US Puts Over $10 Billion Into Critical Minerals, But China Still Refines Most of the World's Supply

Key Takeaways 80% confidence

• The US federal government invested more than $10 billion in critical minerals projects between January 2025 and June 2026, shifting from grants toward direct equity stakes in individual companies, per Council on Foreign Relations tracking.
• The Pentagon became MP Materials' largest shareholder in July 2025 with a $400 million, 15% equity stake plus a price floor and offtake agreement, with an option for $350 million more and a separate $150 million loan for Mountain Pass mine expansion.
• The Commerce Department finalized a $1.6 billion package for USA Rare Earth in June 2026 ($277 million federal funding plus a $1.3 billion CHIPS Act loan) alongside $1.5 billion in private capital, backing a Texas mine and an Oklahoma magnet plant.
• The Pentagon took a 40% stake in a $7.4 billion Korea Zinc joint venture in December 2025 to build a Tennessee smelter targeting 540,000 tonnes a year of zinc, copper, lead and rare earths -- the first large-scale US zinc refinery since the 1970s.
• Even after this spending, China still mines about 60% of the world's rare earths and processes up to 90% of critical minerals overall, and more than 99% of three rare earths used in heat-resistant magnets, per CSIS -- keeping US rare-earth prices two to five times above Chinese spot levels, according to S&P Global.

The US government has invested over $10 billion in critical minerals since 2025, taking direct equity stakes in rare-earth and zinc projects, but China still refines up to 90% of the world's supply.

Analysis 78% confidence

For most of the past decade, Washington's response to China's dominance of critical minerals ran through research grants, tax credits and feasibility studies -- indirect tools that left the construction and financing risk with private companies. That changed over the past fourteen months. The Department of Defense, the Commerce Department and the Treasury have each taken direct financial stakes in individual mining and processing companies, a shift officials have described in unusually blunt terms. Treasury Secretary Scott Bessent said in October 2025 that the government would "set price floors and the forward buying" across a range of industries specifically to stop foreign competitors from underpricing US producers out of business.

MP Materials became the template for that approach in July 2025, when the Pentagon paid $400 million for a 15% equity stake, making it the company's largest shareholder. The deal came with a price floor and an offtake agreement guaranteeing the government would buy output regardless of where global rare-earth prices moved, plus an option for a further $350 million investment and a separate $150 million loan earmarked to expand heavy rare-earth separation capacity at MP's Mountain Pass mine in California -- the only active rare-earth mine of scale in the United States.

The Commerce Department followed a similar playbook with USA Rare Earth, finalizing definitive agreements in June 2026 worth up to $1.6 billion: $277 million in direct federal funding plus a $1.3 billion senior secured loan, routed through the same CHIPS Act program originally built to revive US semiconductor manufacturing. The company raised a further $1.5 billion in private capital alongside the government package, money it is putting toward a fully integrated supply chain -- a Texas ore deposit targeting commercial production in 2028, backed by a magnet-manufacturing plant in Stillwater, Oklahoma, that has commissioned its first production line and is ramping toward 600 tonnes of annual output by the end of 2026.

The single largest of these deals reaches beyond rare earths entirely. In December 2025, the Pentagon agreed to take a 40% stake in a joint venture with Korea Zinc, the world's largest zinc smelting company, to fund a $7.4 billion critical-minerals smelter in Clarksville, Tennessee, replacing an existing Nyrstar refinery on the same site owned by commodities trader Trafigura. Korea Zinc is selling $1.9 billion of new shares to the joint venture to fund its share, on top of $4.7 billion in additional loans and a $210 million Commerce Department subsidy under the CHIPS Act. The plant, targeting a 2029 opening, is designed to produce 540,000 tonnes a year of combined output -- 300,000 tonnes of zinc, 200,000 tonnes of lead, 35,000 tonnes of copper and 5,100 tonnes of rare earths -- which would make it the first large-scale zinc refinery built in the US since the 1970s. The deal briefly looked at risk in December when Korea Zinc's largest shareholder group, led by MBK Partners and Youngpoong Corp, challenged the share sale in South Korean court; the Seoul Central District Court rejected that challenge, clearing the transaction to proceed.

Money alone is not closing every gap, though, and the limits show up most clearly at the smaller end of the pipeline. Patriot Critical Minerals is developing a $300 million tungsten project on 300 acres of Bureau of Land Management land in Elko County, Nevada, reviving a deposit last mined roughly 40 years ago, timed to a 2024 US tariff of 25% on Chinese tungsten products and a Pentagon commitment to stop buying Chinese- or Russian-sourced tungsten by 2027. Even with that policy tailwind and a clear buyer deadline, the company's target of a mid-2029 start has run into a bottleneck that has nothing to do with financing: a shortage of government staff available to process its environmental assessment. That is not an isolated snag. The Council on Foreign Relations notes that the average American mine takes almost twenty-nine years to move from discovery to production once exploration, permitting and construction are all counted -- a timeline no equity check, however large, can shorten on its own.

Even where the money has landed, China's structural position in the supply chain has not moved much. The country still mines roughly 60% of the world's rare earths and controls up to 90% of global processing capacity for critical minerals broadly, according to CSIS -- and more than 99% of processing capacity for three of the specific rare-earth elements used in heat-resistant magnets, the kind that go into fighter jets, wind turbines and EV motors. That processing chokehold, not the mining stage, is what keeps US rare-earth prices running two to five times above Chinese spot levels even now, according to S&P Global analysis -- a gap wide enough that, absent price floors like the one written into the MP Materials deal, Chinese exporters could still undercut new US capacity the same way a surge in Chinese lithium exports drove prices down roughly 80% in 2024, forcing project closures across the US, Canada and Australia.

Why This Matters 68% confidence

None of these deals change India's own metals arithmetic overnight -- India imports the overwhelming majority of the rare-earth magnets its electronics and EV motor manufacturers use, largely through supply chains that still run via Chinese processing. But a US government now willing to guarantee prices and take direct equity stakes to build parallel processing capacity is a genuine second buyer and a genuine second source taking shape, however slowly -- the kind of structural change that could eventually give Indian manufacturers real sourcing alternatives beyond the diversification pledges other blocs have made without comparable financing behind them.

Price Impact

This is a multi-year US industrial-policy buildout, not an immediate supply or demand shock -- the earliest of the newly financed projects to reach meaningful output (USA Rare Earth's Oklahoma magnet plant) is still ramping toward 600 tonnes annually, while the largest (the Korea Zinc smelter) does not target production until 2029. China's mining and processing dominance remains structurally unchanged in the near term, keeping the direct price impact on rare earths and other critical minerals neutral for now, even as the scale of new US state backing strengthens the medium-term case for diversification.

Market Snapshot Computed live

Based on metalscost.com's own tracked India reference price as of 2026-09-21 (current). Volume and open interest aren't tracked by this site and are intentionally left blank rather than estimated.

Technical Analysis Computed live

Price is mixed relative to its 20-period and 50-period moving averages, showing no clear trend alignment.

Breakout probability: Low — price is trading mid-range.

Fundamental Analysis

Demand Drivers 68% confidence

MP Materials' offtake agreement and the Pentagon's 2027 deadline to stop buying Chinese- or Russian-sourced tungsten both tie directly to defense-sector demand for assured, non-Chinese supply of magnet and tungsten materials -- a demand driver rooted in supply-security policy rather than ordinary commercial consumption growth.

Supply Drivers 74% confidence

Four new or expanding US supply projects now have direct government financing behind them: MP Materials' Mountain Pass heavy rare-earth separation expansion, USA Rare Earth's Texas mine and Stillwater, Oklahoma magnet plant, Korea Zinc's planned Tennessee smelter, and Patriot Critical Minerals' Nevada tungsten project -- though only the Oklahoma plant has begun actual output as of mid-2026.

Government Policies 76% confidence

The Department of Defense, Commerce Department and Treasury have each taken direct financial positions in critical-minerals companies since mid-2025 -- equity stakes, price floors, offtake agreements and CHIPS Act loans -- a policy shift Treasury Secretary Scott Bessent described in October 2025 as setting price floors "across a range of industries" to prevent foreign underpricing.

Trade Tariffs 72% confidence

The US imposed a 25% tariff on Chinese tungsten products in 2024, alongside a Pentagon commitment to stop procuring Chinese- or Russian-sourced tungsten by 2027, the policy backdrop behind Patriot Critical Minerals' Nevada tungsten project.

Geopolitical Risks 64% confidence

The scale and structure of these deals -- direct equity stakes, price floors, and a foreign government-linked company (Korea Zinc) taking on a Pentagon joint-venture partner -- reflect a broader US strategy of using state capital to counter China's critical-minerals leverage, a dynamic that also surfaced in South Korean court when Korea Zinc's own shareholders challenged the US-backed share sale.

Mining Production 72% confidence

MP Materials' Mountain Pass mine in California remains the only active rare-earth mine of scale in the US; USA Rare Earth's Round Top deposit in Hudspeth County, Texas is targeting commercial production in 2028; and Patriot Critical Minerals' $300 million, 300-acre Nevada tungsten project is targeting a mid-2029 start, delayed in part by a shortage of government staff to process its environmental assessment.

Refinery Output 74% confidence

USA Rare Earth's Stillwater, Oklahoma magnet plant is ramping toward 600 tonnes of annual output by the end of 2026, while the planned Korea Zinc smelter in Clarksville, Tennessee targets 540,000 tonnes a year of zinc, copper, lead and rare earths by 2029 -- against China's continued command of up to 90% of global critical-minerals processing capacity, per CSIS.

Country Impact 74% confidence

Industry Impact 68% confidence

Timeline

2024: The US imposes a 25% tariff on Chinese tungsten products and the Pentagon commits to stop procuring Chinese- or Russian-sourced tungsten by 2027.
2025-07: The Department of Defense pays $400 million for a 15% stake in MP Materials, becoming its largest shareholder, with a price floor, offtake agreement, an option for $350 million more, and a $150 million loan for Mountain Pass mine expansion.
2025-10: Treasury Secretary Scott Bessent says the government will set price floors and forward buying "across a range of industries" to prevent foreign underpricing of US critical-minerals producers.
2025-12-15: The Pentagon agrees to take a 40% stake in a joint venture with Korea Zinc to build a $7.4 billion critical-minerals smelter in Clarksville, Tennessee.
2026-01-26: USA Rare Earth announces a letter of intent for up to $1.6 billion in US government funding, alongside $1.5 billion in private-sector investment.
2026-06-03: USA Rare Earth finalizes definitive agreements with the Commerce Department for the $1.6 billion funding package.

Market Sentiment

Alternative Scenarios 60% confidence

• If price floors and offtake agreements hold long enough for MP Materials, USA Rare Earth and the Korea Zinc joint venture to reach full designed output, the US could build a meaningfully larger non-Chinese processing base by the end of the decade than it has today.
• If Chinese producers respond by cutting export prices further, as they did with lithium in 2024, US projects without price-floor protection could face the same undercutting pressure that has closed mines in other countries in the past.

Who Benefits, Who Loses

Investor Watchlist 70% confidence

Educational items to monitor — not investment advice.

• Whether USA Rare Earth's Stillwater, Oklahoma magnet plant reaches its targeted 600 tonnes of annual output by the end of 2026
• Progress on construction financing and site work for the Korea Zinc-Pentagon joint venture's Tennessee smelter ahead of its targeted 2029 opening
• Whether Patriot Critical Minerals' environmental assessment clears its government staffing bottleneck in time to support a mid-2029 start in Nevada
• Any further US government equity stakes or price-floor agreements in additional critical-minerals companies

Price Risks 62% confidence

• A renewed drop in Chinese export prices, similar to the roughly 80% lithium price decline in 2024, could pressure US projects that lack a government price floor or offtake guarantee.
• Continued permitting delays, of the kind already affecting Patriot Critical Minerals' Nevada project, could push planned US supply further out even where financing is fully secured.

Historical Comparison

2024 lithium price collapse: A surge in Chinese lithium exports drove global prices down roughly 80% in 2024, forcing project closures in the US, Canada and Australia -- the precedent US officials cite for why price floors, not just funding, are now built into deals like the MP Materials agreement.

Related

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