Efforts by the United States and allied nations to rebuild critical mineral supply chains are progressing, but structural and market challenges are keeping the industry on an uneven footing, according to a Jefferies report.

Rare earth magnet capacity in the US is expanding from a near-zero base, while lithium markets are shifting from surplus toward a tighter carbonate balance by the end of the decade. Battery end markets continue to scale, though short-term volatility is being driven by choppy electric vehicle (EV) demand.

And with China still dominating pricing and liquidity, Western pricing autonomy is limited in the near term.

“The objective is to detach from Chinese domestic pricing, but caution is warranted around EU Rotterdam quotes, which reflect tiny defense and aerospace volumes and can trade thousands of percent above China,” Jefferies analysts wrote.

Planned US NdFeB magnet capacity is projected to reach roughly 50,000 tonnes per year by 2030 across seven projects, but much of it targets lower-grade industrial magnets. High-grade magnets, used in EVs and wind turbines, remain largely unaddressed. Analysts note that physical output is trailing headline investment, reflecting the early-stage nature of US supply chain rebuilding after more than a decade of minimal Western participation.

Mountain Pass, the US’s flagship rare earth site, is now processing concentrate in-house after export restrictions blocked China’s Shenghe Group. The site produces neodymium-praseodymium (NdPr) oxide and some heavy rare earth byproducts, stockpiling inventories for future downstream build-out. Even at steady state, Mountain Pass is expected to generate excess feedstock, potentially supplying third parties and prompting discussions around government-backed stockpiling or pricing support.

Several lithium-focused companies are positioned to benefit from the market transition. Century Lithium Corp. (TSX-V:LCE, OTCQX:CYDVF) and Highland Critical Minerals Corp (CSE:HLND, FRA:U8X) are advancing exploration and development projects, while Argentina Lithium & Energy Corp (TSX-V:LIT, OTCQX:LILIF) continues to scale its South American operations. In the US, American Resources Corp (NASDAQ:AREC), through its ReElement division, is developing domestic lithium and rare earths supply, and TNR Gold Corp (TSX-V:TNR, FRA:TNW, OTC:TRRXF) is pursuing opportunities linked to lithium-bearing royalties. These companies could gain from a tightening global supply-demand balance, but near-term EV market fluctuations remain a key risk.

Other rare earth-focused firms, including Namibia Critical Metals (TSX-V:NMI, OTCQB:NMREF), American Rare Earths Ltd (ASX:ARR, OTCQX:ARRNF), and Royalty Management Holding Corp (NASDAQ:RMCO), are advancing projects to expand the global supply base outside China.