300,000 drones ordered: Pentagon hits hard wall as '98% of the magnets come from China'

The US Department of Defence (also known as the Department of War) has quietly launched the largest drone buildup in American history — ordering 30,000 one-way attack drones with plans to scale beyond 300,000 units by 2028.

But inside that surge lies a vulnerability.

Few outside US defence circles talk about it: every one of those drones runs on rare-earth magnets — and, by industry estimates, about 98% of the world’s supply is manufactured in China, according to an industry report.

Now, the US is working hard to create a supply chain for rare earths to replenish its military arsenal, AFP reported.

That’s the strategic choke point companies like REalloys say they were built to address.

The firm claims to operate the only fully non-Chinese “mine-to-magnet” heavy rare earth supply chain in North America, producing processed metals and alloys that feed directly into magnet manufacturing for defense use.

To understand the urgency, analysts point to Ukraine. Over the past two years, drones have transformed the battlefield at a pace not seen since the machine gun. Ukraine reportedly produced over 1.2 million drones in 2024 alone — and the magnets powering nearly all of them traced back to Chinese supply chains.

That lesson was not lost on Washington.

In June, President Donald Trump signed an executive order titled “Unleashing American Drone Dominance” aimed at accelerating both military and commercial drone production.

A month later, Defence Secretary Pete Hegseth issued guidance to ramp up procurement of American-made systems.

The 2026 defence budget now earmarks $13.6 billion for autonomous systems, underscoring how central drones and AI-enabled platforms have become to U.S. war planning.

Despite the funding, a structural problem remains: rare earth dependence.

By Pentagon estimates, 80,000 components across 1,900 US weapons systems rely on Chinese-sourced rare earth materials — from drone motors to missile guidance, sensors and aircraft systems.

The drone surge is also reshaping the broader defense tech sector. Companies such as AeroVironment, Kratos Defense & Security Solutions, and Palantir Technologies are expanding deeper into autonomous warfare and AI-driven targeting.

Yet nearly all of these platforms ultimately depend on the same magnet supply chain.

The equation is simple: If Beijing tightens the valve, there’s no backup supplier to call.

Still, venture capital is flooding into rare earths.

For example, Vulcan is now building the largest rare earth magnet factory outside of China, as the Trump governments drives the move to lessen or altogether stop reliance on China, which controls 90% of global rare earth processing.

But mine permitting issues in the US remain a key challenge.

An industry report states that securing mining permits in the US typically takes seven to 10 years. However, bringing a new mine online, including development and planning, can take an average of 29 years, making it one of the longest lead times globally.

The US government has begun responding.

The Pentagon took a $400 million equity stake in MP Materials, now its largest shareholder, and has extended loans to other domestic producers.

But most of that effort focuses on light rare earths — neodymium and praseodymium — used in consumer magnets for EVs and electronics.

What military systems require are heavy rare earths such as dysprosium and terbium.

These elements keep magnets stable under the extreme heat inside a jet engine or a high-stress drone motor.

Without them, magnets degrade quickly. That’s the difference between a consumer-grade component and a military-grade one.

And this is where REalloys says it operates: in the heavy rare earth segment that few others in North America currently cover at scale.

While Europe has moved slowly, Washington is now spending aggressively to close the gap in 2026. The Pentagon’s drone ambitions, combined with lessons from Ukraine, have turned what was once a niche mining issue into a frontline national security concern.

The central question is no longer whether the US can build hundreds of thousands of drones.

It’s whether it can build the magnets inside them — without relying on China.