The West Spent Billions. China Still Owns Rare Earths.

Highlights

• China controls approximately 91% of rare earth refining capacity and 94% of permanent magnet manufacturing as of 2024, per the IEA's revised May 2026 report.
• Non-Chinese refining and magnet projects would meet only 25% of projected refining demand and less than 20% of magnet demand by 2035, even with current planned investments.
• The IEA identifies metallization, alloy production, and magnet manufacturing—not mining—as the critical bottlenecks blocking meaningful supply-chain diversification.
• Achieving real diversification would require non-Chinese refining capacity to quadruple and magnet manufacturing to expand six-fold beyond currently planned levels.
• China's true advantage lies not just in capacity but in intellectual property, industrial know-how, integrated supply networks, and decades of accumulated operational experience.

In its revised May 2026 report (opens in a new tab), Rare Earth Elements: Pathways to Secure and Diversified Supply Chains, the International Energy Agency (IEA) delivers a sobering assessment of the global rare earth sector. Despite years of policy initiatives, billions of dollars in Western investment, and repeated calls for supply-chain diversification, China continues to dominate the industry's most critical segments. According to the report, China controls approximately 91% of rare earth refining capacity and 94% of permanent magnet production. At the same time, demand for magnet rare earths is expected to rise substantially over the coming decade, while non-Chinese refining and magnet manufacturing capacity remains inadequate. The report serves as both a warning and an implicit acknowledgment that diversification efforts have progressed far more slowly than many policymakers anticipated.

The Numbers That Matter

The IEA examined the entire mine-to-magnet value chain, including mining, separation, refining, alloy production, magnet manufacturing, recycling, investment requirements, and potential disruption scenarios.

Its findings underscore the scale of China's dominance. In 2024, China accounted for roughly 60% of mined magnet rare earth production, 91% of refining capacity, and 94% of permanent magnet manufacturing. Meanwhile, global demand for magnet rare earths is projected to increase by approximately one-third by 2030.

Perhaps most concerning, the IEA concludes that currently operating and planned non-Chinese projects would meet only about 25% of projected refining demand and less than 20% of projected magnet demand by 2035. In other words, even after years of diversification efforts, the world remains heavily dependent on Chinese processing and manufacturing capabilities.

The Uncomfortable Admission

The report's most important conclusion may be what it reveals about the true bottleneck in the rare earth supply chain. Mining is not the primary challenge.

Magnets are.

The IEA estimates that achieving meaningful diversification would require refining capacity outside China to quadruple and magnet manufacturing capacity to expand six-fold beyond currently planned levels. Throughout the report, the agency repeatedly identifies metallization, alloy production, specialized equipment, workforce development, and magnet manufacturing as the weakest links in the emerging supply chain.

This finding challenges a common assumption among policymakers and investors that opening new mines alone will solve the rare earth dependency problem. The report makes clear that extraction is only the first step. The real strategic challenge lies in building the downstream industrial ecosystem required to transform rare earth oxides into finished magnetic products.

What the IEA Still Underplays

The report remains largely rooted in an energy-transition framework. Yet by 2026, rare earths are increasingly tied to defense systems, drones, robotics, artificial intelligence infrastructure, advanced manufacturing, and geopolitical leverage. While the IEA discusses export controls extensively, it arguably understates China's deeper advantages: intellectual property, industrial know-how, equipment manufacturing capabilities, integrated supply networks, and decades of accumulated operational experience.

These advantages are not easily replicated through capital investment alone. They represent an industrial ecosystem that has been built and refined over decades.

The REEx Verdict

The IEA deserves credit for confronting the realities of the rare earth market with unusual candor. Its revised report reinforces a conclusion that Rare Earth Exchanges™ has emphasized since our founding in January 2025: mines alone do not create supply-chain security. The real competition is taking place downstream—in separation facilities, metallization plants, alloy production lines, magnet factories, equipment suppliers, and the skilled workforce needed to operate them.

Four years into the global diversification effort, Western nations have launched projects, announced investments, and advanced new mining ventures. China, however, still possesses what matters most: the complete industrial ecosystem.

Citation: Dasgupta, A., Kim, T.-Y., Gould, T., Buisson, E., Dhir, S., Miwa, K., Moinier, N., Nishiumi, M., Raboca, J., Scanziani, A., Seo, S., et al. Rare Earth Elements: Pathways to Secure and Diversified Supply Chains. International Energy Agency (IEA), Revised Version, May 2026