Critical Minerals and Rare Earth Elements: Challenges Facing the United States

Key Chapter Title List

1. Executive Summary
2. Policy Recommendations
3. Introduction
4. Section 1: Narrowing the Scope of Critical Minerals
5. Section 2: Prioritizing Processing over Extraction
6. Section 3: Supporting Prices and Manufacturers
7. Section 4: Supporting Materials Science Research
8. Section 5: Workforce and Education
9. Conclusion
10. Appendix (List of Participants)
11. Notes
12. About the Authors and Institution

Document Introduction

This report, released by the Chicago Council on Global Affairs, focuses on the growing centrality of Critical Minerals (CM) and Rare Earth Elements (REE) as a core arena of geopolitical competition. It provides an in-depth analysis of the United States' structural disadvantages and complex challenges relative to China in this field. The report points out that the U.S. is currently lagging behind in investment, innovation, and education in this race. Furthermore, its current policies exacerbate this lag by undermining the network of allied cooperation that should play a crucial role and the domestic green energy market dependent on CM/REE. The report argues that purely market-driven solutions are insufficient for the U.S. to address this challenge, and the current imbalance is a result of the market-dominated model of the past two decades. Therefore, the core challenge for the U.S. lies in how to build a foundation that allows market forces to regain a leading role in financing, research, and workforce development in this sector.

The structure of the report is based on findings from multinational workshops and expert dialogues, proposing a framework for building an interconnected policy network. First, the report emphasizes the necessity to narrow the scope of critical minerals, as not all minerals listed as critical are equally important. The United States and its partners in the Minerals Security Partnership (MSP) need to establish a unified methodology to determine their respective critical minerals lists based on import dependency, existing stockpiles, future demand forecasts, processing bottlenecks, and the potential for China to leverage its supply chain control for economic coercion. Using lithium as an example, the report notes its low risk of supply disruption and increasing global reserves, suggesting a re-evaluation of its criticality. Second, the report advocates for prioritizing processing over extraction. Despite the global race to explore new mineral deposits, expanding raw material reserves has limited effect on reducing dependence on China. The real bottleneck lies in the complex processing technologies that convert ores and oxides into useful materials, a segment that will remain dominated by China for the foreseeable future. Through case studies of cobalt, rare earth elements, and nickel, the report details the obstacles to establishing processing facilities in the U.S. and Europe, including massive capital investment, environmental challenges, public opposition, and workforce shortages.

Addressing the primary obstacle to building secure supply chains—insufficient private investment—the report argues that government support will be mandatory. China controls prices through production quotas and often depresses prices by flooding the market to deter investment elsewhere. To incentivize private capital, the U.S. government must intervene extensively, including through direct investment, offtake agreements, subsidies, tax incentives, and demand-side incentives to steer end-product users toward higher-cost non-Chinese suppliers. Citing the U.S. Department of Defense's $400 million investment in MP Materials and its accompanying floor-price offtake agreement as an example, the report illustrates the current U.S. government's model of strong, direct intervention in picking winners. It also explores the potential for expanding this model to other critical minerals like gallium.

On the technological front, the report suggests the U.S. should emulate the historical SEMATECH model by establishing an international R&D alliance. Given China's continuous advancements in areas like battery technology and the uncertainty of domestic U.S. demand-side policies, no single company can catch up with China in processing technology and materials science. An international alliance comprising key companies across the supply chain—from mining and processing to battery manufacturing and end-use—could collaborate on developing next-generation intellectual property and focus on R&D for new materials that reduce or even replace CM/REE inputs. Additionally, the report dedicates a chapter to workforce and education issues, noting the long-term decline of the U.S. mining workforce and a sharp drop in students in related disciplines. Short-term solutions include leveraging the MSP framework to expand industry-specific work visas to introduce foreign skilled labor. In the long term, it is necessary to increase funding for domestic mining and materials science education programs, update curricula and recruitment strategies to reverse the industry's negative image and attract a new generation of talent.

The report concludes that building a secure and diversified CM/REE supply chain for the United States is a lasting national priority requiring deep and sustained government involvement. Ideally, government investment will catalyze private investment to sustain industry development, but the latter is not guaranteed. While current U.S. policies may achieve short-term progress through massive financial injections, their tendency towards decoupling rather than de-risking and a zero-sum perspective on multilateral cooperation make collaboration with allies and partners more reliant on dollar amounts, casting uncertainty on long-term prospects. The report ultimately warns that without effective policy integration and sustained commitment, the United States risks falling further behind in the race to shape the future of new materials and technologies.