Rare Earth Metallurgy as the Hidden Bottleneck of Western Deterrence
Why Processing Capacity — Not Mining Output — Defines Strategic Readiness in Advanced Defence Systems
The strategic vulnerability in Western defence supply chains does not primarily originate at the level of rare-earth mining, but at the downstream metallurgical stages that convert ores into usable oxides, metals, alloys, and permanent magnets. While global extraction volumes may appear sufficient, the decisive choke point lies in separation, reduction, alloying, and magnet fabrication — stages overwhelmingly concentrated in China. This concentration transforms heavy rare earth elements such as dysprosium, terbium, yttrium, and scandium into strategic leverage variables. Modern Western defence systems — from turbine engines and thermal barrier coatings to high-performance permanent magnets in missiles, aircraft, radar systems, and unmanned platforms — depend on these metallized inputs. A disruption at the processing stage would translate directly into maintenance delays, production slowdowns, and degraded readiness. In this sense, metallurgy constitutes a foundational industrial capacity underpinning deterrence, rather than a peripheral commodity issue.
The report is structured to demonstrate why metallurgical capacity, rather than ore availability, defines strategic autonomy. It first maps the critical supply chains for yttrium, scandium, dysprosium, and terbium, detailing each stage from mining to magnet fabrication and identifying where bottlenecks occur. It then quantifies geographic concentration in processing capacity and assesses the dominance of Chinese refining and metallization infrastructure. The analysis proceeds to evaluate the direct impact of supply constraints on Western defence programs, including aerospace propulsion, missile systems, and semiconductor-enabled communications. A scenario analysis models escalation effects over short-, medium-, and long-term horizons, followed by an assessment of capital requirements and structural financing gaps in rebuilding Western capacity. The conclusion synthesizes these findings to argue that rare-earth metallurgy functions as a hidden determinant of deterrence that current financial markets and policy frameworks have not fully internalized.