China controls over 90% of global neodymium production and 99% of refining for high-temperature magnets, making its supply chain the backbone for this critical rare earth element used in electric vehicles, wind turbines, and defense systems. The journey begins at major mining sites like Baiyun Ebo in Inner Mongolia, one of the world's largest hard rock deposits rich in light rare earths including neodymium. Here, ore is extracted through open-pit methods, yielding concentrates with higher concentrations of neodymium oxide (Nd2O3).
Post-extraction, the ore undergoes beneficiation to produce rare earth concentrates, then moves to solvent extraction facilities, predominantly in Ganzhou, Jiangxi province. This complex, environmentally intensive process separates neodymium from chemically similar elements through hundreds of purification steps, resulting in high-purity neodymium oxide and metals. China invested billions since the 1980s to master this, driving Western facilities to close due to costs and waste issues. Refined neodymium is alloyed with iron and boron (often dysprosium or terbium for heat resistance) into NdFeB alloys at plants like those operated by China Northern Rare Earth Group.
These alloys are powdered, pressed, and sintered into permanent neodymium magnets (NdFeB), where China produces over 90% globally, exporting around 40,000 tons annually to the West from 200,000+ tons total output. Magnets then ship to factories worldwide for integration: in EV motors (e.g., Tesla or Volkswagen suppliers), wind turbine generators, and precision-guided munitions. For instance, Bosch sources for automotive, while U.S. defense faces delays from restrictions.
Since April 2025, China's MOFCOM restrictions require special licenses for NdFeB magnets with dysprosium or terbium, slashing exports 51% initially, easing temporarily via U.S.-China truces, but tightening by September with 45+ day approvals. A July 2025 ban on refined alloys and magnets hit high-tech chains, causing 20-30% price spikes and three-month delays, ending just-in-time manufacturing. U.S. tariffs of 25% on Chinese magnets start January 2026, accelerating diversification.
Responses include MP Materials' Fort Worth plant targeting 10,000 tons/year magnets by 2027 from Mountain Pass mine, and Europe's Magnets-to-Magnets chain with Bosch expansions to 1,200 tons by 2027. Lynas and others build processing abroad, but China's technical edge and subsidies maintain leverage, with bottlenecks persisting into 2026 amid premiums for non-Chinese supply. This neodymium chain underscores Beijing's strategic chokehold, pushing allies toward costly, years-long independence.