Key facts
- China's expanded rare earth export controls could endanger $6.5 trillion of downstream production outside the country.
- The automotive, high-tech, defense, and energy sectors are most exposed to potential supply disruptions.
- The US and Europe would bear nearly half of the economic impact from these restrictions.
- Planned Chinese export controls on graphite could risk $300 billion of downstream production.
- Public financing commitments for new critical mineral projects have quadrupled to $65 billion between 2023 and 2025.
- China's share of global rare earth refining has decreased to 85% and could fall to 70% by 2035 with planned projects.
The International Energy Agency (IEA) has warned that the full implementation of China's rare earth export restrictions could jeopardize approximately $6.5 trillion of downstream industrial production outside of China. These restrictions, which China expanded in October of the previous year with new licensing requirements, were later agreed to be delayed for a year. Rare earths, a group of 17 essential metals, are critical components in products ranging from automobiles and electronics to defense systems. The IEA's Global Critical Minerals Outlook report indicates that the automotive, high-tech, defense, and energy sectors are particularly vulnerable to supply disruptions, with the United States and Europe expected to bear nearly half of the economic impact. IEA Executive Director Fatih Birol emphasized the significant economic value dependent on small volumes of critical minerals, whose supply chains are highly concentrated and thus susceptible to disruption. The agency also flagged risks associated with China's planned export controls on graphite, a key material for electric vehicle batteries. Full implementation of these graphite controls could put about $300 billion of downstream production at risk, given China's dominance with over 90% of global processed graphite output. In response to these supply chain vulnerabilities, Western governments are actively working to establish alternative critical mineral supply chains. The IEA noted that public financing commitments for new projects have more than quadrupled, reaching $65 billion between 2023 and 2025. Efforts such as new rare earth refining projects in the U.S. and Malaysia have already begun to reduce China's global market share in rare earth refining, decreasing it to 85% last year from 90% in 2023. If planned projects proceed as scheduled, China's share could further decline to 70% by 2035.