Robot Wars – How China Has the Robotics Industry in Its Grip

Last year, China started requiring export licenses for rare earth magnets. Within weeks, Elon Musk was telling investors that production of Tesla's Optimus robot had been affected. That's because every humanoid robot needs up to 4.5 kilos of rare earth magnets to move, and China makes more than 90% of the world's supply. It's exactly the problem REalloys (NASDAQ: ALOY) has been building to help solve. The company is putting together a rare earth supply chain outside of China, from processing in Saskatchewan to metal-making in Ohio.And the problem is about to get a lot bigger. Goldman Sachs now expects roughly 6.5 million of them to be sold every year by 2035, which is nearly five times what it was forecasting before.So it’s no wonder REalloys has named robotics as one of the markets it’s going after. And to understand how quickly this problem is building, you have to look at how fast the robots are actually showing up.Humanoid Robots Are Moving Out of the Lab and Onto Factory LinesFor years, humanoid robots mostly showed up in trade show booths and online videos, but in 2026, that’s finally started to change.In July, Tesla said it shut down the Model S and Model X lines at its Fremont factory and was installing its first Optimus production lines in their place. The company says it expects production to start soon, and the eventual plan is capacity for 1 million of these robots a year.China is moving even faster, though. A senior official at China’s industry ministry said the country’s output of humanoid robots is expected to top 100,000 this year alone.And the early numbers back that up. Research firm IDC counted nearly 25,000 humanoid robots shipped worldwide in the first half of 2026, which was more than five times as many as a year earlier, and most of them came from China.So China is building most of the robots, and it’s making most of the magnets that go inside them too. For an American robot maker, that means a single licensing decision in Beijing could stall a whole production line, which is the exact risk REalloys is trying to help take off the table.And it gets worse when you look at what’s actually inside one of these robots.Every Robot Needs About 30 Motors, and Every Motor Needs a MagnetA humanoid robot moves with its joints, and every joint needs its own motor. That works out to roughly 30 motors per robot, and every one of them runs on a rare earth magnet.Some of those motors run hot, and a magnet that gets too hot starts to lose its strength unless it contains a small amount of two heavy rare earths called dysprosium and terbium.That’s where China’s hold gets even tighter. The U.S. relies on imports for 100% of its heavy rare earth compounds and metals. And dysprosium and terbium are both on the list of rare earths that Beijing put under export licenses in April 2025, which are the same rules that held up Tesla’s robot.Those licenses never went away. A broader set of Chinese export controls is only on pause until January 10, 2027, the U.S. says, and even with that pause in place, China’s magnet exports to the U.S. fell 21% in August.That’s exactly why REalloys (NASDAQ: ALOY) went out and secured the rights to a supply of dysprosium and terbium from outside of China. And it turns out investors figured out how valuable that kind of supply is a long time ago.Wall Street’s Best Robot Stocks Weren’t Robot MakersIn February 2025, Morgan Stanley put together a list of 100 stocks tied to humanoid robots and called it the “Humanoid 100.” You might expect the biggest winners on that list to be the companies building the robots, but they weren’t.By that September, the four stocks that performed best were all rare earth companies: MP Materials, Lynas, Northern Rare Earth, and JL Mag. Each of them was up more than 100%, and none of them were the companies building the robots.Morgan Stanley said part of the reason was “a market recognition of the critical nature of the long-standing rare earth bottleneck.” In other words, investors realized that no matter which robot maker wins, every one of them needs the same magnets.The bank’s own researchers went as far as to say that “nearly every robot developer in the world still requires critical components sourced from China and other parts of Asia.”But here’s the part most people miss. Two of those four rare earth winners are Chinese companies. So if you’re an American robot maker trying to get away from China, half of those winners are still part of the problem.You need a supplier that’s outside of China altogether, and that’s what REalloys is building here in North America.What REalloys Already Has in PlaceREalloys’ supply starts in Canada, at the Saskatchewan Research Council (SRC). The company holds the rights to roughly 80% of the output from SRC’s upgraded rare earth facility, and that output includes the dysprosium and terbium those hot-running motors need.It also includes a metal called NdPr, which is the main rare earth ingredient in the magnets themselves. SRC is commissioning roughly 150 tonnes a year of the total 525 tonnes a year NdPr metal capacity in the first quarter of 2027.From there, the work moves to Euclid, Ohio, where REalloys (NASDAQ: ALOY) already makes rare earth metals, alloys, and magnet materials for customers like the Defense Logistics Agency and the Department of Energy’s Ames National Laboratory.And that is just part of a broader demand surge for American-made magnets. Apple (NASDAQ: AAPL) committed $500 million to a deal with MP Materials for U.S.-made rare earth magnets, along with plans for a new recycling operation in California. That's a consumer electronics giant making a major commitment to the same magnet supply chain that is becoming increasingly important to robotics.It's a trend that isn't slowing anytime soon. In July, REalloys signed a non-binding letter of intent with JS Link, a Korean magnet maker.“We believe the logical next step is to extend that platform into permanent magnet manufacturing,” said REalloys CEO Lipi Sternheim.The company has the people and the money to keep going, too. Its new Chief Operating Officer, Dr. Muhammad Imran, spent 17 years at SRC and led its rare earth division. And REalloys had $122.4 million in cash as of June 30.That team and balance sheet matter because a supply chain like this doesn't get built overnight. General Motors (NYSE: GM) signed a long-term agreement with MP Materials in 2021 to bring American-made rare earth magnets into its electric motors, and five years later GM is only now testing magnets produced at MP's Texas facility. If it takes that long with one of America's biggest automakers backing the effort, the robotics industry can't afford to wait until orders are in the millions.REalloys Is Building Its Supply Before the Robots ArriveMost of this demand hasn’t even shown up yet. The robots shipping right now are counted in the tens of thousands, but the forecasts are in the millions moving forward.Getting from tens of thousands of robots to millions also means making them easier to train and put to work. NVIDIA (NASDAQ: NVDA) is pushing that side of the business with its Isaac GR00T AI models and simulation tools that help developers train and test humanoid robots. The faster those tools help get robots into real-world use, the sooner the industry could need a lot more of the magnets that make them move. In September, research firm CRU warned that humanoid robots could widen the rare earth shortage the market was already expecting in the years ahead.Which means the robot makers who wait until they need the magnets could find out there aren’t enough to go around, especially if they’re still depending on China when Beijing’s pause runs out.Tesla (NASDAQ: TSLA) has already shown what that kind of disruption looks like, after China's rare earth restrictions affected Optimus production in 2025. And on its July 2026 earnings call, Musk said Tesla has had to build much of the robot's supply chain from scratch or make the parts itself. If that's the challenge for a company with Tesla's resources, it tells you how exposed the rest of the industry could be as production scales up. Every robot maker that wants out of China is going to need a supplier that was built somewhere else. REalloys is building that supply chain right now in Saskatchewan and Ohio, while most of the industry is still buying from Beijing.By. Michael ScottThe AI boom is triggering an unexpected and unprecedented bull run in natural gas and power stocks. If you aren't paying attention to the energy demands of data centers, you will miss the biggest energy story of the decade. The smart money is already quietly moving into the few companies prepared to power the trillion-dollar AI machine.Oilprice Intelligence brings you the inside view on where the next gains will come from, breaking down the market's biggest growth driver with analysis from veteran oilmen and experts. Click here to get this crucial intel for freeFORWARD LOOKING STATEMENTSThis publication contains forward-looking statements, including statements regarding expected continual growth of the featured companies and/or industry. 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