Can Markets Alone Break China's Rare Earth Grip? A New Study Says the Odds Are Long

Highlights

• University of Maribor study identifies four structural constraints blocking rare earth diversification: midstream bottlenecks, investment uncertainty, ecosystem lock-in, and geopolitical constraints.
• China's dominance stems from refining, separation, and magnet manufacturing expertise—not geology—making new mines insufficient to reduce strategic dependence.
• Markets alone cannot solve coordination failures across rare earth supply chains; integrated industrial ecosystems spanning separation, metals, alloys, and magnets are required.
• Companies like MP Materials, Energy Fuels, and Ucore illustrate that progress in only one supply chain segment creates bottlenecks elsewhere.
• Investors should evaluate rare earth ventures by their ability to build full integrated value chains, not simply by the number of mining projects announced.

A new study by Klavdij Logožar (opens in a new tab) of the University of Maribor's Faculty of Economics and Business in Slovenia (opens in a new tab), published in Business Strategy and the Environment, argues that the world's dependence on China for rare earth elements is not fundamentally a mining problem—it is a systems problem. Drawing together research from supply chain management, industrial policy, economics, and global value chains, Logožar concludes that despite billions of dollars in Western investment and government initiatives, supply chains will remain structurally vulnerable unless countries simultaneously build processing, separation, magnet manufacturing, financing, skilled workforces, and integrated industrial ecosystems. The paper's conclusions closely mirror one of Rare Earth Exchanges®' central themes: the true bottleneck is not the mine—it is the midstream.

The Mine Is Only the Beginning

This is not a laboratory study or statistical analysis. Instead, Logožar develops a conceptual framework by synthesizing decades of academic literature and recent policy research to explain why rare earth diversification repeatedly stalls. The paper identifies four structural constraints: midstream processing bottlenecks, investment uncertainty, ecosystem lock-in, and geopolitical constraints. Together, these forces create a self-reinforcing system that is extraordinarily difficult for new entrants to overcome.

Why China's Lead Persists

The study argues that refining, separation, alloy production, and permanent magnet manufacturing—not geological resources—represent the industry's true strategic choke points. China dominates these stages through decades of accumulated chemical engineering expertise, industrial clustering, capital investment, and coordinated industrial policy. Simply opening new mines or adding suppliers does little to reduce systemic dependence when the downstream ecosystem remains concentrated.

Important Caveats

Logožar is careful not to overstate the findings. This is a conceptual paper rather than an empirical test of new data. The proposed framework still requires validation through future case studies and quantitative research, and the author acknowledges that different critical mineral markets may exhibit different structural dynamics.

Rare Earth Exchanges Analysis

The paper strongly reinforces REEx's long-standing assessment that the West's challenge is not discovering rare earth deposits—it is rebuilding the industrial architecture that transforms ore into strategic products. Where REEx extends the discussion is in documenting these structural constraints in real time. Companies such as Aclara, Solvay, Ucore, Energy Fuels, Iluka, and MP Materials illustrate different pieces of the same puzzle: separation capacity, feedstock security, metallization, magnet production, financing, and long-term offtake must all advance together. Progress in only one segment creates bottlenecks elsewhere.

The study also aligns with REEx's repeated warning that industrial ecosystems—not isolated projects—will determine who wins the ex-China rare earth race. Markets alone are unlikely to solve coordination failures across such a capital-intensive, technologically complex, and geopolitically sensitive supply chain.

The Bottom Line

For investors, the takeaway is straightforward: judge companies and governments not by the number of mines announced, but by their ability to build commercially viable, integrated value chains spanning separation, metals, alloys, magnets, workforce development, and secure customers. Until those capabilities mature outside China, diversification will remain more aspiration than reality.

Citation: Logožar K. Structural Constraints to Sustainable Supply Chain Diversification: Rare Earth Elements, Business Strategy and Resilience in the Energy Transition. Business Strategy and the Environment. 2026. https://doi.org/10.1002/bse.71233 (opens in a new tab).

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