That China may tighten exports of some key rare earth materials is the latest news that has triggered a high level of alarm in U.S. politics and industry. As the core country of the global rare earth industry chain, once China adopts such export restrictions, it will have a far-reaching impact on the high-tech industrial system represented by the United States. This potential policy action is not only related to the security of the global supply chain, but also interpreted as an important ‘resource chip’ in the geopolitical competition between the United States and China.
Rare earths: the ‘invisible engine’ behind high technology
Rare earths are not traditionally scarce elements, but their high technological threshold and environmental costs in refining and processing have long placed them in a position of ‘limited supply and high strategic value’. Rare earths consist of 17 elements and are widely used in the manufacture of smartphones, electric cars, high-performance magnets, lasers, satellite communications equipment, and advanced weapons systems.
‘Without rare earths, iPhones, Teslas, and F-35 fighter jets can’t be built.’ That’s the blunt description of rare earth applications in an assessment released by the U.S. Department of Energy in 2023. The U.S. Department of Defence has long listed rare earths as a ‘strategic material of critical importance to national security’.
China dominates global refining and exports
Even though several countries possess rare earth resources, according to the U.S. Geological Survey (USGS), China will still hold more than 70% of the world’s rare earth mining capacity and more than 90% of the refining capacity as of 2024. Especially in the field of high-purity heavy rare earths, China’s technology and production capacity are in an almost irreplaceable position.
What’s more, the rare earth industry chain does not rely solely on resource advantages, but also on process and environmental protection capabilities accumulated over the years. This makes China have in the global supply system ‘upstream lock throat, downstream pricing’ comprehensive strength.
The United States’ industry chain is highly dependent on China’s rare earth
Although the United States in recent years to vigorously promoted the local rare earth minerals production, such as California’s Mountain Pass mine has resumed operations, its refining and processing still need to rely on China. U.S. Department of Commerce data show that in 2023, the United States’ imports of rare earths, more than 75% from China.
‘Whether it’s new energy vehicles, power equipment, or Pentagon armaments contracts, the role of Chinese rare earths is hard to bypass.’ A brief released by the US Centre for Strategic and International Studies (CSIS) points out that if China implements export quota restrictions on some key rare earths such as neodymium and dysprosium, it will lead to a global price spike and force the US industrial chain to stop work, delay deliveries, and even directly impact national security.
‘Technology blockade’ in the context of resource countermeasures
Some analyses have pointed out that this round of export control discussions is not an isolated incident, but a ‘reciprocal countermeasure’ in the context of China’s continued technological blockade and supply chain suppression by the U.S. Since 2023, the U.S. has strengthened its export controls on China’s chips, high-end manufacturing equipment and AI capabilities, and rare earths, as the basic materials supporting these industries, have naturally become a flexible tool for China to use. Rare earths, as the basic materials supporting these industries, have naturally become one of the strategic tools that China can flexibly use.
Although China has not yet officially announced export restrictions, a foreign ministry spokesperson said in response to media questions that ‘China will implement export management for sensitive materials by its laws and regulations and national security needs.’ This statement is widely seen as a signal to the U.S. side.
U.S. ability to cope with the reality of the bottleneck
The United States is not attempting to achieve ‘rare earth independence’. But from the current reality, the resumption of production and replacement of slow progress is.
First of all, the United States lacks a perfect rare earth industry chain, refining capacity and downstream magnetic material manufacturing almost blank; Secondly, the relevant environmental regulations are strict, making the high cost of rare earth extraction; Furthermore, rare earth alternative technologies such as neodymium-free magnets, ceramic motors, etc. are still in the experimental or early stage of commercialisation, and it is difficult to land on a large scale.
‘It will take at least five to ten years to establish a complete rare earth supply system.’ U.S. Secretary of Energy Jennifer Granholm admitted at a hearing earlier this year, ‘In the short term, we are still inevitably dependent on China.’
Global impact or spillover to new energy and military industries
If China introduces actual restrictive measures, the impact will not be limited to the United States and China. Rare earth prices could rise globally, further jacking up the cost of electric vehicles, wind energy equipment, and consumer electronics. In addition, the tight supply of rare earths could trigger a ‘chain of delays’ in the maintenance and modernisation of high-performance weapons systems in Western countries.
The International Monetary Fund (IMF) analysed that rare earths have been upgraded from the ‘role of raw materials’ to ‘strategic variables’ in the global industrial chain security and geopolitical game.
Conclusion: China-US resource tug-of-war enters new phase
The issue of rare earth export restrictions is becoming a key part of the strategic competition between China and the United States. For the U.S., it is not only a blow at the economic level, but also highlights the vulnerability of its key basic capabilities after a long period of outsourcing. For China, how to balance national interests, industrial strategy, and international responsibility is also a complex reality test.
The future of rare earths is not only about metal elements, but also about the rebalancing of global power.
Leave a comment