The American F-35 is widely viewed as the most advanced stealth jet in the world.
Dubbed by military experts as the “flying computer”, it is equipped with a plethora of sensors, electronic warfare capabilities and weapons designed to ensure it can slip behind enemy lines and deliver devastating strikes.
Yet this fearsome aircraft also has an unexpected Achilles heel – rare earth magnets that play a critical role in the jet’s sensors, engines and wing flaps.
Now, it’s this vulnerability that China is seeking to exploit by imposing a raft of new export restrictions on the magnets themselves as well as expertise and intellectual property related to them.
It means anyone, anywhere, who wants to export a product that contains 0.1pc of rare earth elements produced in China, or was made using Chinese technologies, must declare the proposed end use and obtain a licence from Beijing.
On top of this, China has made clear that it will refuse applications where the product could be used by foreign militaries.
The aim is clear, say experts: it is to choke off the American military’s crucial supplies of rare earth magnets and pile pressure on Donald Trump to capitulate in trade negotiations.
Without urgent action, some experts have warned that Beijing will be able to turn off the tap of rare earths exports as they see fit.
“If China learns its control of rare earths is a trump card that it can use to extract anything it wants from other industrialised countries, it will push that advantage as far as it can,” Noah Smith, the US economist, wrote on Saturday.
“After surrender on trade issues, the obvious next set of demands is geopolitical – control of Taiwan, dominion over the South China Sea, US troops and ships out of Asia, and so on.”
This explains why Mr Trump initially reacted to the restrictions furiously earlier this month, threatening 100pc tariffs on China.
Scott Bessent, the US Treasury Secretary, then went further by suggesting the move could prompt the West to “decouple” from China economically.
As for why the restrictions are so painful, it is because the F-35 and most other defence technologies rely on rare earth magnets made in China, says Gracelin Baskaran, a critical minerals expert at the Center for Strategic and International Studies (CSIS).
China produces more than 90pc of the world’s supply of processed rare earths – Reuters
She says China’s new restrictions effectively turn a tool repeatedly used by the US against other countries – namely, extra-territorial control of exports over products such as semiconductors – back on itself.
“Remember, it only has to have 0.1pc of Chinese heavy rare earths to be subject to that regulation,” she says.
“So even if the magnet was made in France, but it contains a half a percent of Chinese-produced heavy rare earths, it is now subject to those rules.
“You’re not going to find many magnets worldwide that don’t meet that threshold.”
China controls about 90pc of rare earth processing and of rare earth magnet production globally. For some specific types of magnets however, it controls nearly 100pc.
Take for example, the samarium-cobalt magnets in the F-35.
Used because of their powerful magnetic fields, small size and high heat tolerances, they are a linchpin of the jet’s various high-tech systems.
They are found in its turbofan engine, its sensors and avionics, and even the mechanisms used by the pilot to adjust the wing flaps and rudders.
It means that new restrictions applying to samarium could well impact F-35 production, Baskaran warns.
But the F-35 is far from unique in its use of rare earth magnets – particularly the heavy kind China has targeted with its latest restrictions.
Other weapons in the US arsenal that depend on them include the Tomahawk cruise missile, navy destroyers and submarines, the air-to-air missile, the Stinger portable missile and the M1 Abrams tank.
What’s more, the new measures aim to make it as difficult as possible for foreign states to build up their own rare earth supply chains by cracking down on the sharing of expertise and intellectual property.
“The restrictions pretty much make it illegal for Chinese nationals to work for other rare earths and magnet companies worldwide,” explains CSIS’s Baskaran.
“You have to explicitly get Chinese permission. They have closed loopholes for technical leakage, human capital leakage – they are literally closing off and protecting every comparative advantage that they have.”
In response, Mr Bessent has said the US is now engaged in a rare earths version of “Operation Warp Speed”, the rapid American effort to develop vaccines during the Covid pandemic.
Beijing’s low-cost advantage
But breaking China’s rare earths stranglehold will be no quick fix.
Chinese dominance over rare earths has built up steadily since the 1980s, along with advantages in related areas such as low-cost chemical reagents needed for processing.
Yet the biggest barrier to the West’s hope of challenging Beijing’s grip is cost, says Neha Mukherjee, of Benchmark Minerals Intelligence, largely because the government has ploughed so much state support into the sector.
“China has developed their IP over time, and it’s very efficient, very well advanced,” she says. “But cost is the biggest advantage they have, both in capital cost and operational costs.
“All their capital expenditures were subsidised, so they basically do not have to get an investor return.”
By comparison, any western company seeking to get into rare earths has to be able to guarantee its backers that they will make a return.
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2110 The West is spending more money on rare earths
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To take an example of a light rare earth compound such as neodymium-praseodymium – which is used in wind turbines, electric cars and other green technologies – most Western firms require prices to be at $100 (£75) per kilo to break even, she explains.
But Chinese firms can “comfortably continue production at below $60 per kilo”, with prices currently sitting at around $80 per kilo.
This structural disadvantage is why, over the past five years, the US government has increased its own backing of domestic mining and processing operations.
Earlier this year, the US Department of War became the biggest single shareholder in MP materials, a rare earths business behind a mine that extracts neodymium and praseodymium from Mountain Pass in California.
Under the arrangements, the government has also signed up to a 10-year deal that will see it pay $110 per kilo for the mine’s output, helping to ensure its profitability.
Elsewhere, rival American companies are also seeking to grow domestic supplies of rare earth metals needed for platforms such as the F-35 – with British help.
USA Rare Earth this month announced it had acquired Cheshire-based Less Common Metals (LCM), which claims to be “the sole Western provider” of critical materials including samarium-cobalt.
The deal, the companies said, will allow LCM to expand its capabilities, while the company will also supply its parent with “essential feedstock” for a massive new magnet production facility in Stillwater, Oklahoma.
“Midstream metal making is the linchpin of the global supply chain, and LCM is the only proven ex-China producer of rare earth metal, alloys, and strip casting at scale,” says Michael Blitzer, of USA Rare Earth.
But while these efforts may soon start to move the dial, the US is for now backed into a corner and must barter with Beijing, admits Baskaran at the CSIS.
“We’ve had multiple rounds of negotiations,” she says. “And we will negotiate to get access back to these materials that are required for national security.”
