The U.S., EU and their allies are racing to secure supplies of rare earth elements - essential materials for electric vehicles, wind turbines and advanced technologies - as China maintains a dominant position in processing.

With demand rising and supply chains highly concentrated, access to these resources is becoming a central geopolitical priority.

Rare earth elements are a group of 17 metals with unique magnetic and electrical properties, widely used in smartphones, microchips, wind turbines and electric vehicles, particularly in permanent magnets that power EV motors and renewable energy systems.

Despite their name, these elements are not actually scarce. For example, neodymium exists at around 20 parts per million in the Earth’s crust, while copper is at 27. However, they are difficult and costly to extract because they are widely dispersed and chemically complex.

Demand has surged alongside the rapid growth of artificial intelligence, electrification, and clean energy systems. According to the International Energy Agency (IEA), demand for key magnet rare earths such as neodymium and dysprosium has already doubled since 2015 and is expected to rise by another third by 2030.

China’s dominance and supply risks

While rare earth resources are geographically widespread, supply chains remain heavily concentrated. China dominates not only mining but, more importantly, refining and processing - the stages that make these materials usable for high-tech manufacturing.

China is estimated to hold around 44 million tonnes of rare earth reserves, followed by Brazil with approximately 21 million tonnes and Australia with about six million tonnes.

China accounts for around 60% of global mined production and more than 90% of processing for some rare earths, with its share even higher in certain materials.

This creates structural dependence, as many countries rely on Chinese facilities not only for raw materials but also for converting them into components used in high-tech manufacturing.

Global mining activity is also concentrated in a limited number of countries, with Australia, Indonesia and Chile among the key players in critical mineral extraction and supply chains.

This imbalance has raised serious concerns. A U.S. government report warned that failing to secure supply chains could cause “defence production to grind to a halt and choke off manufacturing of other advanced technologies.”

Efforts to diversify supply

The United States is working to reduce its dependence on China by strengthening partnerships with resource-rich countries. It has signed a joint statement with Chile to deepen cooperation on critical minerals and is also in talks with Brazil on broader supply chain agreements involving billions of dollars in potential investments.

At the same time, Washington is proposing structural changes to the market, including plans for a preferential trade bloc for critical minerals and coordinated pricing mechanisms. U.S. Vice President JD Vance said: “We will establish reference prices for critical minerals… to uphold pricing integrity.”

These efforts come amid broader global tensions over critical mineral supply chains and an upcoming U.S.-China summit.

However, allies are not fully aligned on how to counter China’s dominance.

• Rare earths tensions rise as U.S. and China trade barbs
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G7 divisions: competing approaches emerge

Japan, France, and Canada are exploring alternative approaches within the G7 framework. Proposed measures include import quotas on certain rare earths, subsidies for mining projects, and the creation of a Canada-led "buyers’ club" to secure long-term supply agreements outside China.

Canada has already moved forward, signing 30 agreements with 12 countries worth C$12.6 billion, bringing total investments in the sector to around C$18 billion since October. 

Japan is also encouraging its industries to support alternative supply chains, even if they are more expensive.

• G7 and allies discuss ways to reduce dependence on Chinese rare earths
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France, meanwhile, has proposed quota systems and mandatory diversification requirements for companies, signaling a more interventionist approach to supply security.

These differences highlight growing divergence within Western alliances over how to manage supply chain risk and industrial policy.

EU and Australia seek alternatives

The European Union remains highly dependent on China for rare earth magnets and is working to reduce this vulnerability by strengthening cooperation with partners such as the United States and Australia.

In 2020, the European Commission launched the European Raw Materials Alliance to address challenges in the critical raw materials supply.

A proposed EU- U.S. framework, reported by Bloomberg, includes coordinated investments, shared standards, and joint responses to supply disruptions. It also aims to improve resilience against external shocks affecting critical mineral flows.

• EU and U.S. close in on critical minerals deal to boost supply security

The EU and Australia have also signed a free trade agreement after eight years of negotiations, removing tariffs on most goods and improving access to Australian critical minerals.

European Commission President Ursula von der Leyen stated: “The EU and Australia may be geographically far apart but we couldn't be closer in terms of how we see the world.”

Australia is simultaneously expanding mining and processing capacity and building a strategic reserve of rare earths, though officials acknowledge that scaling production to match China will take decades.

Growing demand and environmental challenges

Despite rising demand, supply growth remains uncertain. The IEA notes that investment growth slowed to 5% in 2024, down from 14% the previous year, while exploration activity has plateaued. High costs, regulatory barriers, and long development timelines continue to constrain new projects.

At the same time, the world is entering a 'global battery race,' driven by EVs and energy storage technologies, increasing pressure on already constrained supply chains.

Rare earth production also presents environmental challenges. Processing often involves toxic chemicals and can generate radioactive waste, making it difficult in countries with strict environmental standards. This has contributed to China’s cost advantage.

Recycling is emerging as a potential solution. It could reportedly reduce the need for primary extraction by up to 35% by 2050. Advances in recycling technology and stronger circular economy policies are improving prospects for recovering rare earth materials from used electronics and magnets.

Strategic outlook

Rare earth elements have become central to global competition over technology, energy systems, and industrial capacity. As countries attempt to diversify supply chains and reduce dependence on China, these materials are increasingly shaping economic alliances and industrial strategy.

Although resources are geographically widespread, control over processing capacity determines real influence. As demand continues to grow, critical minerals are increasingly viewed as a core pillar of 21st-century economic and geopolitical power.

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News Critical Minerals Energy transition rare earths deal trade policy robotics Chile EU United States Australia