Even if rare earths can be dug out of the ground, the supply chain isn't complete without factories that turn them into magnets. Over the past several years, the US Department of War has poured massive sums into mining and refining companies like MP Materials, Energy Fuels, and Phoenix Tailings, rushing to break free from dependence on China. But in June 2026, even as Energy Fuels and Phoenix Tailings mobilized over $3.1 billion through government loans and acquisitions, the main buyers of the resulting oxides and metals were Japanese companies via Sumitomo Corporation of Americas and South Korean manufacturers. The reason rare earths mined on American soil flow to Asian magnet factories lies in the "downstream" industrial base that the US still doesn't possess.
Over $3 Billion Mobilized in a Single Week for a "De-China" Plan
On June 18, 2026, Energy Fuels secured a conditional loan of $725 million (approximately ¥117.7 billion, at ¥162.4 per dollar as of July 2026) from the Office of Strategic Capital under the US Department of War. The 20-year loan will fund an expansion of refining capacity at the White Mesa Mill in Utah and a new plant for rare earth metals and alloys. Two days earlier, on June 16, Phoenix Tailings had secured a $500 million (approximately ¥81.2 billion) conditional loan from the same Office of Strategic Capital. The funds are earmarked for the company's planned "Freedom Facility" and form the core of an approximately $1 billion overall funding plan.
On June 23, Energy Fuels went further, announcing an agreement to acquire German magnet maker Vacuumschmelze (VAC) for an equity value of $1.9 billion (approximately ¥308.6 billion; consideration consists of $718 million in cash plus roughly 65.85 million newly issued shares, with an additional $140 million in adjusted net debt to be assumed). The deal is expected to close in early 2027. The two government loans alone ($725 million and $500 million) total $1.225 billion (approximately ¥198.9 billion), and combined with the VAC acquisition, the two companies' total mobilized funding reaches $3.125 billion (approximately ¥507.5 billion). The fact that even Phoenix Tailings—backed by CIA-affiliated venture capital firm IQT (In-Q-Tel)—became a recipient of government-linked funding underscores just how much policy weight is being placed on this sector.
The Destination of the Output: Sumitomo Corporation and South Korean Manufacturers
Neodymium-praseodymium (NdPr) oxides and metals—the flagship products of MP Materials (Nevada, the largest rare earth producer in the US)—became the largest revenue segment in the company's most recent quarterly earnings. The bulk of this output was produced for Japanese companies under a contract with Sumitomo Corporation of Americas. This partnership, an existing framework announced back in February 2023, finally bore fruit as a revenue pillar in 2026. While MP Materials also signed new contracts in Q1 2026 with an unnamed US tech company and industrial firms, the revenue pillar remains supply to Japan.
Until the previous year, the company had been selling raw ore to China's Shenghe Resources. It has since halted these sales in connection with its partnership with the US government, and as for magnet supply, it has signed contracts with General Motors and Apple. The company announced in May that shipments of finished magnets to GM are expected to begin within 2026, but no actual shipments have yet occurred. What currently supports MP Materials' revenue structure is not the anticipated future demand for domestic US magnets—it is the already-established sales channel to Japan.
Energy Fuels CEO Ross Bhappu said, "In the near future, we plan to send oxides to South Korea." The company is also pursuing the acquisition of Australian Strategic Materials (ASM), which operates a metal manufacturing plant in South Korea, and in 2025 a major South Korean manufacturer processed a small amount of the company's NdPr into magnets. Phoenix Tailings CEO Nick Myers went even further, stating, "Japanese customers are hungry for the rare earth metals we produce" and "Our customers are mainly South Korea and Japan. If major defense companies don't move quickly, we'll sell out because others are offering higher prices." Since the company is not yet at mass-production stage and does not disclose sales figures, this statement cannot be treated as confirmation of scale. Nevertheless, the pattern of customers skewing toward Japan and South Korea is shared with MP Materials and Energy Fuels as well.
Why Can't Neodymium Magnets Be Made in the US?
Neodymium-iron-boron (NdFeB) magnets are permanent magnets made by sintering an alloy of neodymium, iron, and boron at high temperatures, and they generate far stronger magnetic force than ferrite magnets. They are used in many products requiring compact, high-output performance—from EV motors and wind turbine generators to smartphone vibration motors and actuators in precision equipment. Manufacturing requires multiple processes: reducing raw oxides into metal, alloying, crushing, magnetic field orientation, sintering, and magnetization. This is an advanced downstream industry requiring completely different technology and equipment from raw material mining.
Thomas Kruemmer, author of the Rare Earth Observer blog, stated, "Currently, only two countries mass-produce neodymium-iron-boron magnets. One is Japan, the birthplace of the technology, and the other is China." According to analysis by magnet industry consultant John Ormerod, among countries outside China that mass-produce NdFeB magnets, Japan produces 10,000–15,000 tons per year, South Korea produces 2,000–3,000 tons per year, and the US remains under 1,000 tons per year. While Kruemmer's statement overlooks South Korea's production scale, it does not contradict Ormerod's figures on the point that Japan is both the technological origin and the largest player in the magnet industry.
Even as the US pours massive investment into mining and refining raw materials, assembling downstream equipment—sintering furnaces, magnetic field orientation equipment, magnetization lines—along with the engineers to operate them, requires years of time and additional investment to build from scratch. Energy Fuels' move to acquire VAC, a downstream company, through M&A reflects a judgment that buying an existing magnet manufacturer is faster than building up this process independently. VAC has just brought online a plant in Sumter, South Carolina with an annual magnet production capacity of 2,000 tons, designed to eventually expand to 12,000 tons per year.
In the Same Month as the Support, China Added MP Materials to Its Sanctions List
Among the funding announcements made by Energy Fuels and Phoenix Tailings from mid to late June 2026, the two conditional loans were backed by the US Department of War. But on that very same June 22, China added ten US companies, including MP Materials, to its export control list. On June 18, when Energy Fuels secured its $725 million government loan; on June 16, when Phoenix Tailings obtained its $500 million loan; and on June 23, when Energy Fuels announced the VAC acquisition—in the middle of the very week when the two companies mobilized a combined $3.125 billion in funding, the largest rare earth producer in the US was added to China's regulatory list.
China controls roughly 90% of the world's rare earth refining capacity, and since April 2025 has tightened export licensing requirements for seven items including samarium, dysprosium, and terbium. According to the US Geological Survey's "Mineral Commodity Summaries 2026," China accounted for 71% of US imports of rare earth compounds and metals between 2021 and 2024, and in 2025 the US relied on imports for an estimated 67% of domestic consumption. Within this structure of dependence, the more the US ramps up investment in its domestic supply chain, the more reason China has to deploy export controls as a countermeasure. The fact that investment in the production stage and addition to the regulatory list overlapped in the same month reveals just how deep this dependence runs—deep enough that upstream investment alone cannot close the gap.
De-Risking from China Remains Limited to Diversifying Production Locations
Japan faced a similar situation in 2010. When China effectively halted rare earth exports to Japan following the fishing boat collision incident near the Senkaku Islands, Japan's dependence on China stood at around 90%. From there, through investments in Lynas (Australia) and domestic recycling technology, Japan reduced that dependence to about 60% over a decade or so (World Economic Forum, 2023). The US's 71% share of Chinese-origin imports (2021–2024) starts from a lower level than what Japan faced at the time of the embargo, but compared to Japan's decade-long process of breaking away, the US is only just standing at the entrance.
Sumitomo Corporation of Americas holds the most stable position within this structure. As the exclusive sales channel to Japan for MP Materials, it controls the primary destination for the rare earths the US extracts. The fact that Japan's magnet industry—including its supply chain to downstream manufacturers like Toyota and Hitachi—maintains an annual production scale of 10,000–15,000 tons has, ironically, ended up supporting the US rare earth strategy from behind.
Questions remain that the three companies' announcements do not address. None of the companies has disclosed whether prices for sales to Asia are higher or lower than those for domestic US sales. Nor has any transition scenario been presented for how much—and when—supply to Japan and South Korea might shrink once domestic US magnet demand fully materializes.
The loans obtained by Energy Fuels and Phoenix Tailings are both "conditional," meaning the plans themselves could change if the conditions are not met. For US domestic production to replace the existing supply networks of Japan's 10,000–15,000 tons and South Korea's 2,000–3,000 tons per year, current production—still under 1,000 tons per year—would need to increase more than tenfold. How many years it takes to achieve a shift of this magnitude will be the first real test of whether the "de-China" plan ends up as mere diversification of production locations, or evolves into a genuine transformation of the supply chain.