Noveon Magnetics in Texas has been fielding daily calls since early April.
As China clamps down on exports of seven rare earth elements and the high-performance magnets they are used to make, would-be buyers are urgently seeking alternatives.
Noveon is the only US manufacturer of sintered neodymium iron boron (NdFeB) magnets vital for everything from electric vehicle motors and wind turbines to industrial robots and defense systems like guided missiles and fighter jets. As such, they are deemed essential to US national security.
But Noveon CEO Scott Dunn said the company, which makes magnets for smaller motors, cooling pumps, braking systems, robots, and more, is being cautious about scaling up production, even as callers offer to fly out to its headquarters to strike deals.
“You don’t get to just switch it on and switch it off and survive cycles when you’re down here in this part of the downstream,” Dunn told Nikkei Asia, saying the company had long been selective about its customers.
“The first thing is assessing how real any sort of new response actually is to this situation. One way that we think about that is, what happens if everything goes back to the way it is tomorrow?”
Beijing’s export controls are part of its retaliation for US President Donald Trump’s “reciprocal” tariffs and the latest example of China wielding its critical minerals as geopolitical tensions intensify. Last year, it banned shipments of gallium, germanium, and antimony to the US.
Noveon, which employs about 100 workers, produces around 1,000 tons of NdFeB magnets a year, while the US imported around 7,500 tons of them from China in 2024, according to Adamas Intelligence. The company aims to double its output in the years ahead and could eventually expand it to up to 10,000 tons on its current site, but that would still be just a fraction of China’s estimated output of more than 200,000 tons a year.
China’s size is unrivaled, but it is not just scale that makes the country’s supply chain so formidable. Because each magnet is different for each application, they cannot be made in bulk. Each application and customer requires a different process.
“The problem is that the Chinese have done very well to practically commoditize something that is not even close to a commodity,” said Dunn, saying China’s model is impossible to replicate elsewhere.
That has not stopped governments and companies outside of China from trying to set up alternative supply chains. Australia, home of the largest non-China rare earth miner and separator, Lynas, has poured over one billion USD of state funds into two additional projects, Iluka and Arafura. Separation projects by Belgium chemicals firm Solvay and France’s Carester are underway in Europe. The US, too, is working to build a domestic industry.
That task is growing more urgent as Beijing’s export controls, which impose more onerous licensing requirements on exports, drive home the West’s crippling overreliance on China for rare earths and the products they create.
Shipments of listed items are already being held at the border as Chinese suppliers navigate the licensing system, industry sources said. China has released compliance information for suppliers, indicating licenses could take 45 days to process.
Major manufacturers sourcing from China are scrambling to get clarity on when their magnets might be released, said industry veteran John Ormerod, adding the clock is ticking as inventories are drawn down.
“Within 90 days, we should see an impact if this doesn’t somehow get resolved,” he said. And even new sources of materials would not be enough, he added.
“Let’s pretend you could get some terbium and dysprosium magically from somewhere. You’ve [still] got to have somebody to make the magnets.”
Terbium and dysprosium, two of the seven elements on China’s export curbs list, are used to make NdFeB permanent magnets more resistant to heat. Lower-grade NdFeB magnets (without these two elements), used in consumer electronics like phones and sound systems, were not included on the list.
China produces over 90% of NdFeB magnets, and no other country hosts all segments of the supply chain to make them. China and its companies are also the overwhelming source of separated so-called heavy rare earths like terbium and dysprosium. Noveon’s Dunn said the company has supply from elsewhere in Asia but declined to give further details.
Rare earth elements are grouped as light, medium, or heavy based on their atomic number and are mainly separated by solvent extraction. Light elements like lanthanum and cerium, which are more easily separated, are used in fuel catalysts, while tougher-to-extract heavy elements are used in a wide range of applications, including medical imaging equipment, lighting, electronics, and nuclear reactor technology.
“In essence, they fill a role similar to that of yeast in pizza,” wrote expert David S Abraham in his 2015 book, “The Elements of Power.”
“While they are only used in small amounts, they’re essential. Without yeast there’s no pizza, and without rare metals there’s no high-tech world.”
Australia’s Lynas, the largest miner and separator of light rare earths outside China, supplies the Japanese market and also sells into China. It is establishing a heavy rare earth separation circuit at its processing facility in Malaysia.
“Once in production, it will be the only source of separated heavy rare earths outside China and enable Lynas to meet customer demand for both light and heavy rare earth materials,” the company said in a statement.
The company’s share price has surged 20% since Beijing’s export controls were put in place. Arafura and Illuka have also seen their share prices rise.
Arafura CEO Darryl Cuzzubbo said the recent developments have “elevated the urgency” to establish alternative supply chains. “This is a shot across the bow to remind the US and others that China’s got a veto card here,” Cuzzubbo said.
“[South] Korea, the US, and Europe are 100% dependent on China for permanent rare earth magnets. Their EVs, their wind turbines, their electronics, their robotics—worth many trillions of USD per annum—are ultimately dependent on China, so they’ve got to get alternative sources.”
Japan, with firms such as TDK and Shin-Etsu, ranks a distant second to China in magnet production and depends heavily on Chinese feedstock for heavy rare earths. South Korea’s Star Magnetics, Canada’s Neo Performance Materials, and Germany’s Vacuumschmelze are similarly constrained.
“There’s a very limited amount of alternatives to sourcing those magnets from the Chinese market,” said David Merriman, of Project Blue.
The new controls also present a major issue for the US Department of Defense. To apply for an export license, suppliers must provide further details of their downstream. The controls concern “dual use” applications, which means it will be “very difficult” to get them for defense purposes, according to Merriman.
“The Department of Defense is going to have to do something dramatic and figure out how they’re gonna get dysprosium and terbium,” Ormerod added.
Since 2020, the Pentagon has awarded more than USD 439 million to companies to establish domestic rare earth magnet supply chains, including USD 28 million to Noveon and USD 288 million to Lynas to build a heavy rare earth separation facility in Texas. It also provided eVac, a subsidiary of Vacuumschmelze, with USD 94 million to build a magnet plant in South Carolina.
US company MP Materials, which operates the country’s only mine for rare earths, has received USD 45 million in Pentagon funds to establish a domestic mine-to-metal-to-magnet supply chain. It plans to produce 1,000 tons of magnets after ramping up late this year for sale to General Motors and other customers.
But MP has halted rare earth shipments to China, its main source of revenue, as a result of the trade war. That comes after a tough 2024 in which revenue dropped 20% to USD 203.9 million and its operating loss ballooned nearly tenfold to USD 169.4 million.
China, in 2023, imposed tight restrictions on exporting processing and magnet-making technology. Its latest controls, if they turn into a ban, would likely further hobble efforts to expand in the West in the short term, said Jon Hykawy, founder of critical minerals consultancy Stormcrow Capital.
“I’d say these new barriers to rare earth trade probably work out quite nicely for China, as it creates additional issues for building a complete supply chain for rare earth magnets in the West,” he said.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.