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Two startups have secured a $1.4 billion deal with the U.S. government to produce domestic rare-earth magnets (The Wall Street Journal, subscription).

What’s going on: The deal, led by North Carolina–based rare-earth magnet maker Vulcan Elements and including rare-earth materials purifier and recycler ReElement Technologies, “involves a $620 million loan from the Defense Department’s Office of Strategic Capital to build and operate a U.S. magnet facility capable of producing 10,000 metric tons of magnets each year, [Vulcan] said Monday. The Commerce Department is chipping in $50 million, and private investors are putting in another $550 million.”

• In return, the government will receive $50 million in equity in Vulcan, and the Defense Department will get warrants in Vulcan and ReElement.

Why it’s important: Rare-earth magnets are critical to modern technology. In April, China—which produces and sells more than 90% of the world’s supply (Reuters, subscription)—tightened rare-earth magnet exports.

• The move followed a late 2024 clampdown on critical minerals leaving the country.
• However … China recently walked back some of its rare-earths export restrictions, following trade talks between President Trump and Chinese President Xi Jinping.

Our view: “Continuing to focus on the domestic production of permanent magnets is important to manufacturers in America,” said NAM Vice President of Domestic Policy Chris Phalen.

• “Both rare-earth magnets and non-rare-earth permanent magnets, like the iron nitride magnets produced by Niron Magnetics, will be crucial to the energy technologies and national security applications Americans and our allies rely on today and will continue to rely on in the future.”