The Mineral War

The earth at Bayan Obo is the color of rust and ash.

Sixty miles north of Baotou in Inner Mongolia, in a landscape where the grasslands of the steppe give way to industrial wasteland, lies the largest rare earth mine on the planet. The pit stretches for miles — a terraced descent into geology that has been exploited since the 1950s, when Chinese scientists first identified the extraordinary mineral concentrations locked in the iron ore. From the air, the tailings ponds glow with an unnatural iridescence: cerium, lanthanum, neodymium, and their fifteen elemental siblings leaching into water that will never run clean again.

The workers who extract these minerals — the miners, the chemical processors, the technicians who operate the acid baths and solvent extraction cascades — are the invisible labor force of the AI age. Rare earth processing is one of the most environmentally destructive industrial activities on Earth. For every ton of rare earth oxide produced, the process generates approximately two thousand tons of toxic waste: radioactive thorium, hydrofluoric acid, heavy metals that seep into groundwater and soil. Villages near Baotou have reported elevated rates of cancer, respiratory disease, and birth defects. The "rare earth lake" — a vast tailings reservoir visible from space — has been called one of the most polluted places on the planet.

This is where artificial intelligence begins. Not in the clean rooms of Silicon Valley or the server halls of Virginia, but in the scarred earth of northern China, where human hands and human lungs process the elements without which no chip can be fabricated, no data center cooling fan can spin, no fiber optic cable can carry light.

China controls the periodic table the way TSMC controls the transistor: not through geological accident, but through decades of deliberate industrial strategy.

The raw numbers are staggering, and they increase at each stage of the supply chain. China mines approximately seventy percent of the world's rare earths — 270,000 metric tons out of a global total of 390,000 in 2024. But mining is where China is most exposed to competition. The real leverage lies downstream. Processing and separation: 85 to 90 percent. Metallization: approximately 90 percent. Permanent magnet production — the sintered neodymium-iron-boron magnets that are essential to everything from server cooling fans to ASML's lithography machines to F-35 fin actuators — 92 to 94 percent.

The dominance increases as you move toward the finished product. This is not an accident. It is the result of a strategic bet placed decades ago, when Western nations decided that rare earth processing was too dirty, too expensive, and too marginal to bother with. China, under Deng Xiaoping, saw differently. "The Middle East has oil," Deng reportedly said in 1992. "China has rare earths." The state invested in processing infrastructure while the West outsourced. By the time anyone noticed the dependency, it was structural.

And now Beijing has weaponized it.

The escalation has been methodical. In July 2023, China announced licensing requirements for gallium and germanium exports — the first shot across the bow. October 2023: graphite controls. December 2023: a ban on exporting rare earth extraction and separation technologies, a move designed not just to restrict supply but to prevent competitors from ever building their own processing capacity.

Through 2024, the controls expanded: antimony, superhard materials. In December 2024, responding directly to the Biden administration's expanded semiconductor export restrictions, China banned exports of gallium, germanium, antimony, and superhard materials to the United States specifically. The tit-for-tat pattern crystallized. Each American chip restriction triggered a Chinese mineral restriction within weeks.

Then came 2025, and the gloves came off.

February: tungsten, tellurium, bismuth, molybdenum, and indium. April: seven medium-to-heavy rare earth elements — samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. These are the elements that make magnets work at high temperatures, that enable the precision polishing of chip wafers, that form the phosphors in night-vision goggles and the dielectrics in advanced transistor gates. Every F-35 Lightning II contains 920 pounds of rare earth material. Every Virginia-class submarine, approximately 4,600 kilograms. Every ASML EUV lithography machine — the $200 million instruments without which sub-7-nanometer chips cannot be manufactured — relies on neodymium-iron-boron and samarium-cobalt magnets for its brushless motors and magnetic levitation systems.

On October 9, 2025, China deployed its most aggressive weapon yet: its own version of America's foreign direct product rule.

The mechanism is elegant in its severity. A de minimis threshold of 0.1 percent: any product anywhere in the world containing Chinese-origin rare earth materials representing at least 0.1 percent of the item's total value falls under Chinese export control jurisdiction. Given that China controls 85 to 90 percent of global rare earth processing, this means virtually any product containing rare earth magnets — manufactured anywhere on Earth — is theoretically subject to Beijing's approval. The rule also extends to any item produced using Chinese rare earth processing technologies, and to any subsidiary where a parent company controls fifty percent or more of shares.

This is extraterritorial jurisdiction over the physical substrate of modern industry. China looked at America's semiconductor FDPR — which reaches any chip made with US-origin technology — and answered with a mineral FDPR that reaches any product made with Chinese-origin materials. The symmetry is deliberate. The message, translated into the language of leverage: you control the design. We control the earth it's made from.

In November 2025, following emergency bilateral negotiations, China suspended the October controls for one year. The April restrictions remain in force. Analysts interpreted the suspension itself as evidence that Beijing recognizes the self-depleting nature of the weapon: the 2010 rare earth embargo against Japan triggered diversification investments that eventually reduced China's mining share from 97 percent to 70 percent. Overuse accelerates the very independence it seeks to prevent.

But the 2025 threat is orders of magnitude more serious than 2010. The War on the Rocks analysis from January 2026 framed it precisely: China's rare earth weapon "burns hot but fast," while America's semiconductor controls are "cooler but enduring." The rare earth leverage is most potent in the 2025 to 2035 window, during which no alternatives exist at scale. The fifteen-to-twenty-year timeline to build independent processing capacity — estimated by CSIS, Econofact, and multiple industry analysts — means that even with maximum political will and investment starting today, the West would not have self-sufficient rare earth processing until 2040 at the earliest.

The scramble to close that gap is real but small. MP Materials, the only operating rare earth mine and processor in the United States, doubled its separated neodymium-praseodymium oxide production in 2025 to 2,599 metric tons. It aims for 6,000 tons annualized by the end of 2026. A new $1.25 billion magnet manufacturing campus in Northlake, Texas, targets 10,000 metric tons per year when fully operational.

Ten thousand metric tons sounds significant. It represents roughly five to seven percent of China's 150,000-ton magnet output. It is a start. It is not a solution.

Lynas Rare Earths, the world's largest non-Chinese processor operating out of Malaysia and Western Australia, is expanding heavy rare earth separation capacity — the strategically critical dysprosium and terbium — with production beginning in phases from 2026 to 2028. In Greenland, potentially enormous deposits sit beneath ice and tundra with no roads, no ports, and no operating mines. Canada has announced a two-billion-dollar critical minerals sovereign fund. Recycling, which currently accounts for less than one percent of rare earth supply, shows technological promise — new techniques using intense bursts of electricity cut energy use by 87 percent — but remains negligible at industrial scale.

And then there is Niron Magnetics in Minneapolis, developing iron-nitride magnets that use no rare earths at all. Performance surpasses some conventional magnets. A 1,500-ton-per-year manufacturing facility is under construction. It is, perhaps, the most hopeful development in the entire mineral war — but it cannot yet match the highest-performance rare earth magnets needed for defense and aerospace applications, and it remains years from meaningful scale.

The deeper truth of the mineral war is geological, not geopolitical. Rare earths are not actually rare — they are distributed across the planet in countries from Brazil to Vietnam to Australia to the United States. China holds 48 percent of global reserves, not all of them. The problem was never scarcity. It was that no one else wanted to do the dirty work.

The processing is toxic. The waste is radioactive. The environmental cost is staggering. Western nations made a rational economic calculation: let China bear the pollution and the health costs, and buy the refined product cheaply. For thirty years, this worked beautifully. Now the bill has come due, and it is denominated in strategic vulnerability.

In September 2022, the Pentagon suspended F-35 deliveries after discovering that a Honeywell turbomachine component contained a magnet made from Chinese-origin cobalt-samarium alloy — a violation of US law prohibiting Chinese specialty metals in defense systems. The Pentagon issued a national security waiver to resume deliveries. Every one of the more than 800 F-35s delivered contained the Chinese-sourced magnet. Honeywell ordered a replacement from a US source. The waiver acknowledged what everyone already knew: there was no alternative.

"Every F-35, missile battery, satellite constellation, and network-centric kill chain depends on these magnets," the Modern War Institute at West Point warned. The dependency is not abstract. It is welded into the airframes.

Back in Bayan Obo, the earth continues to yield its elements. The tailings ponds continue to grow. The workers continue to breathe air thick with particulates from the processing plants. There are fewer than 200 engineers on the planet with deep expertise in rare earth processing, and approximately 80 percent of them live in China.

The mineral war is not about rocks. It is about who was willing to pay the human and environmental price of turning those rocks into the building blocks of the modern world — and who must now reckon with the consequences of letting someone else do it.