A Federal Critical Mineral Processing Initiative: Securing U.S. Mineral Independence from China

China currently dominates global refining for critical minerals essential to modern economies — including lithium, cobalt, nickel, natural graphite, and rare earth elements — making it the primary supplier of processed inputs for advanced technologies, such as semiconductors, aerospace components, energy storage systems, and electric vehicle batteries. Even minerals mined outside of China are often sent to Chinese-owned smelting and processing plants. This near-monopoly grants Beijing significant leverage over global supply chains, heightening concerns over U.S. dependence on Chinese-controlled refining operations. China’s recent export controls on processed rare earth elements, issued in response to U.S. tariffs, bring into focus this strategic vulnerability.

The U.S. military depends heavily on these minerals for a variety of defense applications. For example, gallium-arsenide chips are used in electronic warfare systems that power the AN/ALQ-99 jamming pod, neodymium-iron-boron magnets are critical to the F-35’s flight control systems, and antimony is used in ammunition and artillery shells. These dependencies underscore the national security risks posed by China’s dominance in critical mineral refining.

Although encouraging private sector investments in refining, friendshoring, stockpiling resources, and streamlining permits has been helpful, these efforts fail to address a core issue: The United States lacks domestic refining and advanced processing capabilities. To achieve true mineral independence, the United States should adopt offensive industrial policies that build up the mineral refining sector. This requires establishing a federal initiative for critical mineral processing that builds on existing efforts by expanding funding, prioritizing states with optimal conditions for facilities, streamlining permitting, investing in workforce development, and securing allied supply chains.

Current Defensive Solutions Help but Face Significant Hurdles

China has historically weaponized its mineral dominance by imposing export restrictions on strategic materials to pressure rival economies. In 2010, China restricted rare earth elements exports to Japan amid a territorial dispute over the Senkaku/Diaoyu Islands, triggering price spikes worldwide. In 2023 and 2024, China imposed export controls on germanium and gallium, which are critical for semiconductor production. The United States has taken different approaches in response to these restrictions. After China’s 2010 rare earth elements embargo, the United States, the European Union, and Japan filed a case against China at the World Trade Organization, ultimately forcing Beijing to remove export quotas by 2015. The United States also revived rare earth mineral processing, including efforts to reopen the Mountain Pass Rare Earth Mine in California. In 2023, Washington intensified its “friendshoring” strategy by allocating additional resources to domestic mining and refining through the Department of Defense and Department of Energy budgets, while also strengthening supply chain partnerships with allies like Canada and Australia.

U.S. efforts to reduce dependence on China for critical minerals face a number of significant hurdles. First, domestic refining expansion remains slow, with new processing plants and smelters taking 10–20 years to become operational. For example, the Mountain Pass Rare Earth Mine, which reopened after China’s 2010 export controls, still sent 98 percent of its raw materials to China in 2019 due to the lack of U.S. processing capacity.

Investors are hesitant to fund U.S. refining and processing facilities due to uncertain returns, shifting federal policies, political instability, and environmental opposition. High-capital expenditures make mining and processing less attractive to investors, especially when compared to tech sectors that require minimal upfront investment and offer higher returns. Additionally, China maintains a fully integrated supply chain — from extraction to refining, smelting, and manufacturing — making it far cheaper and more efficient to process minerals domestically than in the United States. Expanding U.S. domestic mineral extraction is also challenging, as moving from exploration to consultation and full-scale operations can take at least a decade.

Even if extraction increases, investors remain concerned that Chinese firms could flood the market with minerals to drive down prices and make U.S. operations financially unsustainable. This played out with lithium in 2023, when oversupply triggered a sharp drop in prices. Similarly, although not driven by deliberate economic policies, nickel prices fell in 2024 due to overproduction by Chinese firms focused on short-term profits. This trend was further amplified by the adoption of a new chemical processing technique that significantly boosted output. Because extraction and refining must scale together to create a cost-effective, fully integrated U.S. supply chain, these barriers severely hinder progress.

Second, while capacity is gradually expanding, alternatives to Chinese processing and refining remain. In Japan, companies like Sumitomo Metal Mining have historically focused on refining nickel and cobalt, but the government has recently taken steps to expand rare earth refining. The Australian government is also scaling up support for rare earths processing, providing grants to firms such as Australian Strategic Materials Limited and extending financing to Iluka Resources. In South Korea, Korean Zinc Company, Ltd.; POSCO Future M Company, Ltd.; and LS-Nikko Copper Inc. are active in mineral processing. Despite the efforts of these three countries, China still dominates 85 percent of rare earth refining, 90 percent of global graphite processing, and nearly all of germanium, gallium, and tungsten refining. Japan, Australia, and South Korea also face capacity constraints, higher processing costs, and competing domestic priorities that limit their ability to fully support U.S. demand. Moreover, their geographic proximity to China heightens their vulnerability in the event of armed conflict.

Third, while stockpiles can provide a temporary buffer, they do not eliminate the need for secure, long-term supply chains, as reserves will eventually deplete. China’s dominance in the sector makes it difficult for the United States to determine optimal stockpile levels, especially given competing demands between military and civilian industries. Current forecasting models, such as those developed by the Institute for Defense Analyses, include considerations for critical civilian sectors. However, these models do not account for the downstream impacts of supply disruptions across the broader industrial base. Additionally, stockpiling is costly, requiring specialized storage, maintenance, and periodic replenishment to prevent material degradation. Adding to the complexity, China’s ability to manipulate mineral markets complicates U.S. procurement strategies: If prices surge, replenishing stockpiles becomes prohibitively expensive, whereas price crashes reduce incentives for domestic extraction and refining.

Fourth, streamlining permits is often proposed as part of a solution, but it alone does not guarantee rapid resource extraction. Mining projects typically take 15–20 years to reach full-scale production due to a lengthy process involving exploration, feasibility studies, environmental assessments, and construction. Political shifts between administrations frequently result in policy reversals on environmental regulations, creating uncertainty for long-term investments. Additionally, local opposition and legal challenges can cause significant delays, as seen with the Thacker Pass lithium mine in Nevada, which, despite its potential to produce 40,000 metric tons of battery-quality lithium carbonate, has faced years of lawsuits and protests that have stalled progress.

Efforts to secure mineral independence remain incomplete, with one of the most pressing challenges being the absence of robust domestic refining and smelting capacity within the United States.

The Limits of Previous Funding Initiatives

The Biden administration created funding initiatives aimed at strengthening critical mineral supply chains. These included the Inflation Reduction Act, Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act, and Defense Production Act, each of which played a role in supporting the domestic industry. The Inflation Reduction Act provided subsidies for battery production and clean energy initiatives, generating over $224 billion in investments. The CHIPS Act allocated $30 billion to private sector projects across 15 states, supporting the construction of 16 new semiconductor manufacturing facilities and creating more than 115,000 manufacturing jobs. However, these initiatives remain too fragmented, with resources spread across various agencies with competing priorities, rather than focusing on scaling up refining and metallurgical processing. The Defense Production Act, arguably the most impactful initiative, allocated $150 million specifically to critical minerals, funding key projects such as $19 million for a tin smelting and refining facility in Pennsylvania, $37.5 million for developing the Graphite Creek deposit and refining operations in Alaska, and over $100 million to establish a U.S.-based rare earth separation plant.

Biden also expanded Department of Energy initiatives and increased Department of Defense contracts to boost domestic production. The Department of Energy allocated $19.5 million toward securing domestic supply chains, and the administration budgeted an additional $43 million to enhance battery technologies for electric vehicles. However, a greater portion of the Department of Energy’s overall funding — particularly the Office of Science Financial Assistance Program’s $500 million open call — was distributed across a range of areas only marginally connected to critical resources or mineral processing, such as fusion energy sciences, nuclear physics, and biological and environmental research. The Defense Department awarded a $26.4 million grant to support a niobium refining plant in Pennsylvania. Yet, this remains just one project among many shortcomings in the effort to establish a self-sufficient U.S. supply chain.

Despite these notable investments, Biden-era initiatives largely failed to directly and adequately address refining and smelting, leaving a critical gap in the supply chain. Current funding levels remain insufficient to close the structural deficit in domestic processing capacity, keeping the United States dependent on foreign supply chains for critical minerals.

A Federal Critical Mineral Processing Initiative: The Path to U.S. Independence from China

Currently, the Department of Defense lacks a strong rationale to invest billions in processing facilities or mines, given that it is widely understood that military demand for critical minerals represents only a small fraction of overall usage. Although exact figures for defense consumption of these materials are difficult to estimate, U.S. military consumption of rare earth elements, for instance, accounts for less than 0.1 percent of global demand. Nevertheless, there are strong national security reasons to subsidize the industry. Military demand is projected to triple — from $15 billion in 2022 to $46 billion by 2046. Most global processing capacity is concentrated in China, a strategic rival to the United States in multiple ways. The private sector is unlikely to make significant investments without substantial government backing. Furthermore, many of these materials are irreplaceable in key defense systems. Any supply disruption could result in production delays or directly undermine combat readiness.

A federal critical mineral processing initiative is essential to eliminate U.S. dependence on China for critical minerals. Congress will need to allocate hundreds of billions of dollars over the next few decades. Replacing China’s copper smelting and refining capacity alone would require approximately $85 billion. To jumpstart this initiative, Congress should allocate $20–40 billion of seed and debt funding over the next decade through a Critical Minerals Industrial Act, forming a strategic public-private partnership that incentivizes U.S. firms to invest in and expand refining and smelting facilities. This legislation will differ from the Critical Minerals Security Act of 2024, which emphasizes reporting and recommendations, and the Critical Mineral Consistency Act of 2025, which prioritizes transparency.

Once funding is allocated, the first step would be to ensure effective fund distribution across key investment areas. Grants and tax rebates should be provided to U.S. companies investing in refining, smelting, and metallurgical processing. Additionally, public-private partnerships should be established to enable U.S. companies — such as those in technology, aerospace, energy storage, automotive, and defense — to serve as offtake partners, securing lower refining and smelting costs in exchange for long-term supply commitments. Federal agencies such as the Department of Energy, the Department of Defense, and the International Development Finance Corporation should expand low-interest loan programs to support domestic processing facilities. To shield these investments from political shifts, the Defense Production Act should be used to fast-track funding for these projects.

The second step would be to strategically select U.S. states with the most favorable conditions for large-scale refining and smelting operations. These states must have ample land, mining-friendly laws, proximity to ports or mineral deposits, and existing infrastructure. Optimal locations include Texas, Arizona, Utah, and West Virginia, all of which offer strong regulatory environments and existing industrial capacity. Oklahoma would also be a possible location. Governor Kevin Stitt has offered incentive packages to relocate processing facilities to the state. Utah, which also has lithium, beryllium, and tungsten deposits, is home to Kennecott Utah Copper, a division of Rio Tinto, which operates the Bingham Canyon Mine — already equipped with smelting and refining facilities that contribute eight percent of U.S. annual copper production. Rare earth elements in coal-related streams, including acid mine drainage and coal waste byproducts, have been discovered in West Virginia. However, the process of extracting these elements is not yet commercially viable. Texas offers a pro-business legal environment, no state income tax, and strong port infrastructure for importing raw materials. Arizona has fast-tracked mining permit laws and access to large reserves of copper, lithium, and rare earth elements. Currently, California’s Mountain Pass Mine Rare Earth Mine, operated by MP Materials, is the only active rare earth mining and processing facility in the United States.

The third step deals with streamlining the permitting process for refineries and smelters. In China, smelters often take two to three years to obtain permits. By contrast, the process takes 7 to 10 years in the United States. According to an S&P Global Report, it takes an average of 29 years to bring a new mine online in the United States, making it the second slowest country in the world for mine development. For example, the Thacker Pass lithium project submitted its initial operations plan in August 2019, but it was not until 2024 that the Department of Energy finalized a loan to support its development, including the construction of a sulfuric acid plant and a lithium processing facility. Similarly, the Mountain Pass Rare Earth Mine secured its environmental permits in 2010 to construct a new rare earth processing facility but did not complete construction until 2014, even though it had on-site processing facilities that smelt and refine rare earth ore into finished products. These delays might be mitigated by using the existing fast-track approval process established under the Fixing America’s Surface Transportation Act of 2015 to accelerate the development of critical mineral infrastructure. This legislation is particularly well-suited for this role, as it streamlines permitting for projects that already exist and are supported by federal investment programs.

The fourth step focuses on workforce development to ensure the United States has the necessary manpower to operate these facilities. By 2029, an estimated 221,000 workers in the mining sector will retire. Given the scale of expansion required in both mining and refining, the United States will need four to five times that number of workers. The workforce challenge is exacerbated by several factors: an aging workforce due to retirements; declining academic programs, as many universities have shut down metallurgy and materials science programs because of declining student interest; and an economic shift away from heavy industry, resulting in a lack of training opportunities for young professionals to enter the field. Currently, only 14 Accreditation Board for Engineering and Technology-accredited programs remain, including the University of Utah, West Virginia University, and the Colorado School of Mines. The U.S. government provides limited financial support for programs, such as the Materials Research Science and Engineering Centers. Recent legislation and programs, including the Mining Schools Act (which allocated $10 million from 2024 to 2031) and the National Science Foundation’s Regional Innovation Engines Program, provides funding for these partnerships. While the government has rightly maintained support for these initiatives, they still fall short of addressing the scale of the challenge.

Alternatively, the United States could import skilled workers from abroad. However, the U.S. immigration process for highly skilled workers is notoriously slow, and national security concerns may limit foreign student enrollment in metallurgy programs. Additionally, global competition for talent is fierce, with countries like China, Australia, Canada, and Germany actively recruiting the same workforce. The U.S. government must allocate massive sums of funding to expand training programs and rebuild the talent pipeline.

Finally, once these four steps are in place, the United States should strengthen allied supply chains by requiring all federally funded defense, infrastructure, and energy products to use 100 percent U.S.-processed critical minerals. Furthermore, the United States should also deepen trade partnerships with Canada, Australia, Japan, and South Korea to jointly invest in refining and diversifying raw materials, and to secure long-term off-take contracts with private and government partners. Existing frameworks, such as the State Department’s Minerals Security Partnership — a multilateral initiative with 14 countries aimed at strengthening critical mineral supply chains — and AUKUS, the trilateral security partnership focused on advanced technologies and critical materials, provide a foundation for advancing this strategy.

Conclusion

Given the urgency to break away from Chinese dependence, pursuing these five steps to secure U.S. mineral independence is not only a matter of economic security, but one of national survival. Without a federal critical minerals processing initiative, the U.S. government can use the Defense Production Act to seize access to raw materials, but that power has clear limits — especially in sustaining production over time. The government can also seize domestically available mineral stockpiles. However, as of 2022, the United States remained more than 50 percent import-dependent for 51 nonfuel mineral commodities and fully reliant on imports for 15 of them.

On the processing and smelting side, seizure is only the first step. Without domestic capacity to refine these materials, they remain militarily useless. In an armed conflict with China, the United States would lose access to critical Chinese processing facilities. Existing U.S. processing capabilities are limited, and without serious investment, the Department of Defense would face real constraints in scaling production. This is not theoretical: During the COVID-19 pandemic, the government invoked the Defense Production Act to accelerate ventilator production, yet still encountered major delays due to limited industrial infrastructure. Compounding the issue is the U.S. reliance on foreign-owned intellectual property for key defense technologies. The Defense Production Act cannot override or replicate proprietary intellectual property in areas like microelectronics, rare earth processing, advanced battery chemistries, or the specialty alloys used in hypersonic and stealth systems. Without access to that knowledge or the means to replace it, even seized raw materials cannot be turned into military capability at scale.

Alvin Camba, Ph.D., is a critical materials specialist at the Associated Universities, Inc., where he works as part of the Beacons Project, a U.S. Department of Defense-funded initiative focused on critical resources and U.S. supply chains. He earned his doctorate from Johns Hopkins University and is a widely published expert on Chinese-Southeast Asian relations.

Image: Tmy350 via Wikimedia Commons.

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