Commentary: Why China’s Rare Earth Dominance Matters More Than Ever
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Rare earth elements, often described as “industrial vitamins” of modern technology, are critical to industries ranging from renewable energy and precision manufacturing to national defense. China holds a commanding position in this field, thanks to its dominance in global reserves and a uniquely comprehensive industrial ecosystem.
According to 2023 data from the U.S. Geological Survey, China accounts for the world’s largest proven reserves of rare earth oxides — 44 million tons, or 49% of the global total. More importantly, it is the only nation with a fully integrated supply chain for all 17 rare earth elements, covering everything from mining and processing to refining and advanced applications.
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- China controls 49% of global rare earth reserves and has the only fully integrated supply chain, solidifying its dominance through industry consolidation, export controls, and technological innovation.
- International rare earth markets are impacted by China’s policy shifts, with global price premiums rising and major producers outside China like Lynas reducing output; the EU and U.S. face significant supply and capability gaps.
- China is moving up the value chain in rare earths, increasing advanced exports and international cooperation, despite risks from supply sources and emerging technologies that could reduce demand.
Rare earth elements (REEs), described as the “industrial vitamins” of modern technology, are indispensable in sectors such as renewable energy, precision manufacturing, and national defense. China plays a dominant role in this industry due to its extensive reserves and a uniquely integrated supply chain spanning mining, processing, refining, and advanced applications for all 17 rare earth elements [para. 1][para. 2]. According to 2023 data from the U.S. Geological Survey, China holds 44 million tons of rare earth oxides, representing about 49% of the global total—the most of any country [para. 2]. This advantageous position places China at the heart of global technological competition and ensures robust supply chain security [para. 3].
In recent years, China has enacted sweeping policy overhauls to further consolidate its control over the REE sector. Since the 2021 establishment of China Rare Earth Group, China’s industry became significantly more concentrated, with the top ten firms (CR10) increasing their market share from 62% to 88% by 2024. The market is now split regionally: Baotou in Inner Mongolia leads in light REEs, while Jiangxi province focuses on medium and heavy REEs [para. 4]. Simultaneously, China tightened export controls, notably imposing export restrictions on gallium and germanium in 2023. This drove export prices of praseodymium-neodymium oxide up by 47% year-on-year and reduced export quotas for critical minerals like dysprosium and terbium by 30%. Despite these constraints, exports of value-added products such as NdFeB permanent magnets surged by 28% [para. 5].
China’s regulatory framework evolved further in 2024 with the implementation of the Rare Earth Management Regulations. These regulations established a full-lifecycle traceability system and green standards for mining and recycling. Twelve technical specifications were set to support the industry’s shift from rapid growth towards precision oversight [para. 6]. Technological innovation underpins these reforms; for example, a pilot at Jiangxi University of Science and Technology achieved an 85% recovery rate in environmentally friendly metal extraction, 20 percentage points above traditional methods. Bayan Obo mine initiated a thorium-based molten salt reactor to process 5,000 tons of radioactive waste annually, and rare earth recyclers received 2.3 billion yuan ($320 million) in subsidies, with recovered magnetic waste surpassing 40,000 tons from January to September 2024 [para. 7]. These changes have increased the global price premium for medium-heavy REEs and strained competitors like Malaysia’s Lynas, whose production dropped 40% due to regulatory challenges [para. 8].
The U.S., in contrast, faces major structural challenges. Its NdFeB magnet inventories would last only 42 days in a wartime scenario, and while companies like MP Materials have made progress, they still rely on China for advanced processing. Shortages have impacted key technological production, such as Tesla’s Gigafactory, which reduced output due to material shortage [para. 10]. Supply security issues persist, with defense projects delayed and domestic resource expansions hindered by legal and financial obstacles. The Department of Energy’s $1.8 billion Rare Earth Initiative has yielded limited results, and recycling initiatives remain costly and insufficient compared to demand [para. 11][para. 12].
China’s rare earth industry is rapidly upgrading with smart manufacturing platforms and integrated “mine-to-motor” business models, resulting in higher profit margins and a shift towards exporting value-added products, which in 2024 overtook raw material exports for the first time [para. 14]. International cooperation is expanding and China is increasingly setting industry standards globally [para. 16]. Despite some risks, such as dependence on imports from politically unstable regions and technological shifts potentially reducing demand for certain REEs, China’s comprehensive approach positions it for sustained leadership in the global rare earth economy [para. 17][para. 18][para. 19].
- China Rare Earth Group Co. Ltd.
- China Rare Earth Group Co. Ltd. was established in 2021 as part of Beijing’s efforts to consolidate control over the rare earth sector. It plays a key role in forming a north-south duopoly in China’s industry, enabling comprehensive integration from mining to advanced applications. The company has also expanded internationally, including a supply deal with Kazakhstan, and its leadership has been instrumental in shaping global standards and policies surrounding rare earth elements.
- Baotou
- Baotou, located in Inner Mongolia, is a key hub for China’s rare earth industry, focusing on light rare earth elements. As part of China’s north-south duopoly in the sector, Baotou is home to major companies like China Northern Rare Earth (Group) High-tech Co. Ltd., which has launched the world’s largest smart manufacturing platform for rare earths, enabling real-time adjustment of 16 elemental compositions.
- Ganzhou
- The article mentions Ganzhou in the context of the U.S. rare earth industry, noting that MP Materials Corp., despite completing its neodymium praseodymium (NdPr) oxide production line, still relies on Ganzhou, China, for terbium purification. This highlights Ganzhou's ongoing importance in the global rare earth supply chain, particularly for advanced processing and separation of specific rare earth elements like terbium.
- Lynas
- According to the article, Lynas, the world’s largest rare earth processor outside China, cut its production by 40% in 2024 due to non-compliant thorium processing in Malaysia. This reduction contributed to a rise in China’s export price of praseodymium-neodymium oxide.
- MP Materials Corp.
- MP Materials Corp. is a U.S.-based rare earth company that completed its neodymium praseodymium (NdPr) oxide production line. However, it remains reliant on China’s Ganzhou region for terbium purification. Despite its progress, the broader U.S. rare earth sector, including MP Materials, faces significant challenges in reducing dependence on China and securing a fully domestic supply chain.
- Tesla
- According to the article, Tesla’s Gigafactory in Austin, Texas, reduced the operating rate of its 4680-battery line to 65% due to shortages of magnetic materials. Additionally, Tesla’s recycling pilot yielded only 150 tons of magnetic materials per million electric vehicles, which is far below the annual U.S. demand gap of 2,000 tons.
- Lockheed Martin
- According to the article, Lockheed Martin postponed delivery of its fifth batch of F-35 jets by six months due to shortages of dysprosium, a critical rare earth element. This highlights the impact of rare earth supply constraints on the U.S. defense industry and the vulnerability of key military programs to disruptions in rare earth material availability.
- USA Rare Earth
- USA Rare Earth experienced a significant financial decline, with its net present value dropping from $1.2 billion to $370 million due to cost overruns. The company faces high costs in its operations, exemplifying broader financial and structural challenges in the U.S. rare earth sector.
- Urban Mining Co.
- Urban Mining Co. is involved in magnet recycling in the U.S., with support from the Department of Energy. However, its recycling process is currently costly, reaching $85,000 per ton—three times higher than the cost of producing new (virgin) materials. This high expense highlights the significant financial challenges faced by U.S. efforts to build a viable domestic rare earth magnet recycling industry.
- China Northern Rare Earth (Group) High-tech Co. Ltd.
- China Northern Rare Earth (Group) High-tech Co. Ltd., based in Baotou, has launched the world’s largest smart manufacturing platform for rare earths. This platform enables real-time adjustment of 16 elemental compositions, highlighting the company’s innovation and advancement up the value chain in China’s rare earth industry.
- Xiamen Tungsten Co. Ltd.
- Xiamen Tungsten Co. Ltd. pioneered an integrated “mine-to-motor” production model in China’s rare earth industry, significantly enhancing value-added processes. This approach raised profit margins on servo motors to 41%. The company exemplifies China’s move up the value chain by combining mining, processing, and advanced manufacturing within a single business model, contributing to the country’s leadership in rare earth deep processing and high-tech applications.
- Toyota
- According to the article, Toyota has debuted a prototype electric vehicle that uses a heavy rare earth-free motor. This development is accelerating demand for alternatives that require less or no dysprosium and terbium, both considered critical heavy rare earth elements.
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