By Jon Emont | Photography by Suzanne Lee for WSJ
KUANTAN, Malaysia -- The Pentagon's push to get its hands on the rarest of the rare-earth elements leads all the way to this small port city in Malaysia.
Here, Lynas Rare Earths, an Australian company, has begun pumping out heavy rare earths, the elusive kind that China dominates.
"No one had made a separated heavy rare earth outside of China in 20 years," said Amanda Lacaze, Lynas's chief executive. The company's chief operating officer, Pol Le Roux, said it had actually been 30 years.
When China cut off exports of heavy rare-earth elements during trade tensions last year, automobile factories in the U.S. and Europe were forced to stop production. Now, Lynas is at the vanguard of an effort by the U.S. and allies to prevent Beijing from using its monopoly power to squeeze the rest of the world.
The Pentagon is opening its wallet in unusual ways to ensure supplies. In March 2026, Lynas announced a preliminary $96 million deal in which the Pentagon would purchase Lynas's rare earths.
And Las Vegas-headquartered MP Materials, backed by billions of dollars in U.S. government support, is planning its own refinery for heavy rare earths that is set to come online later this year.
Last month, Lynas began producing samarium oxide, a difficult-to-source rare earth in high military demand that is used in heat-resistant magnets for jet fighters and missiles.
"There is no doubt that 2025 was the wake-up call the United States needed to undertake bold industrial policy," said Gracelin Baskaran, who leads the critical minerals program at the Center for Strategic and International Studies in Washington.
Rare-earth minerals are already mined outside of China, including Lynas's, which come from Western Australia. To gain independence from Chinese supplies, the hard part is building refining capacity. It often requires hundreds of stages to separate the rare earths using industrial acids.
For more than a decade, Lynas has had a refinery here in Kuantan, a Malaysian chemical-industry center. But it only produced light rare earths, which tend to be more common, while it sold heavy rare earths to China for processing. Last year, as the U.S.-China trade war was at its peak, Lynas finished a new heavy rare-earths processor in Kuantan.
Machinery whirs loudly as a rare-earth mixture is bathed in hydrochloric acid and gradually separated into pure oxides that can be shipped to customers. Terbium, used in powerful magnets, comes out a deep, rich brown. Dysprosium appears as a whitish powder.
Because of their small quantities, the heavy rare earths are fitted into knee-high 55-pound cans that could be worth tens of thousands of dollars, while less-valuable rare earths such as cerium are stuffed into 1800 pound sacks.
Heavy rare-earth elements are sprinkled in magnets so they can function at higher temperatures. That is important in cars and planes whose engines run hot.
Lynas and MP Materials are two of the leading Western rare-earths producers, and Washington wants more suppliers. In February, the U.S. International Development Finance Corp. extended $565 million in loans to Serra Verde, which operates a mine in Brazil with significant reserves of heavy rare earths.
Last week USA Rare Earth, a Stillwater, Okla., company that has recently commissioned equipment to make rare-earth magnets, said it would acquire Serra Verde in a deal valued at about $2.8 billion, part of an arrangement that will ensure a steady supply of heavy rare earths to the U.S.
Not everything has gone smoothly with U.S. efforts. Lynas has said there is "significant uncertainty" on whether it will go ahead with an effort to build a rare earth processing facility in Texas, which was allocated $258 million in Pentagon grant funding in 2023. The estimated project costs ballooned because of challenges in handling wastewater.
Instead, Lynas is building out a second, larger heavy rare-earth processing facility in Kuantan, expected to be completed in 2028.
Lynas scored a quick win when it achieved commercial production of samarium last month. The mineral had been refined almost exclusively in China, causing a scramble among defense suppliers last year when China cut off exports in April. A report from the U.S. Geological Survey last year found samarium was the highest-risk mineral for disruption, with shortages potentially costing U.S. industry billions of dollars.
American defense companies face a 2027 government deadline to ensure that no rare earths in their supply chain for magnets come from China. Lacaze said Lynas was supplying its non-Chinese rare earths to Japanese magnet makers that in turn supply the U.S. defense industry.
Still, Lacaze expressed concern that Western nations weren't doing enough to ensure adequate demand. Military demand for rare earths is relatively small, so she advocated tax credits to induce larger commercial buyers -- such as makers of cars and electronics -- to choose non-Chinese rare-earth magnets.
Baskaran, the critical-minerals specialist, said the effort to achieve rare-earth independence was still in its early stages. "While momentum is real, translating these announcements into production takes years," she said.
Write to Jon Emont at jonathan.emont@wsj.com
(END) Dow Jones Newswires
April 26, 2026 12:00 ET (16:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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