Rare Earth Exchanges

Evolution of the rare earth trade network: A perspective of dependency and competition

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Highlights

  • China controls 60% of global rare earth element (REE) mining and 90% of processing.
  • There are international efforts to reduce dependency on China’s REE control.
  • Countries investing in domestic REE production and processing include:
    • United States
    • Canada
    • Europe
    • Brazil
  • Challenges in REE market diversification:
    • Price volatility
    • Environmental regulations
    • Complex geopolitical risks

The global rare earth elements (REE) trade network has undergone significant transformations, marked by dependency and competition among key players. Historically, China has dominated the REE market, accounting for approximately 60% of global mining and 90% of processing as of 2023. Recent announcements about export controls involving REE only complicates matters more.

This dominance has raised concerns among other nations about over-reliance on a single supplier, prompting efforts to diversify sources and reduce dependency as reported by academic authors in China and the United Kingdom and published in Geoscience Frontiers (opens in a new tab).

China’s Dominance and Strategic Measures

China’s control over the REE supply chain has been both a strength and a geopolitical tool. The country has implemented export restrictions and tariffs, citing resource depletion and environmental concerns. For instance, in 2010, China temporarily halted REE exports to Japan amid a territorial dispute, highlighting its leverage over global supply.

Such actions have underscored the geopolitical implications of China’s market position.

Global Responses and Diversification Efforts

In response to China’s dominance, several countries have initiated strategies to develop their own REE industries:

  • United States: The U.S. has invested in domestic REE production and processing facilities. Companies like MP Materials have resumed operations at the Mountain Pass mine in California, aiming to restore the U.S.’s position in the REE market.
  • Canada: Canada inaugurated a new REE processing hub in Saskatoon, Saskatchewan, in 2023. This facility processes minerals from various countries and represents a strategic move to reduce reliance on Chinese REE supplies.
  • Europe: The European Union introduced the Critical Raw Materials Act, setting benchmarks for domestic capacities, including extracting at least 10% and processing at least 40% of the EU’s annual consumption of strategic raw materials by 2030.

Companies like Solvay are expanding REE processing operations in France to support these goals as Reuters (opens in a new tab) reported.

  • Brazil: Brazil has entered the REE market with the Serra Verde mine commencing commercial production in 2024. The country aims to leverage its resources to become a significant player, though it faces challenges such as low REE prices and technical complexities also cited in Reuters (opens in a new tab).

Challenges and Market Dynamics

Despite diversification efforts, challenges persist. Rare Earth Exchanges provides a summary of such challenges:

  • Price Volatility: REE prices undergo significant declines, reaching approximately three-year lows due to factors like China’s overproduction and strategic market maneuvers. This volatility affects the economic viability of new REE projects outside China. 
  • Environmental and Regulatory Hurdles: Developing REE industries involves environmental concerns and regulatory approvals, which can delay projects. For example, Europe’s ambitious targets are hindered by public opposition and limited funding.
  • Geopolitical Risks: The concentration of REE processing in China poses supply risks, especially during geopolitical tensions. Countries are investing in alternative sources to mitigate these risks, but establishing new supply chains is complex and time-consuming.

Conclusion

The evolution of the rare earth trade network reflects a complex interplay of dependency and competition. While China’s dominance has prompted global diversification efforts, challenges such as market volatility, environmental concerns, and geopolitical risks continue to shape the landscape. Ongoing investments and strategic policies are crucial for countries aiming to secure stable and sustainable REE supplies.  The latest announcement involving a China and U.S. trade war only will intensify the challenges.

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