The new “Project Vault” critical mineral stockpile launched by the White House and the US Export-Import Bank is “absolutely” necessary, but it represents only the first step in many of the broke the supply chain of China’s dominance of mineralsincluding rare earths, for many years to come, industry analysts said.

The plans for an emergency national stockpile of some critical minerals, announced on February 2, come after the Trump administration has already taken the unusual step of making direct investments in several companies mining and processing critical minerals in the US and Canada over the past 10 months.

As supply chain disruptions began to appear during the COVID-19 pandemic, the start of a tariff trade war with China last year has “weaponized” the dominance it has built up over decades in critical minerals mining, processing, and magnet supply chains. Certain minerals, especially the 17 rare earth metals, are important in making everything from military equipment to cars to high-powered computing and data centers, said Charles Boakye, energy sustainability and transition analyst at Jefferies.

“Is (Project Vault) necessary? Absolutely,” Boakye said luck. “Is it effective? I think we have to wait and see. The initial signs are certainly promising, but the bottleneck is not only mining and sourcing; it is also processing. Even if the US can stockpile many of these materials, how and who will do the processing depends on the end-use applications?”

Boakye called the stockpile a “first big step of many” needed to break China’s stranglehold over the next three to seven years, at least. “It’s not a nationalization of US minerals, but it’s pretty close. It’s state capitalism and it’s industrial policy.”

The project has been compared to some of the 50-year-old US Strategic Petroleum Reserve, which currently holds 415 million barrels of crude oil in underground salt caverns in Texas and Louisiana. That reserve was started in response to the 1973 Arab oil embargo.

Commodity trading houses that have agreed to buy minerals for stockpiles include Hartree Partners, Mercuria, and Traxys.

The initial $12 billion effort for the US Strategic Minerals Reserve includes a $10 billion direct Ex-Im Bank loan and a $2 billion private sector investment, President Trump said.

“For years, American businesses have been at risk of running out of critical minerals during market crashes,” Trump said in a brief video announcement. “As long ago we had a Strategic Petroleum Reserve … we are now creating this reserve for the American industry, so we don’t have any problems.”

A long effort

As Ex-Im Chairman John Jovanovic added, “Project Vault is designed to support domestic manufacturers from supply shocks, support US production and processing of critical raw materials, and strengthen America’s critical minerals sector.”

After China began restricting some magnets and minerals last year—in response to U.S. tariffs and a ban on some AI chips—a temporary one-year truce was agreed.

Meanwhile, the US government acquired ownership stakes of two US rare earths miners and specialty magnet manufacturers, MP Materials and USA Rare Earth.

As for other US government investments in critical minerals, the Trump administration has invested in two Canadian players, Lithium Americas and Trilogy Metals — both developing projects in the US — and in North Carolina-based magnet maker Vulcan Elements. The government also has an agreement with a critical mineral processor, Indiana-based ReElement Technologies, for stock purchase rights.

Even if the US and China eventually reach a longer-term agreement on trade and critical minerals, Boakye said he does not believe the US will abandon its efforts.

“This is not something that will immediately change China’s ability to weaponize its dominance,” Boakye said. It’s part of a broader effort that requires more cooperation with Canada, the European Union, Australia, and other US allies to develop mining and processing facilities around the world, he said.

“We are in the midst of an economic war.”

This story was originally featured on Fortune.com

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