EU Aims to Establish Strategic Reserves of Rare Earths
The European Union plans to create emergency reserves of critical minerals, including rare earth metals, along with cable repair kits. This decision comes amid growing concerns over the bloc’s vulnerability to attacks and hybrid threats.
EU Aims to Establish Strategic Reserves of Rare Earths — Financial Times, July 5
As reported by the Financial Times and cited by United Nations News Agency, Brussels has announced its intention to build emergency reserves of critical minerals, including rare earth metals, as well as cable repair kits. The move reflects increasing worries about the EU’s exposure to risks.
Details
In a draft document outlining the reserve strategy, the European Commission stated: “The EU is facing an increasingly complex and deteriorating risk landscape, characterized by growing geopolitical tensions, including conflicts, intensified climate change impacts, environmental degradation, hybrid threats, and cyber threats.”
The EU’s executive body emphasized that member states should coordinate the stockpiling of supplies such as food, medicines, and even nuclear fuel.
It will also accelerate efforts to build EU-level reserves of materials such as cable repair modules “to ensure rapid recovery from disruptions in energy or optical cables,” as well as commodities critical to energy and defense systems, including rare earth metals and permanent magnets.
— The publication noted.
In recent years, several incidents of potential sabotage targeting subsea communication cables and gas pipelines have raised concerns about the vulnerability of critical infrastructure.
This strategy is part of the EU’s broader efforts to enhance the security and stability of the 27-nation bloc. Last month, General Carsten Breuer, Inspector General of the German Armed Forces, warned that Russia could attack an EU member state within the next four years.
The document highlighted that the high-risk environment is driven by “increased activities by hacktivists, cybercriminals, and state-backed groups.”
The EU is also more vulnerable to climate change than many other regions, with warming occurring at twice the global average rate. This week, wildfires in Crete forced the evacuation of 5,000 people from the island.
In a report commissioned by the EU in October, former Finnish President Sauli Niinistö stated that security should be treated as a “public good” and called for preparedness.
Regarding reserves, he suggested that Brussels should “define targets to ensure a minimum level of preparedness for various crisis scenarios, including armed aggression or large-scale disruptions in global supply chains.”
In March, the EU also recommended that households stockpile essential supplies to withstand crises for at least 72 hours.
The EU already maintains a fleet of firefighting aircraft and helicopters across 22 member states, medical evacuation planes, and items such as field hospitals and critical medical supplies as part of its emergency disaster response efforts.
However, the European Commission stated that it will establish a “network of stockpiles” to improve coordination among EU countries. The document noted that “there is limited consensus on what essential goods are needed for crisis preparedness in a rapidly changing risk environment.”
It will also begin compiling regularly updated lists of essential supplies tailored to each region and type of crisis. The document added that EU member states should provide better incentives, such as tax reductions, to encourage the private sector to help build inventories.
The EU must also collaborate with allies on “joint storage” and improve coordination with NATO on resource management and dual-use infrastructure.
A new multiannual budget proposal, to be introduced later this month, will also address the need for investment in critical stockpiles.
The draft document is expected to be published next week and may undergo revisions before being finalized.
Interim Measures for the Administration of Total Quantity Control of Rare Earth Mining and Smelting Separation
(Promulgated by Order No. 71 of the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the Ministry of Natural Resources on July 28, 2025, effective as of the date of promulgation.)
Article 1 These Measures are formulated in accordance with the Mineral Resources Law of the People’s Republic of China, the Rare Earth Management Regulations, and other relevant laws, administrative regulations, and state provisions, to strengthen the administration of total quantity control for rare earth mining and smelting separation.
Article 2 For the purposes of these Measures, "rare earth mining" refers to the production process of mining and beneficiating various types of rare earth raw ores, such as bastnaesite, ion-adsorption rare earth ores, and mixed rare earth ores, to produce rare earth mineral products.
"Rare earth smelting separation" refers to the production process of processing rare earth mineral products to generate various types of single or mixed rare earth oxides, salts, and other compounds.
Article 3 The state implements total quantity control management for rare earth mining (including rare earth mineral products, etc.) and for the smelting separation of various types of rare earth mineral products (including monazite concentrate) obtained through mining, importation, or processing of other minerals.
Article 4 The Ministry of Industry and Information Technology, in conjunction with the Ministry of Natural Resources and the National Development and Reform Commission, is responsible for the national administration of total quantity control for rare earth mining and smelting separation.
The competent departments of industry and information technology and natural resources of local people’s governments at or above the county level shall be responsible for the administration of total quantity control for rare earth mining and smelting separation within their respective administrative regions according to their duty assignments.
Article 5 The Ministry of Industry and Information Technology, in conjunction with the Ministry of Natural Resources and the National Development and Reform Commission, shall study and formulate annual total control indicators for rare earth mining and smelting separation (hereinafter referred to as the "total control indicators") based on factors such as national economic development goals, the reserves and variety differences of national rare earth resources, the development of the rare earth industry, ecological protection, and market demand, and submit them to the State Council for approval.
Article 6 The Ministry of Industry and Information Technology, in conjunction with the Ministry of Natural Resources, shall, based on the total control indicators approved by the State Council and comprehensively considering factors such as the production capacity, technical level, and environmental protection and safety performance of rare earth production enterprises, refine and allocate the total control indicators, issue them to rare earth mining enterprises and rare earth smelting separation enterprises (hereinafter collectively referred to as "rare earth production enterprises"), and notify the competent departments of industry and information technology and natural resources of the relevant provincial people’s governments.
The competent departments of industry and information technology and natural resources of provincial people’s governments shall notify the competent departments of industry and information technology and natural resources of local people’s governments at or above the county level where the rare earth production enterprises are domiciled about the issuance of the total control indicators.
Article 7 Rare earth production enterprises shall strictly comply with laws, administrative regulations, and relevant state provisions, and engage in rare earth mining and smelting separation within the scope of the total control indicators.
Rare earth production enterprises shall be designated by the Ministry of Industry and Information Technology in conjunction with the Ministry of Natural Resources.
Except for enterprises designated in accordance with the preceding paragraph, no other organizations or individuals may engage in rare earth mining or rare earth smelting separation.
Article 8 Rare earth production enterprises shall be responsible for the implementation of their respective total control indicators.
Article 9 Rare earth production enterprises shall promptly report the monthly and annual implementation status of their total control indicators to the competent departments of industry and information technology and natural resources of the county-level people’s government where they are domiciled.
The competent departments of industry and information technology and natural resources of local people’s governments at or above the county level shall compile the monthly and annual implementation status of the total control indicators of rare earth production enterprises within their administrative regions and promptly report them to the competent departments of industry and information technology and natural resources of the people’s government at the next higher level.
Article 10 Rare earth production enterprises shall establish a rare earth product flow record system, accurately record rare earth product flow information, and input the flow information for the previous month into the rare earth product traceability information system established by the Ministry of Industry and Information Technology in conjunction with relevant departments by the 10th day of each month.
Article 11 Rare earth production enterprises shall fulfill their obligations for network and data security protection, establish and improve internal network and data security management systems, enhance the level of enterprise network and data security protection, and ensure the security of enterprise networks and data.
Article 12 The competent departments of industry and information technology and natural resources of people’s governments at or above the county level shall strengthen supervision and inspection of the implementation of total control indicators, investigate and address
violations in accordance with the law, strictly implement legal and administrative regulations as well as the State Council’s requirements for administrative inspections involving enterprises, and ensure that supervision and inspections are law-based, strictly standardized, fair and civil, precise and efficient.
The competent departments of industry and information technology and natural resources of local people’s governments at or above the county level shall promptly report the investigation and handling of violations to the competent departments of industry and information technology and natural resources of the people’s government at the next higher level.
The competent departments of industry and information technology and natural resources of provincial people’s governments shall, by the end of December each year, report the overall supervision and inspection of total control indicators within their administrative regions to the Ministry of Industry and Information Technology and the Ministry of Natural Resources.
Article 13 If a rare earth production enterprise violates the provisions of these Measures or refuses or obstructs the supervision and inspection department from performing its duties in accordance with the law, the competent departments of industry and information technology and natural resources of the people’s government at or above the county level shall, according to their duty assignments, order it to make corrections and impose penalties in accordance with the Mineral Resources Law of the People’s Republic of China, the Rare Earth Management Regulations, and other relevant laws and administrative regulations.
Article 14 If a rare earth production enterprise violates the provisions of these Measures and is subject to administrative penalties, its total control indicators for the following year shall be reduced.
Article 15 If staff members of the competent departments of industry and information technology, natural resources, or development and reform abuse their authority, neglect their duties, or engage in misconduct for personal gain in the administration of total quantity control for rare earth mining and smelting separation, they shall be subject to sanctions in accordance with the law.
Article 16 Violations of these Measures that constitute violations of public security management shall be subject to public security administration penalties in accordance with the law; if a crime is constituted, criminal liability shall be pursued in accordance with the law.
Article 17 These Measures shall take effect from the date of promulgation. The Notice on Issuing the Interim Measures for the Administration of Mandatory Rare Earth Production Planning (MIIT Raw [2012] No. 285) promulgated by the Ministry of Industry and Information Technology on June 13, 2012, is simultaneously repealed.
Rare Earth Exports Surge 21%! The Global Battle Behind China's "Industrial Vitamins"
In the summer of 2025, a piece of news shook global supply chains: China’s rare earth exports soared to 5,994 tons in July, a year-on-year increase of 21%, hitting a record high since the imposition of export controls earlier in the year. Behind this figure lies the technological rivalry between China, the U.S., Japan, and Europe, the rapid advancement of the new energy revolution, and China’s strategic shift from "resource exporter" to "technology exporter."
1. Who Is Buying China’s Rare Earths? Japan Leads, the U.S. Rushes to Stock Up
Japan is the undisputed top buyer of Chinese rare earths. In the first half of 2025, Japan accounted for 58.3% of China’s rare earth metal and alloy imports, meaning six out of every ten tons of rare earths were shipped to Japan. These materials are used to manufacture motors for new energy vehicles, joints for industrial robots, and high-end sensors, supporting the global expansion of giants like Toyota and Fanuc.
The U.S. is also a significant player. Although California has rare earth mines, 80% of U.S. rare earth concentrate is shipped to China for processing into magnets—akin to sending wheat to China to be milled into flour and then shipped back to bake bread. In June 2025, China’s exports of rare earth magnets to the U.S. surged by 660% to 353 tons. The immediate cause was the release of backlogged orders after a Sino-U.S. trade agreement was reached. More importantly, the "grace period" for U.S. tariffs on China was set to expire in August, prompting downstream companies to stockpile early to avoid risks. Countries like South Korea and Vietnam also accelerated imports, creating a regional buying frenzy.
The Netherlands and the Taiwan region of China act more as "middlemen." The Netherlands resells 26.4% of imported rare earth compounds to European automakers, while the Taiwan region processes 16.6% of rare earths into precision electronic components, which ultimately end up in tech giants like Apple and Tesla. This "China-Middleman-End User" chain makes rare earths the "invisible lifeblood" of global supply chains.
2. Why the Sudden Surge? Policy Adjustments + Soaring Demand
In April 2025, China imposed export controls on seven types of medium and heavy rare earths, including samarium and terbium, causing exports of magnets to the U.S. to plummet by 82% in April-May. Yet, just two months later, exports rebounded sharply. This turnaround was driven by three factors:
First, targeted policy easing. China’s Ministry of Commerce expedited the approval process in June, prioritizing licenses for European automakers and Vietnamese processing plants while maintaining strict restrictions on U.S. military-industrial companies. For instance, German automaker Volkswagen resumed production after securing supplies of rare earth magnetic materials, while the production of U.S. F-35 fighter jets faced stagnation risks due to a shortage of samarium-cobalt magnets. This "differentiation strategy" alleviates international pressure while tightening control over critical U.S. military supplies.
Second, rigid demand from the global new energy revolution. In 2025, global sales of new energy vehicles exceeded 30 million, each requiring 2-5 kg of rare earth magnets. Wind power installation capacity grew by 40% year-on-year, with each permanent magnet turbine consuming one ton of rare earth oxides. Eighty percent of China’s exported light rare earths (praseodymium, neodymium) flowed directly into these sectors. As a worker from the Bayan Obo Mine in Inner Mongolia put it, "We’re not digging dirt; we’re digging the keys to the future."
Third, geopolitical stockpiling. With the U.S. tariff grace period nearing its end, companies rushed to place orders early to avoid additional tariffs of 10%-25%. Firms like South Korea’s LG Chem and Japan’s Sumitomo Electric even chartered planes to transport rare earths, fearing they would miss the "last bus." This panic buying further drove up short-term export volumes.
3. The Paradox of Rising Volume and Falling Prices: China’s Strategic Game
Despite soaring export volumes, rare earth prices fell. From January to July 2025, the value of China’s rare earth exports decreased by 23.3% year-on-year, creating a paradox of "rising volume but falling prices." This reflects China’s strategic intentions:
In the short term, China is ensuring global supply chain stability by easing exports of rare earths for civilian use. European automakers and Vietnamese processing plants can maintain production and avoid layoffs, indirectly reducing trade criticisms against China. Meanwhile, China continues to tightly control military-use rare earths (e.g., samarium-cobalt magnets), ensuring strategic resources are not used against its interests.
In the long term, China is transitioning from "selling raw ore" to "selling technology." Companies like Northern Rare Earth are no longer content with exporting raw materials; instead, they are directly exporting value-added products like neodymium magnet powder to Europe and rare earth catalysts to Japan. In 2024, Northern Rare Earth’s profits from high-value-added exports grew by 40%, proving that "technology exports" are more profitable than "resource exports." As a government report from Baotou stated, "We will make rare earths carry Chinese technology to the world."
4. The Rare Earth War Is Far From Over: What Cards Does China Hold?
Despite record export volumes, China’s control over rare earths is strengthening. Ninety percent of global rare earth refining relies on Chinese technology. Civil unrest in Myanmar reduced supplies of medium and heavy rare earths by 70%, and U.S. company MP Materials halted exports of rare earth concentrate to China, making domestic companies more reliant on local resources. More importantly, China is establishing a rare earth futures market, poised to control pricing power much like it does with oil.
The 2025 rare earth export surge is essentially China’s strategic "advance by retreating" in the global supply chain. When Japanese automakers use Chinese rare earths to build motors and U.S. missiles rely on Chinese-processed magnets, the outcome of this silent war is already clear.
The Essence of the International Competitive Advantage of the Rare Earth Industry is Cost Competitiveness
Rare earths, known as "industrial vitamins" and the "mother of new materials," hold an irreplaceable strategic position in fields such as new energy, energy conservation, environmental protection, and national defense. Although there are 17 rare earth elements, the one that contributes the most to the smelting and separation industry is praseodymium-neodymium oxide (PrNd oxide), accounting for about 80%, while terbium oxide and dysprosium oxide together account for about 10%. Any rare earth smelting and separation enterprise globally relies primarily on PrNd oxide for its output value and profit.
Recently, the rare earth market has become volatile again, possibly influenced by rumors circulating online about a whitelist for rare earth enterprises and verification of total control quotas: last Friday, the price of PrNd oxide jumped by 24,000 yuan in a single day, and today it jumped again by 29,000 yuan, approaching the 600,000 yuan/ton mark. Superficially, this appears to be a sign of a hot market, but for the entire industry chain, it represents both an opportunity and hidden risks. This article attempts to offer some views on this matter; corrections are welcome for any inaccuracies.
On one hand, history has proven that excessively high prices directly suppress downstream demand. The most typical example is the wind power industry. Rare earth permanent magnet direct-drive technology was once a landmark breakthrough for domestic wind turbine manufacturers. However, as rare earth prices continued to soar, leading companies like Goldwind had to adjust their strategies, shifting towards semi-direct drive and double-fed technologies to reduce their reliance on rare earths. On the other hand, excessively high rare earth prices provide breathing room and development opportunities for the overseas rare earth industry, thereby intensifying international competition and aiding the establishment of overseas rare earth supply chains.
If we examine the rare earth industry within a longer historical context, we find that: besides the advantage of resource endowment, the true international competitive advantage of China's rare earth industry is fundamentally the cost competitiveness achieved after technological breakthroughs. This is both the root reason why we were able to defeat competitors and dominate the international market, and the key to whether we can maintain this advantage in the future.
I. Cost Advantage Established China's International Dominance in Rare Earths
The rise of China's rare earth industry actually started with "cost."
(1) The Exit of the United States: Closing its Domestic Rare Earth Industry in 2002
In the 1980s, when China's rare earth industry was just beginning, the United States was still the absolute hegemon of the global rare earth industry. At that time, the US possessed the world-class rare earth resource, the Mountain Pass mine in California, and mastered the entire industry chain from mining and separation to application, once accounting for over 65% of global rare earth supply. This situation changed completely with the development of rare earth science and technology in China. Under the leadership of esteemed figures in the rare earth field such as Academicians Xu Guangxian, Zhang Guocheng, and Yu Yongfu, China successively broke through key technologies in rare earth beneficiation and separation. These innovations were widely applied in production practice, successfully breaking the long-term monopoly held by the United States and France in rare earth smelting and separation technology. This not only significantly improved the quality of China's rare earth products but also markedly increased production efficiency. Since the 1990s, Chinese enterprises, leveraging unique resource advantages, competitive labor costs, relatively lenient environmental policies, and continuously optimized smelting and separation technologies, have continuously reduced production costs. This series of advantages made it difficult for American companies to compete, ultimately ceding dominance of the global rare earth industry. By 2002, the US finally closed the Mountain Pass mine and exited the rare earth smelting and separation segment. The decline of the US rare earth industry was not due to resource depletion but resulted from losing to China's cost advantage.
(2) The Struggles of Australia's Lynas: Near Bankruptcy in 2016
The power of China's cost advantage can also be seen in the experience of Australia's Lynas. Lynas is the largest rare earth company outside of China, but its separation plant in Malaysia has been plagued by environmental controversies and immense financial pressure. By 2016, Lynas was in severe financial crisis, burdened with debt, and even publicly sought a buyer.
However, precisely in 2017, China initiated domestic crackdowns on illegal activities, stockpiling, and verification of total control quotas in the rare earth sector, leading to strengthened supply-side control and driving the price of PrNd oxide up to 520,000 yuan/ton. This rapid price increase, in turn, gave Lynas a temporary breather, allowing it to sustain operations. Had it not been for this price surge, Lynas might have already disappeared from the global rare earth landscape. With the recent price jumps, it feels like history is repeating itself.
Facts prove that China's cost advantage is not eternal; when prices become too high, it can inadvertently support overseas competitors. Today, Lynas has become the largest overseas competitor to China's rare earth industry.
II. The "Scissors Gap" Between Rare Earth Prices and the Industry Chain
The rare earth industry is a typical "tightly coupled upstream and downstream" industrial chain. Excessively high upstream prices often lead to hindered downstream innovation and even shifts in technological routes.
Taking wind power as an example, rare earth permanent magnet direct-drive technology was dominant between 2008 and 2015, considered an important direction for improving turbine reliability and efficiency. However, if rare earth prices remain high for an extended period, turbine manufacturers are forced to turn to alternatives. Now, Goldwind has significantly increased the proportion of double-fed and semi-direct drive products, indicating that out-of-control upstream prices are forcing downstream players to abandon the rare earth permanent magnet route.
This not only affects domestic demand absorption but also influences the global market's acceptance of rare earth permanent magnets. In other words, imbalances in rare earth prices not only harm downstream enterprises but also shake the overall international competitiveness of China's rare earth industry chain.
III. International Competitive Landscape: Cost Advantage and Policy Games
(1) Gradual Development of Overseas Resources
Over the past decade, the US, Australia, Canada, Vietnam, Greenland, and others have been actively relaunching their rare earth industries. Particularly, the US-led Mountain Pass mine restarted in 2017 with plans to build a supply chain independent of China.
The advancement of these projects often relies on two aspects: firstly, rare earth prices remaining relatively high, ensuring profitability; and secondly, government subsidies and policy support. This indicates that as long as prices are high enough, the overseas rare earth industry can survive and even grow.
(2) China's Cost Advantage Still Exists but is Narrowing
Even today, China still accounts for 70-80% of global rare earth smelting and separation capacity and possesses a complete application industry chain. However, with increasing environmental requirements, rising labor costs, and more internationalized capital markets, our cost advantage is narrowing.
Meanwhile, the international market is consciously supporting non-Chinese rare earth industries. For example, the US and Australia have signed strategic cooperation agreements, and Japan and South Korea are establishing long-term supply relationships with Lynas. This trend of "de-Sinicization" of the supply chain is essentially driven by concerns that China might use rare earth prices or supply as leverage.
IV. The Key to Maintaining the Competitive Advantage of China's Rare Earth Industry
If the victory of China's rare earth industry over the past 30 years relied on "cost competitiveness," then to maintain this advantage in the future, it must "build a synergistic advantage across the entire industry chain based on cost."
(1) Adhere to Supply-Demand Balance to Prevent Excessive Price Fluctuations
Excessively high prices both suppress downstream demand and incentivize overseas competition. Industrial policies that respect market laws should be formulated to help keep market prices within a reasonable range, avoiding a repeat of the 2011 scenario where prices skyrocketed and then plummeted.
(2) Further Reduce Costs Through Technological Innovation
Past cost advantages came more from labor and environmental cost differentials. The implementation of the "Rare Earth Industrial Pollutant Discharge Standards" in 2011 spurred a large number of green environmental technologies. In recent years, industry-wide environmental standards have generally improved, and correspondingly, environmental costs have also increased. In the future, we must rely on technological progress to sustain our advantage. For example:
Improve smelting and separation efficiency, reducing energy consumption and reagent usage.
Advance green smelting, reducing environmental management costs.
Promote material conservation and recycling in application segments like magnetic materials and alloys.
(3) Strengthen Upstream-Downstream Synergy to Form a Domestic Major Cycle Advantage
The value of rare earths lies not only in mineral resources but also in final applications. If upstream and downstream form a positive interaction, for instance through long-term supply contracts, coordinated industrial fund investments, etc., it can avoid the "scissors gap" – where profit maximization at the resource end squeezes the market space of the application end – and enhance competitiveness together.
(4) Create an Internationalized Industrial Layout
Facing international "de-Sinicization," we need to proactively go global. Through investment, joint ventures, and mergers and acquisitions, participate in overseas rare earth resource development and industry chain construction, turning competitors into partners, and incorporating overseas rare earths into our global layout.
V. Conclusion: Cost Advantage is the Foundation, Synergistic Innovation is the Future
Looking back over the past 30 years, the key reason China's rare earth industry transformed from a follower to a global leader lies in the cost advantage achieved after solving key technological problems. The US exit in 2002 and Lynas's financial crisis in 2016 are clear evidence of China's cost advantage.
But today, the situation has subtly changed. Excessively high prices frustrate domestic downstream industries and also provide living space for overseas competitors. If we cannot build a synergistic advantage across the entire industry chain on the basis of cost advantage, we may become passive in future international competition.
International competition in the rare earth industry is essentially about cost, but even more so about systems. Only by ensuring cost advantage while achieving technological progress, upstream-downstream synergy, and global layout can China's rare earth industry truly seize the initiative for the future.
Written in the end: Prices are determined by supply and demand. The jump in PrNd oxide prices indicates tightening supply. Currently, for production enterprises, the worst awkward predicament is that prices have gone up, but they have no goods on hand! China possesses the world's largest proven rare earth resources and the largest global rare earth smelting and separation capacity. Why is there suddenly a supply crunch? The reasons are presumably well understood by everyone. Imagine if imported ore is also brought under the total control plan management in the future, then the market would likely lose its self-adjusting elasticity. When demand grows, prices will inevitably rise. Pursuing profit maximization is the innate nature of enterprises, the internal driving force for their survival and development. From a national strategic perspective, the value of rare earths does not lie in how high the price of rare earth products is sold for, but in how well they are used. A rough estimate of the output value of the rare earth industry chain in 2024, from mines to functional materials like rare earth permanent magnets, is about 200 billion yuan, which is less than the output value of two steel companies, Baotou Steel Group and Ansteel Group. However, the output value of end-terminal industries that indispensable rely on rare earths, such as computer, communication, and consumer electronics (3C) products, new energy vehicles, wind power generation, energy-saving elevators, industrial robots, large-scale integrated circuits, drones, etc., exceeds 20 trillion yuan. Therefore, the formulation of macro policies for the rare earth industry must focus on the synergistic effects of the industry chain, rather than the gains and losses of rare earth price fluctuations.
Disclaimer: The content described in this article represents only personal views and analysis and does not represent the position of any official institution or specific enterprise. All data and information come from public channels, and every effort has been made to ensure their accuracy and timeliness. However, due to rapid market changes and information updates, the content of this article may contain deviations. The discussion of rare earth market price fluctuations and policy suggestions in this article is intended for reference only and does not constitute investment, decision-making, or market action advice. Readers should bear their own risks when making any decisions based on the content of this article and are advised to further consult relevant professionals.
Please provide criticisms and corrections for any inappropriate points in the comments section.
McKinsey: Demand for rare earths in magnets to triple
According to Mining.com, a report by McKinsey & Company predicts that the market for rare earth permanent magnets will expand threefold by 2035 as the energy transition accelerates, posing greater challenges to global supply.
Rare earth permanent magnets are currently the strongest magnets available for use in motors and wind turbine generators. These magnets typically require four rare earth elements as raw materials: neodymium (Nd), praseodymium (Pr), dysprosium (Dy), and terbium (Tb). The first two are the main components, while the latter two are additives used in more critical applications to enhance performance.
McKinsey estimates that although they account for only 30% of total rare earth production, rare earths used in permanent magnets represent 80% of the total value of the rare earth market.
Due to its significance in clean energy technologies, global rare earths used in magnets will increase from 59,000 tons in 2022 to 176,000 tons in 2035. McKinsey adds that the main driver of this growth is the strong increase in the penetration rate of electric vehicles, which is outpacing the substitution of copper wire coil magnets for rare earths. Another factor is the rapid development of renewable energy.
At the same time, supply could decrease by up to 30%. Geopolitical instability may exacerbate the shortage of rare earth supplies.
McKinsey warns that although countries around the world are striving to develop their own rare earth supply chains, it will be difficult to diversify the supply chain in the next 5 to 10 years. The long lead time for building new mining and processing facilities, environmental obstacles, and high costs make secondary resources such as recycling increasingly important.
Currently, over 80% of rare earth waste comes from parts in consumer electronics, electrical or internal combustion engine vehicles, all of which use smaller magnets for motors, brakes, and sensors.
However, McKinsey believes that by 2050, the increased use of magnetic rare earth elements in electric vehicles and wind turbines may lead to an expansion of waste sources. Pure electric vehicle drive systems, industrial motors, and wind turbines may generate similar amounts of waste rare earths, thereby providing a new and larger source of magnets that contain a higher proportion of valuable heavy rare earth elements.
McKinsey estimates that there are approximately 40,000 tons of pre-consumer waste rare earths, which come from the design and manufacturing stages of magnets, and approximately 41,000 tons of post-consumer waste rare earths, which come from various end-of-life products.
McKinsey believes that compared to the relatively concentrated distribution of pre-consumer waste rare earths, post-consumer waste rare earths are more geographically dispersed but more difficult to recycle.
McKinsey states that the recycling of post-consumer rare earth elements will require the specialized separation of magnets for further processing, a practice that is not currently adopted in the existing recycling value chain, which focuses on high-value or high-volume materials such as gold and copper or aluminum and steel.
Research from overseas think tanks: How will the rare earths dispute between China and the US evolve?
Since the Ministry of Commerce of China, in conjunction with the General Administration of Customs, issued the "Decision on Export Control of Certain Items of Medium and Heavy Rare Earths", the global supply chain has been shaken. China and the US have been continuously engaged in a rare earths game. The US has even attempted to use the "trade lifting of bans" on ethylene, EDA, and aircraft jet engine parts, etc., to get China to be lenient on rare earths. At the same time, to reduce its reliance on the Chinese rare earths market, the US government has begun to promote the domestic development of the rare earths industry chain, supplemented by joint development with multiple countries and regions to increase the diversity of rare earths resources supply.
How do these changes affect the rare earth competition between China and the United States? How will other countries and regions respond to China's rare earth control measures? This article selects analyses from multiple authoritative think tanks to explore the current situation and development trends of the global rare earth industry.
Beyond the agreement, uncertainties remain
On June 11, 2025, the Center for Strategic and International Studies in the United States released "Trump Reached Agreement to Restore Rare Earth Supply Channels". The article stated that the China-US economic and trade negotiation agreement includes China's resumption of rare earth and magnet exports to the United States. This event highlights the importance of rare earth raw materials to the US economy and China's dominant position in the global key mineral supply chain.
In April 2025, China imposed export restrictions on seven rare earth elements, directly impacting the global supply chain. This crisis exposed the high degree of dependence of Western countries on China in key mineral sectors. Although a 90-day tariff truce agreement was reached between China and the United States in May, the delay in administrative approval led to a slow recovery in actual supply. American car manufacturers were particularly affected - the Ford Chicago plant was shut down for a week, and many European automotive suppliers were forced to halt production. Japanese Suzuki even suspended the production of the Swift model.
In the new framework reached in the London negotiations in June, although China committed to resuming some rare earth supplies, this was merely a temporary measure. In the long run, the US should accelerate efforts to reduce its reliance on China's heavy rare earths. Data shows that the production capacity of MP Materials in the US for neodymium iron boron magnets in 2025 is only 1,000 tons, which is less than 1% of China's production in 2018. This highlights that the process of achieving supply chain autonomy is arduous.
The US strategy for breaking through focuses on two directions: One is to achieve diversification of the rare earth supply chain through Australia. The country's production of rare earth oxides is planned to triple within three years. After the Arafura Rare Earths Limited starts production next year, it is expected to account for 4% of the global demand for neodymium and praseodymium by 2032. The other is that in its "Defense Industry Strategy", the US states that it aims to establish a "mine-magnet" full industrial chain by 2027.
The supply and demand dynamics in the rare earth market are intertwined with geopolitics.
On May 31, 2025, the International Energy Agency released the latest "2025 Global Critical Minerals Outlook". The report indicates that in 2024, the global demand for major energy minerals saw a strong growth. The continuous expansion of battery power and new energy infrastructure led to a nearly 30% increase in lithium demand, while nickel, cobalt, graphite and rare earths maintained a high growth rate of 6% to 8%.
The report indicates that the potential shortage of copper and lithium is the most decisive. Although the overall supply of energy minerals seems abundant in the short term, both copper and lithium will face severe shortages in the medium and long term: by 2035, the primary copper shortage may reach 30%, and the lithium shortage may also approach 40%. Once the shortages materialize, it will increase the cost of downstream products, forcing new energy and industrial projects to postpone or reduce their scale, thereby slowing down the global process of achieving net zero goals.
The report states that strategic mineral resources that underpin the new energy and high-tech industries are facing multiple market risks. Firstly, due to the small scale of the market and limited transparency, the key mineral markets are prone to price fluctuations. According to statistics, among the 20 strategic minerals, 75% have a higher price volatility rate than crude oil, and half exceed that of natural gas. Secondly, trade restrictions affect the key mineral markets. A series of recent export control policies have increased market uncertainty. Moreover, the highly concentrated supply (especially in the refining and processing stages) amplifies the risks: China dominates the refining capacity of 19 out of the 20 strategic minerals, accounting for an average market share of approximately 70%. Additionally, minerals such as tantalum, titanium, and vanadium either lack feasible alternatives or require a compromise between cost and performance.
The report also mentions that although technological innovation (such as AI exploration, DLE, and tailings reutilization) can enhance efficiency, it is difficult to mitigate geopolitical risks; likewise, policy support (tax incentives, price differentials, long-term purchase and sale agreements) will not form a sustained driving force without the availability of practical technologies. Therefore, "technology and policy" collaboration is necessary to break the reliance on a single approach. By providing loan guarantees, strategic reserves, and simplified approval processes from the government and international organizations, and by providing targeted support for efficient technology projects, it is possible to both introduce new production entities and ensure that these entities operate stably under both policy and market safeguards.
The United States currently lacks a suitable alternative supply chain.
The Center for Strategic and International Studies of the United States released "The Consequences of China's New Restrictions on Rare Earth Exports" on April 14th, stating that China's practice of restricting the export of seven types of rare earth elements has caused a huge stir in the international market, especially in the relevant industries of the United States.
The US defense technology sector was the first to be impacted. From the perspective of procurement, the restrictions have brought about threefold effects. Firstly, during the establishment of the licensing system, export activities were temporarily suspended, disrupting the stable procurement rhythm of US enterprises. Secondly, 16 US defense and aerospace enterprises were included in the export control list, significantly increasing the risk of supply chain disruption. Thirdly, the dynamic licensing system has prompted countries to seek cooperation with China. If US enterprises fail to adapt in time, they may lose their advantages in international competition.
The United States is also extremely vulnerable in the supply chain of rare earths. China has long held 99% of the global market share for processing rare earths. The only Vietnamese refinery that can provide a small amount of output has been out of production for a year due to tax disputes. This makes the United States highly dependent on China for rare earth supply. This restriction on heavy rare earths directly targets the core of the US supply chain. Currently, the United States does not have the ability to separate rare earths. By the end of 2025, MP Materials, funded by the Pentagon, can only produce 1,000 tons of NdFeB magnets annually, while China was already able to produce 138,000 tons of NdFeB magnets annually in 2018; in 2024, MP Materials announced an output of 1300 tons of oxide NdPr, and China produced approximately 300,000 tons of NdFeB magnets in 2018. Although the United States has relevant development plans, they are far from the target. Although the Department of Defense has invested over 439 million US dollars (approximately 3.18 billion yuan) to build the domestic supply chain, the related facilities will not be able to meet the defense needs until 2027.
Rare earth elements are of great significance to the national security of the United States. In defense technologies, numerous key equipment such as the F-35 fighter jet, Virginia-class and Columbia-class submarines, and "Tomahawk" missiles all extensively utilize rare earth elements. An F-35 fighter jet contains over 900 pounds of rare earth, and a Virginia-class submarine requires approximately 9,200 pounds. The United States already has a disadvantage in the manufacturing of defense technologies, and if China restricts the import of key minerals, it will rapidly widen the military capability gap between China and the United States.
When it comes to seeking alternative suppliers for international cooperation, although many countries have plans and investments for developing rare earth resources, currently China still holds a dominant position in the heavy rare earth refining process. Although Australia has been striving to develop the Browns Range mine to make it a production base for dysprosium, it still needs a lot of work in terms of processing and refining capacity construction, and will still rely on China's oxide refining technology at least until 2026. The article points out that the United States needs to strengthen cooperation with other countries and accelerate the overcoming of the technical knowledge gap in rare earth separation and processing.
Africa may become the next main battlefield for competition between China and the US
The report "How China and the US Invest in Key Minerals" released by the Stimson Center points out that in the current situation where global demand for key minerals is surging and geopolitical situations are complex and volatile, the competition between China and the US in the field of key minerals in Africa has become increasingly prominent.
From the perspective of investment scale, in 2023, through the "Belt and Road Initiative", China's total economic participation in Africa reached 21.7 billion US dollars (approximately 155.689 billion yuan), among which the investment in key mineral projects was approximately 8 to 10 billion US dollars; while the United States invested 7.4 billion US dollars (approximately 53.025 billion yuan) in Africa that year, with key mineral investment being only about 300 million US dollars. China's investment in key minerals in Africa was far greater than that of the United States.
The goal of the green energy transition has driven China's demand for key minerals. As a signatory to the 2030 Sustainable Development Goals, China has vigorously developed clean technologies, resulting in a significant increase in demand for key minerals. Policies such as the "New Energy Vehicle Industry Development Plan (2021-2035)" and the "New Three Goods" economic growth drivers have prompted enterprises to strengthen the supply chain of key minerals. Africa has become an important supply source. For instance, nearly 90% of China's cobalt is imported from the Democratic Republic of the Congo. The United States, aiming to reduce its reliance on key minerals from China and ensure national security, urgently needs to diversify the supply chain of key minerals. Africa has become an important partner for it.
In terms of investment projects, China has made extensive deployments in key mineral industries in Africa. In 2023, copper-related projects in the Democratic Republic of the Congo were valued at over 2 billion US dollars (approximately 143.31 billion yuan), in Botswana it was nearly 2 billion US dollars, and there were also large-scale projects such as lithium mining in Mali and Zimbabwe. At the same time, China is a global center for the import, refining, and processing of key minerals. It accounts for 85-90% of global rare earth element refining and processing. In terms of key mineral exports in Africa, China is the largest importer of many minerals, such as 72% of cobalt and 28% of graphite. The two sides have formed a mutually dependent relationship.
The United States, through institutions such as the International Development Finance Corporation (DFC), has invested in multiple projects in Africa to strengthen key mineral supply chains. For instance, it invested in the "Lobito Railway Corridor Project". It also signed memorandums of understanding with countries like Angola and Zambia. When providing funds, DFC emphasizes cooperation with the private sector and highlights environmental, social, and governance (ESG) standards. This contrasts with the model used by China, where state-owned enterprises play a leading role, investment is driven by the state, and it often faces criticism due to ESG compliance issues.
Looking ahead, the new Trump administration's stance on the critical mineral supply chain in Africa remains unclear. Although they have the intention to obtain critical minerals, such as proposing cooperation with Greenland and discussing the acquisition of minerals with Ukraine, there is still uncertainty regarding whether they will continue the measures of the Biden administration in their diplomatic and economic engagement with Africa. China is expected to continue to expand its participation in the critical mineral sector in Africa. The role of Africa in the US's critical mineral supply chain is full of uncertainties, and the competitive situation between China and the US in the critical mineral sector in Africa will continue and may evolve.
Europe: An Important Variable in the Competition for Rare Earths between China and the US?
On April 17, 2025, the China-Europe Policy Analysis Center released the report "Rare Earth Minerals: China + Tariffs = Crisis". The article states that recently, China suspended the export of six types of rare earth minerals, posing a severe challenge to Western industries. Between relying on Chinese supply and seeking solutions independently, the West is at a crucial crossroads.
In response to the scarcity situation caused by China's restrictions on rare earth exports, Europe has focused on developing new technologies and production capacity for recycling. The "Critical Raw Materials Act" was thus born, setting targets for domestic mining, processing and recycling, and reducing reliance on a single supplier. The European Commission has launched 47 strategic projects in 13 member states to promote the all-round development of key minerals.
In practice, a number of enterprises and projects dedicated to rare earth recycling have emerged across Europe. Heraeus Remloy in Germany has built the largest rare earth magnet recycling plant in Europe, aiming to significantly increase production capacity to meet over 30% of the new magnet demand in Europe; Carmag in France has constructed a large-scale recycling facility, with the goal of recycling a large amount of rare earths and producing considerable amounts of heavy rare earth oxides annually; Ionic Technologies in the UK has developed a patented process to recover key elements from decommissioned equipment; Hydrometal in Belgium utilizes its expertise to recycle rare earth elements subject to export restrictions from China; NeoPerformanceMaterials in Estonia and RarEarth in Italy focus on the recycling of electric motors. These efforts aim to build a comprehensive circular economy strategy, reduce reliance on imports, and enhance the resilience of Europe in the field of rare earths.
In summary, China will continue to dominate global rare earth supply in the short term. However, in the medium and long term, it will also face multiple challenges: On one hand, as other countries accelerate production and technological breakthroughs, and as the international community's ability to replace and recycle strategic minerals continuously improves, China's market share may be squeezed; on the other hand, export control countermeasures and geopolitical frictions may also increase industry uncertainty. China not only needs to accelerate the improvement of its long-term resource development and technological innovation layout, but also should strengthen the supervision and crackdown on rare earth smuggling, improve the transparency of the industrial chain, in order to ensure supply chain security and consolidate its industry leadership position.
