Rare earth elements (REEs) comprise a family of 17 metallic elements, including the 15 lanthanides, as well as scandium and yttrium. Despite their name, most are relatively common in Earth’s crust; they’re “rare” only because economically viable deposits are scarce. REEs have unique magnetic, catalytic, and luminescent properties. They are vital in modern technology: for example, neodymium (Nd) and praseodymium (Pr) are used in powerful permanent magnets for electric motors and wind-turbine generators, while dysprosium (Dy) and terbium (Tb) make those magnets heat-resistant.
Other examples include cerium in auto catalytic converters and europium in energy-efficient lighting. Even though each device may use only tiny amounts of these metals, without them, many technologies would not work. REEs are components in over 200 products – from smartphones and computer hard drives to lasers, guided missiles, and F-35 fighter jets.
China’s Dominance in the Rare Earth Supply Chain
For decades, China has dominated the global rare-earth supply chain. By the late 2000s, it came to produce over 90–97% of the world’s rare earth oxides. Today, China still controls roughly 60–70% of mined output and an even larger share of processing capacity. According to the International Energy Agency, China is the leading supplier of refined rare earths – in 2024, about 90% of global rare earth refining was done there. In particular, China has built a near-monopoly on the processing of “heavy” rare earths like dysprosium and terbium. Until 2023, China accounted for approximately 99% of all heavy-REE separation worldwide, thereby gaining practical control over the supply. (A small plant in Vietnam had begun processing heavy REEs, but it was shut down in 2022, temporarily consolidating China’s grip.)
China’s dominance stems from decades of low-cost production, lax environmental rules, and state support. It set up a national quota and licensing system (which it tightened in 2025) to manage output. In practice, China’s government issues annual mining and processing quotas to a few state-owned firms, effectively controlling how much REE material enters the world market. In mid-2025, China quietly issued its 2025 rare earth mining and smelting quotas – traditionally a public announcement – signalling concern about global demand and trade tensions.
State consolidation has also limited competition: by 2024, only two Chinese conglomerates (China Rare Earth Group and China Northern Rare Earth Group High-Tech) qualified for most quota allocations. These policies, combined with China’s vast processing capacity, give Beijing enormous leverage. In 2024, the Chinese government added several REEs and related magnetic alloys to its export control list, cutting off supplies and even forcing some foreign automakers to suspend production because they lacked magnets.
Diversifying: Responses by the US, Australia, Europe, and Japan
Aware of the risks, the United States, its allies, and other producers are racing to diversify rare-earth supply chains.
United States
Until recently, the US had no domestic heavy-REE refining and relied almost entirely on imports. The government has poured hundreds of millions of dollars into building a homegrown industry. For example, the U.S. Department of Defence (DOD) aims to establish a complete “mine-to-magnet” domestic supply chain by 2027. Since 2020, it has committed over $400 million in grants and contracts. One result is MP Materials’ Mountain Pass mine in California, which is receiving DOD funds to build separation and refining facilities. MP Materials reported record production of about 1,300 tons of neodymium-praseodymium oxide in 2024.
The DOD also funded Lynas Corp’s new U.S. subsidiary (Lynas USA) to build REE processing plants. By early 2025, a new private firm (USA Rare Earths) even produced a sample of high-purity dysprosium oxide from Texas ore. These projects are early-stage and volumes remain small – by late 2025, MP Materials expects to make only ~1,000 tons of NdFeB magnets, which is less than 1% of China’s annual output – but they mark the first steps toward reducing U.S. dependence on imports.
Australia
Australia is the world’s second-largest rare-earth producer and the largest outside China. It’s Mount Weld mine (run by Lynas) supplies mixed carbonate to processing plants in Malaysia and (recently) Australia. Lynas has invested heavily in new capacity: by 2025, it will produce separated dysprosium and terbium oxides in Malaysia, making it “the world’s only commercial producer of separated heavy rare earth products outside China”. Lynas is also building a major U.S. processing facility in Texas (with $258 million in U.S. funding) that aims to produce thousands of tons per year of heavy and light REE products. Other Australian ventures include Iluka Resources’ new Eneabba refinery (processing heavy REEs) with about A$1 billion in support, and Northern Minerals’ Browns Range project (aimed at dysprosium production). However, Australia currently must ship much of its output to China for final refining. For example, Australia’s Lynas is still sending oxides to China, and experts expect Australian processing to remain partly China-dependent at least until 2026.
Europe
The European Union has launched programs to develop REE refining. Belgian chemical firm Solvay has opened a separation line in France, targeting permanent-magnet oxides by 2025. In the UK, Less Common Metals (LCM) is now producing rare-earth alloys and has joined a European consortium (Supreemo) to build a complete REE supply chain. The EU is also funding recycling and extraction R&D. For example, France’s Carester aims to recycle thousands of tons of magnets per year for reuse.
Japan
Japan, lacking domestic REE deposits, has focused on partnerships and technology. It maintains a world-class magnet industry (companies like Shin-Etsu, TDK) and supports R&D in extraction. Japan’s Muroran Institute of Technology runs a Rare Earth Research Centre, including a joint venture in Vietnam for processing. In July 2025, Japan agreed with the EU on a strategic rare-earth procurement alliance to “pivot away from China-dominated supply chains,” highlighting critical minerals as a shared concern. Japan is also pushing urban mining: one firm claims ~96% recovery of REEs from used magnets.
Other initiatives
The so-called “Quad” countries (U.S., Japan, Australia, India) are also exploring coordination. India recently negotiated critical minerals partnerships with Chile and Peru, and Canada unveiled a C$4 billion plan for new mines. Even resource-rich countries like Brazil, Vietnam, and Greenland are entering the market. In mid-2025, Brazil, for example, expanded REE exploration and signed off-take deals with foreign automakers. Together, these efforts aim to build alternate supply lines outside China (often with government finance and policy backing) to ensure raw materials for emerging green industries.
International cooperation is rising to break China’s rare-earth monopoly. In July 2025, Japan and the EU announced a formal partnership on critical minerals, pledging joint R&D and procurement strategies to secure REE supplies and reduce reliance on Chinese sources. This and similar alliances acknowledge that rare earths are strategic resources – the “invisible infrastructure” of modern economies.
Geopolitics of Rare Earth Elements – Tensions and Supply Risks
Rare earths have already become a tool of geopolitical bargaining. In 2010, China briefly halted REE exports to Japan amid a diplomatic row, causing global prices to spike over 1,000% and sounding alarm bells about supply risk. More recently, U.S.–China trade frictions have prompted export curbs on both sides. In April 2024 (amid the Trump administration’s tariff fight), China’s commerce ministry imposed licensing requirements on seven REEs and related magnets – particularly heavy elements used in defence and renewable energy – requiring special permits for exports. This caught some U.S. companies off guard and signalled that Beijing is prepared to wield rare earths as leverage. In turn, U.S. authorities have added Chinese state firms to sanction lists and accelerated strategies to “reshore” critical minerals.
China’s recent export controls are more nuanced than an outright ban, but they can still disrupt production. For example, after new licensing rules in 2024, some automakers reported production halts due to magnet shortages. Beijing also quietly tightened quotas and technology rules: in late 2023, it banned exports of specialised REE extraction and separation technology, and in 2024, it raised mining quotas only with little notice. These steps, framed as environmental protection, underscore a broader trend of resource nationalism. They create uncertainty for foreign manufacturers and encourage countries to stockpile or accelerate domestic projects.
Recent Developments (2023–2025)
Several notable developments have occurred in the last two years:
- New Production and Processing: In Australia, Lynas Rare Earths achieved a milestone in May 2025 by producing its first dysprosium oxide at its Kuantan, Malaysia plant. This made Lynas the only company outside China to commercially separate heavy REEs (Dy, Tb). Lynas is now planning to add terbium production and is building a second processing plant in Seadrift, Texas – backed by a $258 million U.S. defence grant – to supply both light and heavy REE products to U.S. industry. In Europe, Belgian Solvay started a new separation line in La Rochelle, France, aiming to begin rare-earth oxide production for magnets by 2025. Norway’s REEtec (a subsidiary of Swedish LKAB) is slated to open a commercial separation plant by 2025. In Africa, companies are advancing projects in Malawi (Lynas’ mine), Madagascar, and South Africa, seeking to bring new REE concentrates to market.
- Recycling and Substitution: Recycling of permanent magnets and electronics (“urban mining”) has gained attention. Japan’s Mitsubishi Materials reported nearly 96% recovery of REEs from used hard-disk drives and magnets. The EU is funding recycling pilots (for example, France’s Cyclic Materials is recycling magnets into raw oxides, supplying Solvay). Researchers are also exploring novel sources: studies suggest extracting REEs from coal waste or geothermal brines, though these remain experimental. Work continues on magnet alternatives (like iron-nitride magnets), but so far, NdFeB-type magnets have no equal in performance, so REEs remain indispensable.
- Market Trends: Global production is rising. The USGS estimated world REE mine output reached roughly 350,000 metric tons in 2023. (Preliminary data suggest even higher production by 2024, as new mines come online.) Despite this, most growth has flowed through China’s industry: over 90% of the increase in refined REE supply since 2020 came from China. Prices have been volatile – in mid-2025, rare-earth ore and oxide prices were higher than five years earlier – but not yet reaching the extreme spikes seen in 2011. Analysts warn that if new supplies fail to keep pace with demand, prices could accelerate again.
Implications for Power and the Green Transition
Control of rare earths is shaping global power dynamics. Countries that secure reliable REE supplies gain an advantage in both industrial competitiveness and defence. China’s success has given it leverage in technology and green industries, which has prompted a geopolitical pushback. The U.S. and its allies now view critical mineral supply chains as a matter of strategic security. The result is a fundamental realignment: supply chains are being built with trusted partners and financial support, and strategic stockpiles or “alliance procurement” agreements are emerging.
In the broader context, rare earths are the new energy minerals. Just as oil once underpinned 20th-century geopolitics, rare earths (along with lithium, cobalt, etc.) are at the heart of 21st-century industry. The urgent goal of decarbonization – with billions of EVs, wind turbines, and electronic devices – effectively hands influence to those who control these inputs. If Chinese firms maintain dominance, it could give China disproportionate influence over the pace of green technology adoption worldwide. Conversely, accelerated diversification and recycling could democratise the green revolution and reduce vulnerability. In any case, the geopolitics of REEs will remain central to international economics: nations are rethinking trade and investment rules to favour “secure” sources, and new multilateral forums are forming to coordinate critical-mineral policies.
In summary, rare earth elements are far more than obscure minerals. They are indispensable for modern electronics, renewable energy systems, and advanced weapons, and thus have become a focal point of international competition. The next few years will be crucial: if alternative mines, processing plants, and alliances successfully scale up, global reliance on China could diminish. If not, the balance of technological power may tip in China’s favour. Either way, understanding rare-earth supply chains is essential to grasping 21st-century economics and the future of the green transition.
Article by Sruti Bhaumik