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China's Dominance

Extent of China's control over REE mining and processing

China holds a dominant position in the global market for Rare Earth Elements (REEs). Its control spans the entire supply chain, from mining the raw ores to processing them into high-purity materials needed for modern technology. Understanding the scale of China's control is essential for comprehending global supply chain risks and geopolitical dynamics.

China mines the largest share of the world's REEs. In recent years, it accounted for approximately 70 percent of global mined production. Its official mining quota for 2024 was set at 270,000 metric tons. This volume significantly surpasses the output of other nations. The United States, for instance, produced about 45,000 metric tons in 2024, all from a single mine site. China also possesses the world's largest REE reserves, estimated at 44 million metric tons.

China's influence intensifies significantly in the processing stages. The separation and refining of REEs involve complex chemical processes. China dominates this midstream segment, handling approximately 90 percent of global REE refining. This means that even raw materials mined in other countries are often shipped to China for final processing into usable metals, oxides, and alloys. Furthermore, China controls about 90 percent of the world's manufacturing capacity for high-performance rare earth permanent magnets.

This market concentration translates directly into supply chain dependence for many countries. The United States, for example, imports about 70 percent of its REEs. Much of this material originates from or passes through Chinese processing facilities. China also leads in REE-related innovation, holding over 25,000 patents in the field, compared to around 10,000 held by U.S. entities.

Strategies employed by China to maintain dominance

China utilizes a combination of strategies to establish and preserve its commanding position in the global REE industry. These strategies encompass state-directed industrial policy, targeted investments both domestically and internationally, and the tactical use of market controls.

Controlling exports serves as a primary tool. China employs export quotas, licensing requirements, and occasionally imposes restrictions or outright bans on the export of specific REE materials. In April 2025, it mandated export licenses for seven critical rare earths. Similar restrictions affected other key minerals starting in December 2024. China often presents these actions as necessary for resource management or environmental protection, or as responses to international trade measures like high U.S. tariffs (which reached 145 percent on some goods). Regardless of the stated reason, these export controls provide China with geopolitical leverage and can significantly disrupt supply chains for global competitors.

Substantial government investment bolsters China's REE sector. Reports indicate China allocated $2 billion to advance REE technology development. State support also underpins exploration efforts, contributing to major discoveries, such as a recent find in Yunnan province containing over one million tonnes of valuable heavy and medium REEs. The Chinese government explicitly designates REEs as strategic national assets, ensuring state oversight and direction for the industry.

China also invests heavily outside its borders to secure resources and extend its influence. As part of its Belt and Road Initiative and other foreign investment programs, China directed over $21 billion towards overseas mining projects in 2024. Its cumulative investments in Africa exceed $1.34 trillion, often targeting mineral resources. Chinese companies dominate cobalt mining in the Democratic Republic of Congo, for example. China also builds related industrial facilities abroad, such as an electric vehicle battery plant in Morocco. These investments secure access to raw materials worldwide.

Finally, China actively pursues technological leadership through research and development. Its significant lead in REE-related patents, numbering over 25,000, helps maintain an edge in processing efficiency and material science. These combined strategies—export controls, domestic and foreign investment, state direction, and technological development—allow China to exert strong influence over the global rare earth market today.

Supply Chain Vulnerabilities

Risks associated with concentrated supply sources

Relying heavily on a single country or region for Rare Earth Elements (REEs) creates significant supply chain risks. The current global market structure, with its heavy concentration in China, makes importing nations vulnerable. If that single source experiences problems or chooses to restrict supply, essential industries can face disruption.

China currently mines about 70 percent of the world's raw rare earths. Its control over the complex processing stage is even greater, reaching approximately 90 percent globally. This concentration means many countries depend directly or indirectly on Chinese supply. The United States imports over half of its designated critical minerals, including 70 to 78 percent of its REEs, from China. The European Union sources 94 percent of its REE imports from just three countries: China, Malaysia (where Chinese companies often operate processing plants), and Russia.

This dependence is inherently risky. A historical event illustrates this danger clearly. In 2010, China temporarily stopped REE exports to Japan during a diplomatic dispute. This action caused serious problems for Japanese manufacturers reliant on rare earths. Although Japan invested heavily afterwards to diversify its sources, it still imports over half of its REEs from China. This experience prompted Japan to build strategic stockpiles of critical materials.

The United States faces a similar vulnerability today. It possesses only one operational rare earth mine, Mountain Pass in California. While this mine produces a substantial amount of raw concentrate (around 50,000 tonnes annually), the U.S. lacks sufficient domestic facilities to process this material into finished metals. As a result, much of Mountain Pass's output is shipped to China for refining. This reliance on a dominant supplier for the crucial processing step represents a critical choke point in the supply chain. Adding to the complexity, environmental concerns and instability surrounding mining operations in potential alternative source countries, like Myanmar, create further risks.

Impact of export restrictions and trade disputes

Deliberate actions like export restrictions and broader trade disputes can severely impact the fragile REE supply chain. Decisions made by dominant supplier countries can instantly affect global availability and prices, impacting industries worldwide. Recent trade tensions between the United States and China provide stark examples.

In April 2025, China announced strict export controls, including new licensing requirements, for seven key REEs and rare earth magnets. This decision came amid escalating trade friction, including U.S. tariffs reaching as high as 145 percent on certain Chinese goods. China had also restricted exports of other critical minerals like gallium and germanium in the preceding months.

Such restrictions have immediate and far-reaching consequences. Following the April 2025 announcement, analysts predicted Chinese REE exports could fall by 30 percent over the next year. Market prices reportedly surged by 50 percent soon after the news broke. This price volatility directly affects downstream industries. For example, rising REE costs could increase the price of each electric vehicle by approximately $1,000. Shortages could cause production delays in vital sectors like defense, healthcare (which relies on elements like gadolinium for MRI technology), and semiconductors. With limited domestic stockpiles, potentially lasting only a few months, U.S. military readiness could be compromised if imports are severely disrupted.

Broader trade disputes amplify this instability. The U.S.-China trade war, ongoing since 2018, involves extensive tariffs on hundreds of billions of dollars worth of goods. These tariffs increase costs and create uncertainty for businesses reliant on international supply chains. Financial markets react strongly to escalations; the Dow Jones Industrial Average fell nearly 4 percent in a single day after the announcement of new U.S. tariffs in April 2025. Some economists increased their probability forecast for a global recession to 60 percent following these trade actions.

These events compel governments to act. The U.S. passed the Critical Minerals Security Act of 2025 to address vulnerabilities. It is investing hundreds of millions ($439 million+ from the Department of Defense alone) to foster domestic production and processing capabilities. Companies are launching projects to increase U.S. output. International partnerships aim to diversify supply sources away from China. These responses underscore the serious impact that export controls and trade disputes have on access to critical resources like rare earths.

International Responses

Efforts by the U.S. and allies to diversify supply

Recognizing the risks tied to concentrated Rare Earth Element (REE) supplies, the United States and its allies actively work to diversify their sources. These efforts aim to reduce dependence on China, which supplies 60 to 80 percent of U.S. rare earth imports and controls most global processing. Strategies include boosting domestic production, identifying new global suppliers, improving recycling methods, and developing alternative materials.

The U.S. government directs substantial investment towards building domestic REE capacity. In 2025, it allocated $17 million for critical minerals projects and $19.5 million to develop better technologies for recovering minerals from waste streams like coal ash. The Department of Defense committed over $439 million to establish a domestic supply chain. Private sector investment is also crucial. MP Materials, operator of the only U.S. REE mine, announced a $1 billion plan to strengthen domestic processing. American Rare Earths advances its Halleck Creek project in Wyoming, potentially holding 2.63 billion tons of REEs, enough for nearly 100 years of U.S. demand at an estimated initial cost of $380 million. Phoenix Tailings, another U.S. company, secured $43 million to build a processing facility aiming to produce 200 metric tons of REEs by 2025. Researchers also explore novel sources, estimating $8.4 billion worth of REEs could potentially be recovered from U.S. coal ash deposits.

Key U.S. allies undertake similar diversification drives. Australia invests significantly in its large REE sector. Iluka Resources committed AU$1.8 billion to related projects. The Australian government plans a A$22.7 billion investment between 2025 and 2035 to train its critical minerals workforce. Canada possesses vast mineral resources, including cobalt and lithium, making it a vital partner. India launched its National Critical Mineral Mission, funded with about $1.88 billion, to increase domestic exploration and mining. India holds the world's fifth-largest REE reserves but currently produces less than 1 percent of the global total.

Efforts extend to finding and developing new sources globally. Vietnam currently produces about 600 tons of REEs annually. Malaysia mined 80 tons in 2024. Africa holds roughly 30 percent of the world's mineral reserves and emerges as a key focus area. Projects develop in South Africa (where Rainbow Rare Earths received $30 million in support), Angola, and Tanzania, contributing to a goal for Africa to supply 10 percent of global REEs by 2030. Saudi Arabia plans a massive $46 billion investment in its mining sector by 2030. Uzbekistan invests $500 million to increase its mineral production.

Improving recycling technology offers another supply stream. The global market for recycled REEs projects growth from $312 million in 2023 to $649 million by 2031. Leading electronics and chemical companies like Umicore and Mitsubishi Electric Corporation pursue REE recycling. Additionally, research into alternative materials continues. Companies like Niron Magnetics develop powerful magnets using iron nitride, avoiding rare earths entirely.

Collaborations and partnerships to secure REE access

Alongside national diversification efforts, international cooperation forms a critical pillar of the response to REE supply challenges. Nations forge alliances and partnerships to pool resources, share technological expertise, finance projects, and build more resilient supply chains independent of Chinese control.

The Minerals Security Partnership (MSP) represents a major multilateral initiative. Launched in 2022, the MSP brings together the United States, the European Union, and 13 other partner countries (some sources list 23 total partners). Its purpose is to accelerate development of sustainable critical mineral projects globally by coordinating government and private sector investment. The MSP backs projects like the Dubbo rare earths project in Australia with $600 million in financing and has identified 32 potential projects worldwide for support.

Bilateral agreements strengthen cooperation between key partners. The United States and India signed an agreement on October 3, 2025, specifically committing to collaborate on securing mineral supply chains. The U.S. maintains close cooperation with Canada on critical minerals, formalized through initiatives like a Joint Action Plan. Australia remains a cornerstone partner for the U.S. in diversifying REE sources. A 2023 agreement between the U.S. and Japan focuses on collaborative REE research and development.

Industry-level partnerships also span international borders. U.S.-based Energy Fuels partnered with South Korea's POSCO International. Their joint venture aims to establish an EV magnet supply chain outside of China, targeting production of 850 to 1,000 tonnes of key magnet materials (neodymium-praseodymium) annually – enough for over 30,000 EVs. Another venture involves U.S. and global firms partnering in Vietnam to potentially access three mines holding an estimated 7 million metric tons of REEs. Canada Rare Earth, a Canadian company, acquired a 70 percent interest in a processing refinery in Laos capable of producing 3,000 tonnes of rare earth oxides per year.

Regional organizations also pursue strategic partnerships. The European Union actively seeks agreements with resource-rich African nations like Namibia and Zambia to ensure sustainable mineral supplies. The EU engages with Central Asian countries, considering a proposal for a regional REE research center in Kazakhstan. A potential EU trade agreement with the Mercosur bloc in South America aims to reduce tariffs on minerals by 90 percent. These varied cooperative efforts demonstrate a widespread international push to build more secure and diverse supply routes for the rare earth elements crucial for global technology, energy, and security.

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Table of Contents

(Click on any section to start reading it)

1. Introduction: The Strategic Significance of Rare Earths

• What Are Rare Earth Elements (REEs)?

  • Definition and classification of REEs

  • Unique properties and applications

• Historical Context

  • Evolution of REE usage in technology and defense

  • Past supply chain challenges and lessons learned

• Current Relevance

  • Why REEs are critical to modern national security

  • Overview of global REE demand and supply​

2. Military and Technological Dependence on Rare Earths

• Defense Applications

  • Use of REEs in fighter jets, missile systems, and naval vessels

  • Importance in communication and surveillance equipment

• Advanced Technologies

  • Role in emerging technologies like hypersonics and directed energy weapons

  • Integration in AI and quantum computing hardware

• Civil-Military Integration

  • Overlap between civilian and military REE applications

  • Implications for supply chain security​

3. Global Supply Chains and Geopolitical Dynamics

• China's Dominance

  • Extent of China's control over REE mining and processing

  • Strategies employed by China to maintain dominance

• Supply Chain Vulnerabilities

  • Risks associated with concentrated supply sources

  • Impact of export restrictions and trade disputes

• International Responses

  • Efforts by the U.S. and allies to diversify supply

  • Collaborations and partnerships to secure REE access

4. U.S. Strategies for Securing Rare Earth Supplies

• Domestic Initiatives

  • Investment in domestic mining and processing facilities

  • Legislative measures to promote REE independence

• Stockpiling and Reserves

  • Development of strategic reserves for critical minerals

  • Policies under the Strategic and Critical Materials Stock Piling Act

• Research and Development

  • Funding for alternative materials and recycling technologies

  • Support for innovation in REE extraction and processing

5. Economic and Environmental Considerations

• Market Dynamics

  • Price volatility and its effects on industry

  • Economic implications of supply disruptions

• Environmental Impact

  • Challenges in environmentally sustainable REE extraction

  • Regulatory frameworks governing mining activities

• Balancing Security and Sustainability

  • Strategies to reconcile national security needs with environmental concerns

  • Role of recycling and circular economy approaches​

6. Future Outlook and Policy Recommendations

• Emerging Technologies and REE Demand

  • Projected growth in REE requirements for future tech

  • Potential for new materials to reduce dependence

• Policy Frameworks

  • Recommendations for U.S. policy to enhance REE security

  • Importance of international cooperation and alliances

Baked with love,

Anna Eisenberg ❤️