Beyond Subsidies: The Hidden Risk in U.S. Critical Mineral Strategy

The current scramble for rare earths, nickel, and germanium has moved beyond the extraction of raw materials. Beijing has mastered the art of controlling the supply chain through its near-total monopoly on refining and separation capacity. By imposing export bans on gallium and germanium in 2023, China demonstrated that processing power is a potent geopolitical lever. Other nations, notably Indonesia, have attempted to replicate this by forcing domestic processing, yet often find themselves still dependent on Chinese capital and technical expertise, which maintain control over roughly 75% of their smelting capacity.

This dependency risk is now surfacing in U.S.-backed initiatives. Consider Korea Zinc’s Project Crucible, a $7.4 billion venture in Clarksville, Tennessee, supported by a $210 million CHIPS Act award. The project faces an internal governance battle as firms like MBK Partners and Young Poong—entities with documented histories of cooperation with Chinese state-owned enterprises—seek to gain control of the board. If such firms secure majority stakes in companies central to U.S. defense, the strategic intent of government subsidies is effectively undermined.

Washington’s national security policy must evolve to look past the physical infrastructure. Ownership, offtake agreements, and technical partnerships are not merely corporate concerns; they are the front lines of the industrial race. Without rigorous oversight of who controls, finances, and influences the companies operating these refineries, the U.S. risks creating a domestic supply chain that is technically on-shore but strategically compromised by foreign entities.