What happens when one country makes 94% of the world’s strongest magnets?

A small part, a big dependency, and a date on the calendar

Rare earth magnets sit inside every electric car, wind turbine, drone, missile and robot. One country controls almost all of them, and it has started to use that as leverage.

• The part. A rare earth magnet makes an electric motor small, light and efficient. Alternatives exist, but they usually give up some efficiency.
• The lock. China mines about 70% of rare earths, refines up to 90% and makes about 94% of sintered magnets. It has also banned the export of the know-how.
• The cliff. Since April 2025, seven rare earths need a Chinese licence. A much wider package, reaching products made anywhere, is paused only until 10 November 2026.
• The response. The US, Japan, the EU, the G7 and India are spending billions to loosen the lock. Japan has shown it can be done: its reliance on China fell from about 90% to 60–70%.
• The workarounds. Four routes are being built: new supply, new magnets, motors with no magnet, and recycling. Indian startups are already selling motors on the third route.

This is the first of three notes. It sets out the problem and the global response. The second looks at cars, where motors without magnets are already on the road. The third looks at defence, where magnets must keep working at high heat.

A strong magnet is what makes a motor small and light

An electric motor is magnets pushing and pulling on each other to spin a shaft. The stronger the magnet, the smaller and lighter the motor for the same power. The best motors use permanent magnets, which stay magnetic without electricity.

The strongest is the neodymium-iron-boron magnet, invented by Japanese scientist Masato Sagawa in the 1980s. It is about ten times stronger than an ordinary magnet (AFP). It is mostly iron: rare earths are only a quarter to a third of the alloy (Adamas Intelligence). Neodymium and praseodymium give the strength. Dysprosium and terbium keep the magnet working when hot.

The name misleads. These elements are not especially rare in the ground. They are hard and dirty to separate from each other, and that skill is the real bottleneck.

China’s grip tightens at every step from mine to magnet

A new mine outside China does not break the lock by itself. Its ore still has to be separated, turned into metal, then alloy, then a finished magnet. Most of those later steps still happen in China.

China built this position on purpose. Its share of magnet making rose from about half two decades ago to 94% today. In December 2023, it banned the export of the know-how to separate rare earths and make magnets, so the rest of the world cannot simply buy the recipe (Swarajya).

India’s rare earths sit mostly in monazite, a mineral found in beach and inland sands in Andhra Pradesh, Odisha, Tamil Nadu, Kerala and West Bengal. The government puts reserves at about 6.9 million tonnes of rare earth oxide, around 5% of the world’s (Indian Bureau of Mines). India mined about 2,900 tonnes in 2025, against China’s 270,000 (USGS).

A reserves number on its own says little. What matters for magnets is which elements are in that sand.

So the reserves figure overstates India’s position. The sands do hold the light elements a magnet needs for strength, at small but growing output. The heavy elements that keep magnets working at high heat are not there in usable amounts. That difference shapes both sector pieces in this series.

Each step has gone further than the last

Three things Beijing can do on 10 November

The October 2025 package is the one that worries boardrooms. It would require Beijing’s permission to ship any product made anywhere with 0.1% or more Chinese rare earth content by value (Startup Fortune). China’s late-September truce statement did not mention rare earths at all (FXStreet). Analysts see three paths.

The stakes are large. The IEA estimates that full enforcement could expose up to $6.5 trillion a year of production outside China to disruption (Technology.org). That is an exposure figure, not a loss forecast. A second date follows close behind: from 1 January 2027, new US rules restrict where magnets in some military contracts may come from (FXStreet).

Japan proved the lock can be loosened. Now everyone is copying it

After China cut Japan off in 2010, Tokyo spent a little over $1 billion to diversify. In 2011 its state agency JOGMEC and trading house Sojitz put $250 million into Lynas, an Australian miner with a refinery in Malaysia. Japan’s reliance on Chinese rare earths fell from about 90% to between 60% and 70% (New York Times via The Nightly).

Every major economy now has a plan. The scale and style differ a lot.

India’s gap is the largest. It imports more than 90% of its rare earth magnets, mostly from China (Business Today). Government labs expect a need of about 8,220 tonnes a year by 2030, so even a fully built 6,000-tonne scheme covers only about 73%. India also has no commercial production of the heavy rare earths that heat-proof a magnet (SMM). That gap is where technology comes in.

Four ways out, and Indian companies are building on every one

Governments mostly fund the first route. Startups are where the other three are being built. The global map is below; India’s own builders follow in the next section.

More than ten Indian companies are now raising money or building plants

Analysts still describe India’s commercial magnet industry as close to blank (SMM). But since China’s April 2025 curbs, Indian companies have announced plants and raised money on all four routes. Some of it is venture capital into motor startups. Some is industrial groups putting hundreds of crores into magnet plants. Most of these names are private today, which is exactly the kind of access a family office can help open up.

The gap between those two charts is the story for an investor. Indian industrial groups are committing hundreds of crores to magnet plants. Indian motor startups, with technology that could matter globally, have raised only a few million dollars each. Parts 2 and 3 look at which of them are worth backing, and how.

A long theme with policy money behind it, and real traps

Governments are now acting as buyers of last resort, setting price floors and funding plants. That lowers the risk for the first route. The bigger upside, and the bigger risk, sits with the startups building routes two to four. Parts 2 and 3 look at how to get exposure sector by sector. For now, five risks apply across the theme.

1. China can move the price. Outside China, NdPr prices recently slipped to about $95/kg, below the $110/kg floor (Benchmark). Cheap supply is the classic way to starve a new competitor.
2. A pause can kill urgency. If the pause is extended, buyers may relax. Carmakers keep alternatives in reserve when prices fall (Reuters via Mining.com).
3. Scaling is slow. India’s policy is running ahead of its industrial base, and car-grade parts take years to certify (SMM).
4. Magnet-free has a cost. Motors without permanent magnets usually give up some efficiency (New Mobility). Part 2 looks at who is closing that gap.
5. Pitch numbers inflate. The popular “417 kg of rare earths per F-35” traces to one unpublished 2012 study (Adamas Intelligence). Ask where every big number comes from.

The dates that will decide the next two years

The same problem looks very different by sector

The country that controls the magnet controls the motor. On 10 November, we find out how hard China intends to hold on.