Pentagon magnet ban likely to require waivers as 2027 deadline nears

The US defense industrial base is unlikely to be fully prepared for the Pentagon's sweeping 2027 ban on Chinese-origin rare earth magnets and otherstrategic minerals, and military suppliers will seek import waivers, according to industry experts.

While the US has invested heavilyto rebuild domestic rare earth supply chains, industry experts said the magnet sector remains years away from achieving the scale, reliability, and supplier qualifications needed to fully replace Chinese material in defense applications.

Beginning Jan. 1, 2027, the Pentagon is scheduled to implement stricter sourcing requirements for materials such as neodymium-iron-boron, samarium-cobalt, tungsten, tantalum and molybdenum- all key materialsin US military hardware. The ruledeems materials noncompliant if any stage of production, including mining, refining, separation, melting or fabrication, occurs in China, Russia, Iran or North Korea.

China accounted for approximately 91% of global rare earth refining production and 94% of finished rare earth magnet production in 2024, according to the International Energy Agency, underscoring the scale of the challenge facing Western governments and industry.

"January 2027 may be a regulatory milestone, but it will certainly not mark the sudden independence of the US magnet supply chain from China," Richard Arlot, director at IMAG Consulting, a specialized consulting firm on magnetics and permanent magnet industry, told Platts.

"Funding is certainly available, and customer commitments are encouraging. However, scaling up such highly specialized metallurgical processes to reliable mass production requires time, expertise, and extensive industrial experience," Arlot added.

The White House did not respond to a request for comment.

Platts is a part of S&P Global Energy.

Waivers needed

Industry experts expect waivers will bean important bridge between Washington's 2027 deadline and the longer-term goal of establishing a fully independent Western magnet supply chain. Sprott, a global asset management firm, estimates the US Department of Defense currently requires roughly 3,000-4,000 mt/year of specialized rare earth magnets, with demand expected to increase to approximately 10,000 mt/year by 2030.

The US produces almost none of the heavy rare earths, such as terbium and dysprosium, or tungsten that defense contractors need, despite the Trump administration's aggressive investments in miners and processors.

The greatest risk lies with sintered NdFeB magnets, where domestic supply chains and industrial manufacturing capabilities are indevelopment, Arlot said.

"Even for limited volumes, I expect waivers will be necessary for certain programs," he said, citing defense customer preference for proven and qualified suppliers.

Projects targeting rare earth processing have been launched across the US, Canada, Europe, and Australia, but many remain in development or in the early stages of commercialization.

Even some of the West's most advanced and closely watched projects are only now approaching key milestones. MP Materials, which operates the Mountain Pass rare earth mine and processing facility in California, plans to commission a heavy rare earth separation circuit by the end of 2026, with targeted capacity to process 200 mt/year of dysprosium and terbium oxides.

Defense Department procurement rules already include mechanisms that allow exceptions when compliant materials cannot be sourced, reducing the risk of immediate disruptions to defense supply chains, saidPeter Cook, an analyst at the Breakthrough Institute.

"The defense contractor procurement date is not an industry-wide cliff because the rules allow exceptions if eligible materials are unavailable," Cook said.

Chris Berry, founder and president of House Mountain Partners, similarly said waivers and existing exemptions should limit near-term impacts, but added that companies relying on Chinese-origin materials will ultimately need permanent alternatives as Washington intensifies efforts to reduce dependence on China.

Long-term impact

While waivers may prevent disruptions to critical defense programs, analysts said the ban is helping create long-term demand signals for domestic and allied rare earth processing, metalmaking and magnet manufacturing projects.

"The Pentagon has made it clear that companies using materials that originate in or pass through China will need to eventually have a workable and permanent solution in place," Berry said.

The defense sector's requirements may appear modest compared with overall global demand, but they are substantial relative to the lack of non-China production capacity.

Global demand for rare earth magnets, meanwhile, is estimated at around 250,000 mt/year, but ex-China production currently totals only about 20,000-25,000 mt/year, highlighting the supply constraints facing Western manufacturers.

Berry added that dependence on China has become increasingly difficult for companies to defend politically in Washington, creating additional incentives to diversify supply chains.

"I'm also confident that companies affected with the China dependence issue have been working hard for quite some time now to establish new suppliers," he said.