A formal memorandum from the U.S. Department of War has signaled a fundamental shift in the two-decade struggle for rare earth supremacy, potentially breaking a cycle of Chinese market tactics that has crushed Western competitors.
Back
US War Memo Signals End to China's 20-Year Grip on Rare Earths
A Department of War memorandum issued to REalloys Inc. on May 6 is redrawing the strategic map for critical minerals, signaling a whole-of-government push to build a U.S. heavy rare earth supply chain that is immune to Chinese market manipulation ahead of a 2027 import ban.
"For decades, critical material dependencies have represented one of America's most consequential strategic vulnerabilities," said General Jack Keane (Ret.), a board director at REalloys and former Vice Chief of Staff of the U.S. Army. "Building a sovereign, zero-adversary-nexus supply chain is a fundamental national security imperative."
The memo specifically prioritizes Dysprosium (Dy) and Terbium (Tb), essential for defense applications. This comes as a 2027 deadline looms for updated Defense Federal Acquisition Regulation Supplement (DFARS) rules, which will ban Chinese-origin rare earths in U.S. weapons. The last major price spike in 2011 saw Dysprosium oxide surge over 2,400% to $2,300 per kilogram before China flooded the market, crashing prices and bankrupting U.S. producer Molycorp by 2015.
The directive suggests a move away from commercial price dependence toward mandated, defense-driven demand. For REalloys (NASDAQ: ALOY), which is building North America's largest heavy rare earth metallization facility, this government focus could de-risk its entire business model by creating a customer base insulated from the price wars that defined the last 20 years.
For more than two decades, China maintained its dominance over the rare earth market with a simple but devastatingly effective economic weapon: the price tag. According to a detailed analysis by Oilprice.com, Beijing historically countered any Western attempt to build independent processing capacity by manipulating the Chinese-controlled Asian Metal Index (AMI) and flooding the market with cheap material. The investment case for Western projects would collapse, funding would dry up, and the nascent competitors would fold. This cycle crushed the last major U.S. rare earth producer, Molycorp, which filed for bankruptcy in 2015 after a boom-and-bust cycle saw prices skyrocket and then collapse by more than 90 percent.
Why 2027 Changes Everything
The Department of War's memo to REalloys shows why this time is different. The strategic landscape has been reshaped by policy, not price. On January 1, 2027, the updated DFARS rules will effectively prohibit materials processed in China, North Korea, Russia, or Iran from the U.S. defense supply chain. This creates a legally mandated, non-market-dependent demand for compliant rare earth metals. The primary customer is no longer a commercial entity swayed by global prices, but the U.S. defense industrial base, which is required by law to source domestically.
This policy shift is underpinned by direct financial and strategic government support, a factor absent in previous cycles. REalloys has a $200 million letter of intent from the U.S. Export-Import Bank and a memorandum of understanding with the Japan Organization for Metals and Energy Security (JOGMEC). This institutional commitment from government bodies signals a long-term strategic priority that transcends commercial market volatility.
REalloys' Non-Chinese Supply Chain
Crucially, REalloys has engineered a platform that avoids the hidden trap of technological dependence. Past Western efforts often relied on Chinese equipment or expertise, creating a critical vulnerability. In contrast, REalloys' partner, the Saskatchewan Research Council (SRC), built its own processing systems from the ground up. The result is a proprietary, patent-pending hydrofluoric-acid-free fluorination process that is more efficient and eliminates a key hazardous chemical.
The company's integrated model connects allied resources directly to U.S. manufacturing. REalloys holds an offtake agreement for 80% of the output from SRC's new processing facility, which is fed by its own Hoidas Lake asset and other allied feedstock sources. This material will be converted into defense-grade metals at the company's facility in Euclid, Ohio—the only heavy rare earth metallization platform in North America. By early 2027, the platform expects to produce approximately 30 tonnes of dysprosium oxide and 10 tonnes of terbium oxide, making it the largest source of heavy rare earths outside China. While other companies like MP Materials (NYSE: MP) focus on light rare earths and USA Rare Earth (NASDAQ: USAR) develops its Round Top deposit, REalloys is positioned to specifically solve the heavy rare earth challenge for the defense sector.
This article is for informational purposes only and does not constitute investment advice.
[1] REalloys (NASDAQ: ALOY) Receives Department of War Memorandum on Securing Domestic Heavy Rare Earth Supply Ahead of 2027 Deadline[2] How China Killed Every Rare Earth Competitor Before It Could Get Started[3] The Economic Playbook Behind China's Rare Earth Market Success[4] China's Rare Earth Leverage Explained in 3 Shocking Charts
