Core Viewpoint - China's recent restrictions on rare earth exports signify a strategic shift in the global supply chain for critical minerals, potentially igniting a new "gold rush" in the West as countries seek to secure their own supplies [2][20]. Industry Overview - China currently dominates the rare earth market, controlling approximately 70% of global mining, 92% of refining, and 98% of magnet production [5]. - The 17 rare earth elements (REEs) are essential for various modern technologies, including electric vehicles, defense systems, and consumer electronics [4]. Recent Developments - Starting December 1, 2023, companies exporting goods with over 0.1% of their value from Chinese-sourced rare earths must obtain a government license, marking the most extensive export ban in China's history [7]. - The new regulations also impact supply chains linked to foreign defense contractors, affecting advanced weapon systems like the F-35, which relies on significant amounts of rare earths [8]. Market Reaction - Following China's announcement, rare earth stocks have surged, particularly those of Lynas Rare Earths, Iluka Resources, and MP Materials, the largest rare earth miner in the U.S. [11]. Government Initiatives - The U.S. Department of Defense has made a $400 million equity investment in MP Materials to secure a stable supply of neodymium-praseodymium magnets for defense applications [12]. - The U.S. and Australia have signed a Critical Minerals Framework Agreement, committing at least $1 billion to enhance processing capacity and reduce reliance on Chinese supplies [13]. Future Outlook - The current situation may lead to a new resource supercycle in critical minerals, driven by bipartisan support for reshoring and significant capital investments [20]. - Historical precedents, such as the U.S. semiconductor industry's recovery in the 1990s, suggest that the U.S. could regain its footing in the rare earth sector if it maintains its strategic focus [18][19].