MAY 5, 2024WE USED TO MAKE THEM, BUT DECIDED IT WAS SMARTER TO...

MAY 5, 2024

WE USED TO MAKE THEM, BUT DECIDED IT WAS SMARTER TO OUTSOURCE THAT TO OUR LIKELY GEOPOLITICAL ENEMIES: America’s War Machine Runs on Rare-Earth Magnets. China Owns That Market.

The American war machine depends on tiny bits of metal, some as small as dimes. Rare-earth magnets are needed for F-35 jet fighters, missile-guidance systems, predator drones, and nuclear submarines.

The problem: China makes most of the world’s rare-earth magnets, with 92% of the global market share.

Now, Washington is doling out hundreds of millions of dollars in grants and tax credits to revive magnet-making in America. Defence manufacturers are on a clock.

A U.S. law in 2018 restricted the use of made-in-China magnets in American military equipment, shrivelling the list of potential suppliers to a small number in Japan and the West. By 2027, the curbs will extend to magnets made anywhere that contain materials mined or processed in China, covering nearly all of the current global supply.

After three decades of post-Cold War deindustrialization, rebuilding the industry—against China’s market heft—is an uphill battle, even with government help. Only one company in the U.S. is in production of the dominant type of rare-earth magnet.

“We’re not going to be able to simply flip a switch and get to where we want to be,” said Anthony Di Stasio, a senior U.S. defence official. “The only thing that you can really judge success on right now is how many positive ripples have you made from throwing the rock into the lake.”

The office Di Stasio runs in the Defence Department is diving into supply chains to invest in the pieces and parts that make the military work. Much of what they invest in is processing minerals and making metals, betting that regardless of how, for example, submarine technology evolves, the same building blocks will be needed.

Plus: “In the West, mines and processing facilities face more regulations. There are only a small number of experts left in the field, requiring pricey workarounds such as importing foreign talent, sending Americans abroad for training, and automating.”