Rare earths are becoming the 'new oil' — but with a huge difference

The global race to secure rare earths is accelerating after Chinese suppliers halted some shipments to US customers in 2025, underscoring a vulnerability that governments have spent years trying to eliminate.

Some Chinese rare-earth companies have recently declined to ship material to the United States amid concern over possible repercussions from Beijing.

The disruption comes as President Donald Trump prepares for a planned Sept. 24 meeting with Chinese President Xi Jinping, where critical minerals are expected to be among the contentious trade issues.

The latest developments demonstrate that the world's rare-earth problem is not simply about finding deposits underground.

China remains overwhelmingly dominant in the refining and processing of rare earths and in the manufacture of the powerful permanent magnets made from them.

Those magnets are essential to electric vehicles, wind turbines, industrial motors, aerospace systems, electronics and military equipment.

The comparison between rare earths and oil is tempting but imperfect. Oil is consumed as fuel. Rare earths are generally used as industrial inputs and remain embedded in products.

That means: eliminating rare-earth consumption is not necessarily the objective.

Rather, it is to make the supply chain resilient enough that one country cannot shut down an industry by restricting a handful of minerals, magnets or processing technologies.

And unlike oil, the strategic bottleneck may not be the natural resource itself.

It may be the factory that turns the resource into something manufacturers can use.

The rare-earth contest is increasingly being described as a strategic supply-chain battle rather than simply a mining race.

A recent Reuters analysis found that US efforts have reduced China's share of global rare-earth refining from about 90% in 2023 to roughly 85% in 2025.

But the International Energy Agency (IEA) estimates that China's share could still be around 70%-73% in 2035 even if all currently announced projects outside China are completed.

It's just a snapshot of the Chinese dominance in rare earth processing.

Beijing's control became particularly visible in April 2025, when China imposed export restrictions on several heavy rare earths and rare-earth magnets.

The restrictions disrupted supplies to automakers, aerospace companies, semiconductor manufacturers and defence contractors, forcing companies to seek alternative suppliers and, in some cases, temporarily adjust production.

China subsequently expanded its use of export controls.

In July 2026, Beijing added 14 European entities to an export-control list, meaning Chinese exporters require special authorisation to supply them with controlled dual-use products including rare earths and permanent magnets.

The message for Western industries is increasingly clear: having a mine outside China does not necessarily guarantee an independent supply.

If the ore still has to be shipped to China for separation, refining or magnet manufacturing, the supply chain remains exposed.

One of the clearest examples is yttrium. The relatively obscure rare-earth-related metal is used in aerospace applications, semiconductor manufacturing and coatings that protect jet-engine components from extreme temperatures.

China is the dominant supplier, and tighter Chinese controls have already disrupted supplies to US and Japanese industries, according to a Reuters analysis.

Yttrium illustrates an important feature of the rare-earth market: the most strategically important materials are not necessarily the ones produced in the largest quantities.

It shows that a relatively small amount of a specialised element can become a bottleneck -- if there are few alternative suppliers.

China’s rare-earth grip tightens as US and allies race to build alternatives Rare earths have become a new front in the US-China economic battle, with fresh supply disruptions highlighting how difficult it will be for Washington and its allies to break Beijing’s dominance of the minerals needed for EVs, wind turbines, chips and advanced weapons.

A 2025 peer-reviewed study published in Energy Economics examined the effect of geopolitical risk on global supplies of rare-earth permanent magnets.

The researchers found that geopolitical tensions can have significant implications for exports from China, the world's leading supplier of rare-earth permanent magnets.

The study highlights the importance of rare-earth magnets to electric vehicles and offshore wind turbines, making supply disruption a potential obstacle to the wider energy transition.

The finding matters because governments cannot solve the problem simply by stockpiling raw ore.

The critical product is often the finished magnet.

That means a country could possess a rare-earth deposit and still lack the industrial capability needed to turn it into the component required by an EV motor, wind turbine or missile guidance system.

A separate 2025 study examining the sustainability of rare-earth consumption found that improving recycling efficiency could significantly increase secondary supplies of rare earths and reduce dependence on newly mined material.

A recent Council on Foreign Relations (CFR) study reached a similar strategic conclusion, arguing that recycling old electronics and recovering rare earths from mine waste could help reduce US dependence on Chinese supply chains.

But the CFR study also points to a paradox: US e-waste can be exported overseas, potentially allowing valuable critical minerals to re-enter Chinese-controlled supply chains rather than being recovered domestically.

That turns recycling from an environmental issue into a national-security issue.

Rare earths are not used in every electric vehicle motor.

But neodymium, praseodymium, dysprosium and terbium are important in high-performance permanent magnets used in many traction motors.

Those magnets allow motors to generate powerful magnetic fields while remaining relatively compact and efficient.

That makes them attractive for EVs, wind turbines, robotics, industrial motors and aerospace applications.

As EV production expands, so does the strategic importance of the supply chain behind those magnets. This creates a dilemma for automakers.

Moving away from combustion engines reduces oil dependence but can increase exposure to mineral and processing supply chains dominated by China.

Washington has responded with subsidies, strategic partnerships and investments in domestic mining and processing.

The US government has backed companies including MP Materials and has sought to establish a domestic mine-to-magnet supply chain.

But building an alternative supply chain takes far longer than imposing an export restriction.

In the US case, a mine can take years to permit, finance and develop. Separation and refining facilities require specialised chemical processes. Magnet factories require another layer of expertise and customers willing to sign long-term contracts.

This is why the US can invest heavily and still remain dependent on China in the near term.

Reuters reported that US efforts have already attracted significant investment, but China's position remains dominant and policy uncertainty in Washington risks making investors hesitant to commit to projects requiring decades of predictable demand.

The United States is now also looking beyond conventional mines.

The Trump administration is preparing to issue permits for deep-sea mining in US territorial waters within months, Interior Secretary Doug Burgum said on Sept. 14.

The administration sees seabed mineral deposits as another potential source of critical minerals needed for EVs, electronics and defence.

Companies including The Metals Company and Impossible Metals have already submitted permit requests.

But deep-sea mining remains highly controversial. Environmental groups warn that disturbing deep-ocean ecosystems could cause irreversible damage, while the international regulatory framework remains contested.

Europe is also trying to reduce its exposure to China.

But the continent remains highly dependent on imported raw materials and processing capacity.

China's July decision to place 14 European companies under export controls demonstrated how quickly trade restrictions can reach European manufacturers.

The EU's challenge is therefore not simply finding alternative mines.

It must build an entire industrial chain: from mining to separation and refining to metal production, alloy, magnet, motor and finished vehicle or machine.

Every missing link can recreate dependence on China.

This is the most important lesson from the rare-earth crisis. For decades, the focus was on where minerals were mined.

China's strategic advantage came from building the processing and manufacturing industries that followed.

That is why Beijing can exert influence even when China is not the only country with rare-earth deposits.

The United States, Europe, Japan, Australia and other countries are now trying to replicate that industrial ecosystem.

Japan has been particularly aggressive because it experienced China's rare-earth leverage during an earlier diplomatic dispute and has spent years diversifying its supply sources.

But the latest restrictions show that diversification remains incomplete.

The rare-earth contest is likely to intensify as three forces collide:

The IEA expects rare-earth demand to continue growing strongly, while research increasingly points to diversification, recycling and new processing capacity as necessary parts of the solution.

The numbers suggest that breaking China's dominance will not happen quickly.

Even if every announced alternative project is built, the IEA expects China to retain a commanding share of rare-earth refining well into the next decade.

That leaves the world facing an uncomfortable reality: The rare-earth race is no longer about who has the biggest mine. It is about who controls the entire chain from rock to magnet — and China still has a huge head start.