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

List of Key Chapter Titles

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

Document Introduction

This report, published 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 relative to China in this field and the complex challenges it faces. The report points out that the U.S. is currently lagging 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 the result of a market-dominated model over the past two decades. Therefore, the core challenge for the U.S. is how to build a foundation that allows market forces to regain a leading role in financing, research, and workforce development in this field.

The report's structure is based on the outcomes of multinational workshops and expert dialogues, proposing a framework for constructing an interconnected policy network. First, the report emphasizes the need 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 mineral 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 supply disruption risk and increasing global reserves, suggesting a reassessment of its "critical" status. Second, the report advocates "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 China will continue to dominate 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 biggest obstacle to building a secure supply chain—insufficient private investment—the report argues that "government support will be mandatory." China controls prices through production quotas and often depresses prices through oversupply to deter investment elsewhere. To incentivize private capital, the U.S. government must intervene extensively, including direct investment, offtake agreements, subsidies, tax incentives, and demand-side incentives to steer end-product users towards 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 strong intervention model of "directly picking winners" and explores its potential for expansion into other critical minerals like gallium.

On the technological front, the report recommends that the U.S. should emulate the historical SEMATECH model and "establish an international R&D alliance." Given China's continuous progress in areas like battery technology and the uncertainty of U.S. domestic demand-side policies, no single company can catch up with China in processing technology and materials science. An international alliance comprising key firms across the supply chain—from mining and processing to battery manufacturing and end-use—could collaborate to develop next-generation intellectual property and work on new materials that reduce or even replace CM/REE inputs. Additionally, the report dedicates a chapter to "Workforce and Education," pointing out the long-term decline in the U.S. mining workforce and a sharp drop in students in related fields. Short-term solutions include leveraging the MSP framework to expand industry-specific work visas to introduce foreign skilled labor; long-term solutions require increased funding for domestic mining and materials science education programs, updating 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 would 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 view of 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 investment, the United States risks being left further behind in the race to shape the future of new materials and technologies.