Rare earth elements (REEs) are a group of 17 metallic elements that are essential to modern defense systems. Despite their name, they're not actually rare—but the processing infrastructure to refine them is concentrated almost entirely in China. This dependency has become a critical national security concern, and the U.S. government is investing billions to build a domestic rare earth supply chain.
Why Rare Earths Matter for Defense
Military Applications
REEs are used in virtually every modern weapons system:
Neodymium and Samarium — Permanent magnets
Precision-guided munitions (JDAM, Hellfire)Electric motors in military vehiclesGenerators in aircraft and shipsActuators in missile systems
Europium and Terbium — Phosphors and displays
Night vision devicesHeads-up displaysTargeting systemsCommunication equipment
Dysprosium — High-temperature magnets
Jet engine componentsSatellite systemsRadar equipment
Yttrium — Lasers and ceramics
Laser range finders and designatorsThermal barrier coatingsRadar domes
Lanthanum — Optics and catalysts
Night vision gogglesCamera lenses for surveillancePetroleum refining catalysts
The Scale of Demand
A single F-35 fighter requires approximately 920 pounds of rare earth materialsA Virginia-class submarine uses approximately 9,200 poundsA DDG-51 destroyer requires approximately 5,200 poundsAnnual DoD rare earth demand exceeds 10,000 metric tons
The Current Supply Chain Problem
China's Dominance
China produces 60% of rare earth oreChina processes 90% of rare earth materialsChina manufactures 90% of rare earth magnetsIn 2010, China restricted REE exports to Japan during a diplomatic dispute, demonstrating willingness to weaponize supply
U.S. Domestic Capacity
One active mine — Mountain Pass, California (MP Materials)Limited processing — Most ore is shipped to China for processingGrowing investment — Multiple projects in developmentRecycling emerging — But still a small fraction of demand
The Federal Response
Defense Production Act Investments
The DoD has used DPA Title III authority to fund:
Heavy rare earth processing facilitiesRare earth magnet manufacturingSeparation and refining technologyRecycling and recovery programs
Key Projects and Investments
MP Materials — $35 million DoD investment for processing at Mountain PassLynas Rare Earths — $120 million for a processing facility in TexasUSA Rare Earth — Processing facility development in OklahomaUrban mining initiatives — Multiple projects for REE recovery from e-waste
Legislative Support
CHIPS Act includes provisions for critical materialsNational Defense Authorization Act mandates domestic REE sourcing timelinesTax incentives for domestic minerals production
Opportunities for Small Businesses
1. Mining and Exploration
Exploration services for new REE depositsMining support servicesEnvironmental assessment and monitoringGeological consulting
2. Processing Technology
Novel separation technologiesSolvent extraction equipmentPurification systemsQuality control and testing
3. Magnet Manufacturing
Sintered NdFeB magnet productionBonded magnet manufacturingMagnet assembly and integrationQuality testing and certification
4. Recycling and Recovery
E-waste collection and processingMagnet recovery from motors and generatorsSpent catalyst processingIndustrial waste stream recovery
5. Equipment and Services
Processing equipment manufacturingMaintenance and repair servicesEnvironmental compliance consultingLogistics and transportation
Getting Started in the REE Market
Educate yourself on REE chemistry, applications, and market dynamicsIdentify your niche based on existing capabilities and local resourcesConnect with industry through the Rare Earth Technology Alliance and similar organizationsPursue funding through DOE, DoD, and SBA programsBuild partnerships with established REE companies and research institutionsEngage with KDM for government contracting support and consortium opportunities
Conclusion
The rare earth elements market is at an inflection point. Decades of Chinese dominance are being challenged by massive U.S. government investment and private sector innovation. For small businesses with the right capabilities and commitment, this is an opportunity to build a business at the intersection of national security and advanced technology.
Ready to Take the Next Step?
Whether you're a small manufacturer seeking defense contracts, a government buyer looking for qualified suppliers, or a business owner pursuing CMMC certification, KDM & Associates and the V+KDM Consortium are here to help.
Join the KDM Consortium Platform today:
Schedule a free introductory session to learn how we can accelerate your path to government contracting success.
Whether you're a small manufacturer seeking defense contracts, a government buyer looking for qualified suppliers, or a business owner pursuing CMMC certification, KDM & Associates and the V+KDM Consortium are here to help.
Join the KDM Consortium Platform today:
[Register as a Supplier (SME)](/register?type=sme) — Get matched with government contract opportunities, access capacity-building resources, and connect with prime contractors.[Register as a Government Buyer](/register?type=buyer) — Discover qualified, defense-ready small businesses and streamline your procurement process.
*Schedule a free introductory session to learn how we can accelerate your path to government contracting success.*
