On April 4, 2025, China announced its decision to impose export control on seven rare earth elements, essential for military and technological uses in retaliation to Donald Trump’s increase in tariffs on Chinese goods.
China is a dominant player in the market, producing around 80-90% of the world’s rare earths. China has expertise in refining and processing, not just mining and fulfils 85-95% of global demand. It has major REE deposits in Jiangxi, Guangdong, Hubei, Sichuan, and Inner Mongolia, where they have been declared as “strategic minerals” since the 90s.
China currently supplies 90% of the rare earth magnets used in electric cars, drones, robots, missiles, and spacecraft.
China has the world’s largest rare earth reserves (44 million metric tons) and is the leading producer of rare earth elements, followed by Brazil (21 million metric tons) and Russia (3.8-10 million metric tons). India, with 6.9 million metric tons of REEs is also a notable player in the rare earth market. Apart from the above, Vietnam, Australia, the United States, Greenland, Tanzania and South Africa are some of the emerging players in the rare earth market
What are rare earth elements (REEs)?
Rare earth elements (REEs) are a group of 17 chemical elements that are crucial for various high-tech applications. The 17 rare earth elements include: Scandium (Sc), Yttrium (Y), Lanthanum (La), Cerium (Ce), Praseodymium (Pr), Neodymium (Nd), Promethium (Pm), Samarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Holmium (Ho), Erbium (Er), Thulium (Tm), Ytterbium (Yb) and Lutetium (Lu).
However, despite their name, not all REEs are rare in terms of availability and abundance, but are difficult to extract and process because of their geochemical properties. Rare earth elements (REEs) are called “rare” due to historical and geological reasons. The term “earth” in Rare earth elements (REEs) is because they were initially discovered in oxide forms. Paradoxically, despite being called “rare,” some REEs are more abundant in the Earth’s crust than certain other elements.
It is quite a challenge to extract and process the REEs because of their low concentrations and complex separation process.
- REEs are dispersed throughout the Earth’s crust
- REEs are often found in low concentrations, requiring large amounts of ore to be processed to obtain significant quantities
- Separating individual REEs from each other is a complex and costly process due to their similar chemical properties.
Rare earth extraction is a complicated process including: mining – rare earth minerals are extracted from open-pit or underground mines, crushing and grinding – ore is crushed and ground into a fine powder, flotation – minerals are separated using flotation techniques, chemical processing -rare earths are extracted using chemical methods like solvent extraction or precipitation and separation-individual rare earth elements are separated using techniques like ion exchange or chromatography.
The extraction process can be complex and environmentally challenging due to:
- Low concentrations: Rare earths are often found in low concentrations.
- Toxic byproducts: Extraction and processing can generate toxic waste.
- Environmental concerns: Mining and processing can impact local ecosystems.
These challenges in extraction and processing make them valuable and highly sought after for various high-tech applications. The unique properties of REEs make them essential for many modern technologies. REEs are used in various applications, including: Electronics (e.g., smartphones, displays and other electronic components), Renewable energy (e.g., wind turbines, solar panels), Electric vehicles and renewable energy systems, advanced ceramics and glass, Catalysts, medical devices (e.g., MRI machines), and defence technologies (e.g., missiles, drones, radars and other military equipment). Rare Earth Elements are important components in over 200 products, including consumer electronics, electric vehicles, defence systems, and electric vehicles.
What are rare earth elelments used for?
Effectively immediately, exporters in China will have to obtain a license for exporting the following controlled items, as well as their oxides, alloys, compounds and mixtures:
Samarium (Sm): Used in magnets, lasers, and nuclear applications. These include metallic samarium and samarium-containing alloys (e.g., samarium-cobalt alloys), samarium oxide and its mixtures, and compounds and mixtures containing samarium.
Gadolinium (Gd): Used in magnetic resonance imaging (MRI) machines, nuclear reactors, and some speciality glasses. These include metallic gadolinium and gadolinium-containing alloys (e.g., gadolinium-magnesium alloys), gadolinium oxide and its mixtures, and compounds and mixtures containing gadolinium.
Terbium (Tb): Used in fuel cells, magnets, and lighting. These include metallic terbium and terbium-containing alloys (e.g., terbium-cobalt alloys), terbium oxide and its mixtures, and compounds and mixtures containing terbium.
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Dysprosium (Dy): Used in magnets, nuclear applications, and speciality glasses. These include metallic dysprosium and dysprosium-containing alloys (e.g., dysprosium-iron alloys), dysprosium oxide and its mixtures, and compounds and mixtures containing dysprosium.
Lutetium (Lu): Used in catalysts, lasers, and speciality glasses. These include metallic lutetium and lutetium-containing alloys, lutetium oxide and its mixtures, and compounds and mixtures containing lutetium.
Scandium (Sc): Used in aluminium alloys, catalysts, and speciality glasses. These include metallic scandium and scandium-containing alloys (e.g., scandium-aluminium alloys), scandium oxide and its mixtures, and compounds and mixtures containing scandium.
Yttrium (Y): Used in phosphors, ceramics, and superconductors. These include metallic yttrium and yttrium-containing alloys (e.g., yttrium-aluminium alloys), yttrium oxide and its mixtures, and compounds and mixtures containing yttrium.
How will China’s export restrictions affect the world?
As things stand today, shipments of all seven key REEs have stopped.
This move is likely to have immediate and strategic impact on global supply chains dependent on rare earth materials for high-performance magnets, electronics, defence systems, clean energy and advanced manufacturing.
The announcement could lead to increased regulatory uncertainty and upward pressure on prices.
This is not a ban, but an export restriction. As with previous export restrictions, affected parties will need to wait and see how many applications (and how much material) are approved for export.
It is expected to take at least 45 days before the exports resume under the new regulatory system.
China is drafting a regulatory framework to restrict access to rare earths to specific companies, particularly American military contractors. Even Chinese companies have been debarred from maintaining contact with those related to the American military.
It is anticipated that exports could decrease dramatically. Additionally, prices for these materials could double on short order, with some analysts anticipating a 500 per cent increase in the near future.
This may lead to international shortages and increased prices from $230 to $300/kg, affecting manufacturers and industries that rely on them.
The restrictions might prompt countries to diversify their sources and develop new mines and recycling projects to reduce dependence on China. These require significant time and investment to implement effectively.
China will draft a regulatory framework for issuing export licenses and, in all probability, deny access to American military contractors.
China’s export restrictions on rare earth elements (REEs) will significantly impact the global supply chains, especially countries heavily reliant on these materials for high-tech industries.
China’s regulatory framework’s impact on USA
Donald Trump may not like to admit it, but the stark reality is that the US is heavily dependent on China, without any backup plan to do without it.
China had been producing 99 per cent of the world’s heavy rare earth metals until 2023, and still manufactures 90 per cent of rare earth magnets globally. Lack of these magnets will lead to inability to assemble cars and other products containing electric motors, which are crucial components of electric cars, drones, robots, missiles, and spacecraft.
Gasoline-powered cars also use electric motors with rare-earth magnets. Rare earth metals are also used in jet engines, car headlights, spark plugs, and capacitors, used in computer chips, artificial intelligence servers and smartphones.
China controls over 60% of global mined rare earth production and roughly 90% of global output. China accounted for 70% of rare earth exports to the U.S. between 2020 and 2023.
According to the US Geological Survey, the U.S. is 100 per cent dependent on Yttrium, which is primarily used in catalysts, ceramics, electronics, lasers, metallurgy, and phosphors. The global production of yttrium, one of the rare earths now under export restrictions, is no more than 20,000 tonnes annually. Almost 93 per cent of Yttrium brought into the United States between 2020 and 2023 came from China.
Neodymium and dysprosium are used in electric motors and generators. Europium and terbium are used in phosphors for lighting and displays. Cerium is used in catalytic converters for vehicles.
Likewise, Samarium and its compounds are used in aerospace manufacturing and the defence sector, and gadolinium is used in MRI scans. Heavy rare earths are particularly crucial for producing magnets capable of maintaining their properties under high temperatures or electrical fields. In 2024, the United States was 80 per cent reliant on imports of rare earths.
Countries Affected:
- United States – imports most of its rare earths from China and will likely face significant disruptions in its supply chain.
- European Union and Japan — heavily rely on Chinese REEs and may experience shortages and increased costs, and prices may rise
Industries Affected:
- Electronics, semiconductors and other high-tech components.
- Electric vehicles, electric motors, wind turbines, and renewable energy systems.
- Aerospace, missiles, drones, and other defence systems
