For decades, companies optimised for efficiency and just-in-time supply chains. Now governments are optimising for resilience, and are willing to pay well above market price to guarantee it. The right question is no longer "what is scarce" — it's "what will governments ensure is never scarce again, regardless of cost."
Corporate strategy spent forty years optimising for efficiency — just-in-time inventory, single-source suppliers, the lowest-cost location for any given input. National governments are now running the opposite playbook for a specific, growing list of materials and technologies, and they are willing to pay well above market price to do it. This letter is about that list, and why the framework for pricing it is geoeconomics, not economics.
China's dominance in rare earth processing is not a modest edge — it is close to a chokepoint. According to Adam Webb, head of energy raw materials at Benchmark Mineral Intelligence, China controls approximately 92% of refined neodymium-praseodymium (NdPr) supply, the magnet material essential to EVs, wind turbines, and precision-guided weapons. For heavier rare earths such as dysprosium and terbium — used where magnets must hold their strength at high temperature, a requirement in jet engines and missile guidance systems specifically — that figure rises to 98-99%. This is not a diversified market with a leading player. It is a near-monopoly on the processing step that sits between raw ore (which is more geographically distributed) and a usable industrial input.
Washington's policy response has been concrete and well-funded, not merely rhetorical. On February 3-4, 2026, the administration launched "Project Vault" — explicitly modelled on the Strategic Petroleum Reserve, described in the president's own words as "a strategic petroleum reserve... for American industry" — with $10 billion in authorised EXIM financing to establish a Strategic Critical Minerals Reserve. The National Defense Stockpile Transaction Fund received an additional $2 billion under the One Big Beautiful Bill Act, on top of $5 billion for the Industrial Base Fund and $500 million in Defense Production Act Title III credit programmes. On May 29, 2026, the administration authorised critical-position pay of up to $400,000 annually for up to 400 federal specialists — investment, engineering, financial, and legal professionals — specifically to compete with Wall Street and Silicon Valley for the talent needed to manage these programmes. Governments do not pay private-sector salaries for public-sector roles unless they are genuinely urgent about winning a specific competition for scarce expertise.
The same resilience-over-efficiency logic is now running in parallel across semiconductors (the CHIPS Act's minerals provisions covering gallium, germanium, and high-purity silicon), pharmaceuticals (active pharmaceutical ingredient reshoring after COVID-era supply shocks), food security (this publication's own Letter 95 coverage of grain stockpiling as diplomatic leverage), and defence manufacturing (NATO members moving from 2.5% to as much as 5% of GDP in defence spending, with a specific stated aim of replenishing depleted stockpiles). The common mechanism across all of these: a government identifies a single point of failure in a supply chain that also happens to matter for national security, and it becomes willing to fund domestic or allied capacity at a price no private investor would pay on pure return-on-capital grounds.
Ask not what is scarce today — ore deposits for most critical minerals are more geographically distributed than headlines suggest. Ask what governments have already declared, in appropriated dollars, they intend to make permanently un-scarce, regardless of what that costs relative to the cheapest available import.
The EXIM Bank's own disclosed critical-minerals transaction list is, in effect, a direct map of where US policy risk-adjusts private capital: $565 million for rare earth extraction in Brazil, $455 million for domestic rare earth development and processing, $400 million for Arkansas lithium extraction, $350 million for Australian cobalt and nickel, and a $1.3 billion commitment to the Reko Diq copper-and-gold project in Pakistan. Companies operating inside this financing perimeter are not purely commercial bets — they carry an implicit government backstop that a comparable commercial mining project without strategic designation does not have. MP Materials (NYSE: MP), operator of the Mountain Pass rare earth mine in California, has already received $400 million in DPA Title III equity plus a $150 million loan specifically for heavy rare earth separation — a direct, disclosed instance of the mechanism this letter describes. For diversified exposure across the broader reshoring theme rather than a single-name bet, the WisdomTree Efficient Rare Earth Plus Strategic Metals Fund (NYSE: WDIG) tracks a basket built around exactly this thesis.
The right frame for this entire category is geoeconomics, not economics: these are investments where a government has already committed appropriated capital to guarantee an outcome, which changes the risk profile in the specific companies operating inside that financing perimeter. MP Materials and WDIG are the clearest, most direct current expressions, but the underlying mechanism — the state paying above-market prices for resilience wherever a supply chain is both concentrated and strategically important — is broader than rare earths alone, and this publication's own Letter 130 (Economics of Wars) and Letter 95 (Eating the World) already document the same logic in sanctions and food security respectively. The risk: government-backed doesn't mean government-guaranteed — Section 232 tariff negotiations, appropriations fights, and the pace of China's own countermoves (export controls on rare earth processing technology, in particular) can all move faster than a single administration's stated policy commitment.
Founder, NextGen Economics · Bangalore, India · July 2026
Sources: Investing News Network (Rare Earths 2026 forecast, Benchmark Mineral Intelligence data) · US Department of State, 2026 Critical Minerals Ministerial (EXIM transaction disclosures) · WisdomTree ("Washington Is Staffing Up in Rare Earth Minerals," May 2026) · Inside Government Contracts (Federal Critical Minerals Stockpiling, 2025-2026 review) · ODI (Critical Minerals Geopolitics in 2026). Builds on this publication's own Letter 130 (The Economics of Wars) and Letter 95 (Eating the World).
Not investment advice. This letter evaluates a geoeconomic policy trend; it does not constitute a recommendation regarding any security.