Pentagon lends $700M to Vulcan and ReElement to boost domestic rare earth magnet production amid China tensions

The Pentagon is stepping directly into the supply chain battle, and this time the focus is smaller than fighter jets or satellites but just as decisive. Rare earth magnets — the silent muscle behind everything from missile systems to AI data centers — have become a national priority, and the U.S. government is putting serious money on the table to bring production home.

The Department of War has finalized a $700 million conditional loan package aimed at accelerating domestic rare earth magnet manufacturing through two startups: Vulcan Elements in North Carolina and ReElement Technologies in Indiana. The announcement, released in a Pentagon statement Friday, signals a sharper effort to counter China’s near-total dominance of a supply chain that powers EVs, advanced defense hardware, robotics, and nearly every high-performance electronic device in use today.

“The Office of Strategic Capital (OSC) announces a joint $700 million conditional loan commitment with Vulcan Elements (“Vulcan”) and ReElement Technologies (“ReElement”) to increase domestic Neodymium Iron Boron (NdFeB) magnet production and significantly bolster U.S. critical minerals supply chains,” Pentagon said in a news release.

Of the total package, $620 million is headed to Vulcan Elements and $80 million to ReElement Technologies. This funding sits inside a larger $1.4 billion public-private effort that pairs federal backing with private investment.

Bloomberg also confirmed the report, saying, “The US Department of Defense agreed to lend $700 million to producers of rare-earth magnets in a bid to increase domestic production of materials used in consumer electronics and weapons. The conditional loan package is made up of $620 million to Vulcan Elements Inc. and $80 million to ReElement Technologies Corp. to lift production of magnets made from neodymium, iron and boron, the Pentagon said in a statement Friday. The Department of Commerce will take a $50 million equity stake in Vulcan.”

The Department of Commerce is also taking a $50 million equity stake in Vulcan, reinforcing just how central this company has become to Washington’s strategy. Commerce Secretary Howard Lutnick framed it clearly: “Our investment in Vulcan Elements will accelerate U.S. production of rare earth magnets for American manufacturers. We are laser-focused on bringing critical mineral and rare earth manufacturing back home, ensuring America’s supply chain is strong, secure, and perfectly reliable.”

U.S. Startups Vulcan and ReElement to the Rescue: Inside the $700M Deal to Break China’s Grip on Rare Earth Magnets

At the center of this effort is the neodymium-iron-boron magnet, better known as NdFeB. These magnets are compact, incredibly efficient, and essential for high-performance motors used in electric vehicles, drones, defense systems, data storage, semiconductor tools, satellites, and submarines. According to the National Institute of Standards and Technology, these components show up across industries where shortages can ripple out into national security risks. China currently controls more than 90% of global rare earth magnet production, and that grip has tightened even further with restrictions placed on exports of elements such as samarium, gadolinium, terbium, and dysprosium following recent U.S. tariffs.

Inside the Pentagon, this push is being managed through the Office of Strategic Capital, created under a federal initiative that opened up to $100 billion in lending for critical minerals and defense-related manufacturing. Michael Grimes, executive director of the U.S. Critical Minerals Institute, summed up what’s at stake: “Accelerating Vulcan Elements’ rare earth magnet production is strategic to the United States and will have profound ramifications for industries including semiconductors, AI data centers, defense, aerospace, and automobiles.”

Vulcan, founded in 2023 and based in the Research Triangle Park region, has already delivered magnets that meet demanding performance standards across commercial and defense applications. The new funding will help finance a 10,000-metric-ton annual production facility, with the exact location expected to be announced soon. That scale could help close a significant gap in domestic supply, positioning the U.S. to support EV production and military applications without relying on foreign sources.

ReElement complements that effort from the other side of the pipeline. As a subsidiary of American Resources Corporation (NASDAQ: AREC), it specializes in pulling rare earths from ores, electronic waste, used magnets, and even coal byproducts. Its chromatography-based process avoids traditional solvent extraction and allows for modular, lower-footprint operations that produce high-purity oxides. That material will flow directly into Vulcan’s magnet manufacturing line. In August, the two companies signed a five-year offtake agreement, locking in a domestic feedstock starting in 2026.

Vulcan CEO John Maslin, a former Navy officer, described the moment as a responsibility as much as an opportunity: “Now more than ever, we remain focused on execution and performance, so that we can deliver a capability that the nation urgently needs.” The deal also grants the Department of Defense warrants in both companies, tying public interest to long-term performance.

This move builds on a broader wave of federal investment. Earlier this summer, the Pentagon acquired a 15% stake in MP Materials for $400 million, becoming the company’s largest shareholder. That was followed by a $500 million deal between MP Materials and Apple to supply magnets for iPhones and electric vehicles. Together, these steps paint a clear picture of a government no longer content to sit on the sidelines of critical manufacturing.

Wall Street has noticed. Shares in American Resources jumped after the initial announcement, reflecting optimism that the U.S. is finally constructing a serious alternative to China’s rare earth monopoly. Questions remain around cost competitiveness and long-term recycling scale, though the strategy now in motion is hard to miss.

This is about more than minerals. It is about control. Control over inputs that decide who leads in AI, who builds the next generation of defense systems, and who sets the pace in electric transportation. The outcome will not be decided by speeches or policy papers. It will be decided by magnets rolling off production lines on American soil.