China produces around 70 percent of global rare earth mining output and 90 percent of refining capacity, making neodymium's journey a showcase of its strategic leverage. Mining begins in southern provinces like Jiangxi and Guangdong, where ion-adsorption clays host neodymium-rich bastnasite and monazite ores. These low-grade deposits, averaging 0.05 to 0.3 percent rare earth oxides, yield mixed rare earth carbonates via heap leaching with ammonium sulfate. This stage matters because China sources heavy rare earths from Myanmar imports, exposing a mining chokepoint as domestic quotas tighten and environmental rules curb expansion. Economically, low-cost surface mining keeps production viable even at depressed prices; geopolitically, quotas enable supply management to influence global benchmarks like NdPr oxide at 850,000 yuan per tonne.
Concentration follows at facilities in Longnan or Ganzhou, where carbonates undergo cracking with hydrochloric acid and precipitation to produce rare earth chlorides. The real chokepoint emerges in separation: China's mastery of multi-stage solvent extraction using P507 extractant isolates high-purity neodymium oxide (99.5 percent Nd2O3). Over 100 separation plants, mostly state-backed, process 90 percent of world supply. This step demands massive scale and expertise; Western rivals struggle with yields below 90 percent versus China's 98 percent efficiency. Dependency here stalls diversification, as seen in halted U.S. shipments to Chinese refiners. Prices surged to $123 per kg due to quotas, underscoring refining's pricing power.
Intermediate processing converts neodymium oxide to metal via electrolysis in fluoride-chloride melts at factories in Baotou, Inner Mongolia. Alloyed with praseodymium (as NdPr at 30:1 ratio), it forms the basis for permanent magnets. Sintering mills like Zhong Ke San Huan press, hydrogen-decrepitates, and aligns NdFeB powder in magnetic fields before heat-treating into blocks. China controls 85 percent of magnet output, with chokepoints in vacuum induction melting where impurities above 10 ppm degrade performance.
Factory manufacturing spans end-uses. In electric vehicles, NdFeB arc segments from JL Mag enable Tesla Model 3 motors with 200 kW power density, consuming 1.5 kg per car. Wind turbines use 500 kg per megawatt in generators from Goldwind. Defense applications include missile actuators. Each stage amplifies China's hold: mines feed refineries under quota, refining bottlenecks dictate prices, and integrated magnet clusters near auto hubs like Shenzhen minimize logistics. Disruptions, like export curbs, ripple to U.S. EV production delays. Breaking this requires Western refining scale, but high capex and tech gaps persist, making neodymium a flashpoint in U.S.-China talks.