusetts-based firm is deploying a $500 million loan from the Pentagon to construct a dedicated processing plant, termed the Freedom facility, aiming to expand domestic separation of neodymium, praseodymium, dysprosium, terbium, samarium, and yttrium over the next 14 to 18 months.

Phoenix Tailings currently produces roughly 200 kilograms of refined metal annually. The company plans to scale output to 5 tons in the near term, with a long-range target of 120 tons per year by 2028. The expansion is aimed directly at closing deficits in metals like samarium, where the U.S. defense sector requires 50 to 100 tons annually but lacks robust domestic production.

While domestic infrastructure expands, defense manufacturers are also relying on European industrial re-shoring. In Rochester, New York, magnet manufacturer Arnold Magnetic Technologies historically relied on Chinese samarium to produce high-temperature samarium-cobalt magnets used in Tomahawk guidance systems. The company has shifted its supply chain to La Rochelle, France, where chemical manufacturer Solvay restarted its rare earth separation operations. Solvay had abandoned rare earth refining at the site in the 2000s due to Chinese price competition, but reactivated its plant after China restricted export flows of critical processed materials in April 2025.

Despite these supply chain adjustments, mining executives warn that replacing critical materials remains an uphill battle. Brodie Sutherland, chief executive officer of Patriot Critical Minerals Corp., noted that developing new domestic tungsten mines takes years, forcing defense firms to rely on existing inventories, recycled scrap, and limited non-Chinese suppliers to meet impending Pentagon mandates. Defense primes, including Lockheed Martin, confirmed they are actively assessing global rare earth supply lines to ensure operational continuity under the tightened federal rules.