Summary
The U.S. government's effort to secure strategic materials outside of Asia suffered a major setback with the cancellation of a $500 million cobalt procurement tender. This highlights the immediate, complex challenges of military-grade material specification and negotiating fixed prices in a volatile market. Compounding the supply crisis, China has escalated its rare earth restrictions, explicitly banning exports for foreign military use and applying an extraterritorial licensing regime to Western manufacturers. Simultaneously, a bright spot for North American resource independence emerged: a high-grade Magnesium project in British Columbia is nearing final government approval, positioning it to address a crucial industrial and defense supply gap.
Key Points
U.S. DLA Cancels $500M Cobalt Stockpile Tender
The U.S. Defense Logistics Agency (DLA) has abruptly canceled its tender to purchase up to 7,500 tonnes of cobalt, worth a maximum of $500 million, citing "outstanding issues with the Statement of Work." This setback, the U.S. government's first attempt to procure cobalt since 1990, underscores the difficulty of securing long-term, fixed-price contracts for defense-grade cobalt amid extreme price volatility (prices doubled since February due to DRC quotas) and complex technical specifications for military alloys. The DLA plans to reissue the solicitation after technical requirements are resolved.
China Imposes Near-Blanket Ban on Rare Earth Exports for Foreign Military Use
China has implemented its most aggressive rare earth export controls to date (effective Oct 9, 2025). The new rules explicitly state that export licenses for "foreign military forces" or "overseas defense users" will "in principle, not be granted." Furthermore, these restrictions now apply an extraterritorial "de minimis rule," requiring Chinese approval for foreign goods containing as little as 0.1% of certain Chinese-sourced rare earths. This move directly targets the U.S. defense industrial base, which remains heavily reliant on Chinese rare earth supply.
Canada’s High-Grade Magnesium Project Nears Final Approval
West High Yield (W.H.Y.) Resources Ltd. announced it has received a draft permit from the British Columbia Ministry of Mining and Critical Minerals, representing a critical step toward final extraction approval for its Record Ridge magnesium deposit. The project holds an estimated 10.6 million tonnes of contained magnesium, making it one of the highest-grade deposits globally. Magnesium is critical for lightweighting military and automotive alloys, and the project is positioned to provide a reliable, environmentally-forward source in North America.
EU's New Battery Regulation for Recycling Takes Full Effect
The EU's new Battery Regulation has fully repealed the old Directive, bringing into force strict new obligations focused on the circular economy. This includes Extended Producer Responsibility (EPR), forcing battery producers to finance the costs of collecting, treating, and recycling batteries at end-of-life. The regulation sets mandatory recycling efficiency and material recovery targets for cobalt, nickel, and lithium, creating a significant regulatory tailwind for European battery recycling companies and adding pressure to production cost models.
Why It Matters
Defense Procurements Face Market Realities
The cancellation of the cobalt tender underscores that large-scale government procurement cannot simply override market forces. The volatility and complexity of critical mineral markets, coupled with stringent military specifications, require highly flexible procurement strategies. This setback will likely accelerate the DLA's pivot from simple purchasing to direct equity investment and long-term, price-indexed offtake agreements to share risk with private industry.
The War for Supply is Now a Ban on Technology
China’s near-blanket ban on military-use rare earth exports is a massive geopolitical escalation. It forces Western defense contractors to immediately accelerate the de-Sinoization of their military supply chains, particularly for high-performance magnet components used in missiles, radar, and fighter jets. The long-term cost of this transition is expected to be significant, cementing the strategic necessity of domestic and allied rare earth processing capacity.
Magnesium: A Quiet, Strategic Win
Magnesium is a cornerstone of the defense and automotive aluminum alloy industries. The imminent approval of the Record Ridge project in Canada offers a crucial de-risking event for North American manufacturing, providing a high-purity, stable source for a metal where the U.S. remains heavily import-dependent. This project highlights the growing value of niche, non-battery critical minerals backed by stable government policy.
Watchlist Companies
Company / Entity | Context | Homepage / Link |
West High Yield (WHY) | BC-based magnesium developer nearing final permit approval for one of the world's largest deposits. | |
MP Materials (MP) | Only major U.S. rare earth mine; direct beneficiary of China's defense export ban as Western sourcing becomes paramount. | |
Glencore Plc (GLEN) | Major cobalt producer and one of three suppliers qualified for DLA's canceled tender; monitoring reissue. | |
American Tungsten (TUNG) | Tungsten is a defense-critical metal; U.S. military-driven supply crisis increases focus on its Idaho operations. | N/A (Canadian/OTC Exchange) |
Li-Cycle Corp. (LICY) | North American lithium-ion battery recycler; directly supported by EU's new EPR mandates and recycling targets. | |
Trilogy Metals (TMQ) | Canadian-based company with U.S. government equity stake; working to unlock copper/zinc supply in Alaska. |
Critical Minerals Spotlight
Cobalt — Procurement Failure: DLA's cancellation confirms the market's fixed-price sensitivity and the DLA's pivot toward more flexible, risk-sharing procurement methods.
Rare Earths — Defense Ban: China's explicit ban on military exports marks the ultimate weaponization of its market dominance, forcing a full decoupling of defense supply chains.
Magnesium — Alloy Security: High-grade North American magnesium supply is on the verge of being unlocked, providing a stable source for lightweighting and defense manufacturing.
Action Points
Anticipate Reissued DLA Tender: Suppliers should prepare for the DLA's reissued cobalt solicitation to feature price-indexing mechanisms or shorter contract durations to mitigate price volatility risks.
Accelerate Magnesium Sourcing: North American auto and aerospace manufacturers should formally engage with the Record Ridge project to secure future offtake and reduce reliance on unstable overseas magnesium supply.
Monitor EPR Compliance Costs: European battery producers must closely track the financial impact of the new EPR mandates, as recycling costs may not be easily passed to end-users in a competitive market.
This briefing is for informational purposes only and is not legal, investment, or policy advice. Information is believed accurate at time of publication. Sources are publicly available.