Highlights
- China controls over 90% of global rare earth permanent magnet production, using geopolitical tensions to manipulate market exports.
- A 1% rise in global geopolitical tension correlates with a 3.8-ton increase in China’s rare earth permanent magnet exports.
- Global demand for NdFeB magnets is projected to grow 7.5% annually through 2040, driven by electric vehicles and wind turbine industries.
A groundbreaking study published in Energy Economics (opens in a new tab) has confirmed what many in the rare earth industry long suspected: global geopolitical risk directly influences China’s export behavior of rare earth permanent magnets (REPMs), a critical component in electric vehicles (EVs) and offshore wind turbines.
Authored by economists Lisa Depraiter, Stéphane Goutte, and Thomas Porcher all from France, the peer-reviewed study uses China’s customs data from 2017 to 2024 and multiple regression models to uncover a striking correlation: a 1% rise in global geopolitical tension is associated with a 3.8-ton increase in China’s REPM exports, with a noticeable four-month lag. More surprisingly, the study finds this effect is even more pronounced when tensions rise in the U.S. and Australia—China’s key rivals in the rare earth upstream sector.
“This isn’t just about demand catching up with the energy transition,” says lead author Depraiter. “It’s also about how China responds strategically when its competitors are disrupted.”
China’s Market Muscle on Full Display
China currently controls over 90% of global REPM production—a chokehold that extends from mine to magnet. While the rest of the world slowly builds alternative supply chains, China continues to expand capacity, tweak quotas, and adjust pricing to defend its dominant position.
The study argues that China may be leveraging geopolitical shocks—like Russia’s invasion of Ukraine or U.S.–China trade disputes—to flood the market with exports, undercut emerging rivals, and maintain long-term dominance. This tactic echoes prior behavior during the 2010 “Rare Earth Crisis” and the subsequent takedown of Molycorp, once America’s flagship REE producer.
Demand Explosion and Lack of Transparency
The timing couldn’t be more critical. Global demand for NdFeB magnets, the most powerful REPMs, is expected to grow 7.5% annually through 2040, with EVs and wind turbines leading the charge. Yet the REPM market remains opaque, unregulated, and largely cornered.
“Unlike copper or aluminum, rare earths aren’t traded on transparent exchanges,” notes the study. “China’s ability to adjust supply and pricing in an unregulated over-the-counter market introduces enormous volatility and strategic risk.”
Implications for Western Policy
The findings support recent U.S. and EU efforts to diversify REE supply chains through initiatives like the Mineral Security Partnership (MSP) and domestic processing incentives under the Defense Production Act. But they also underscore a harsh reality: building capacity takes time, and China isn’t standing still.
“Australia, the U.S., and others are making strides,” said Porcher. “But until the West can build vertically integrated mine-to-magnet supply chains, it remains vulnerable—not just to shortages, but to economic sabotage via pricing and export strategy.”
What’s Next? Regulation, Recycling, and Resilience
The authors recommend greater investment in REE recycling, the development of regulated rare earth trading platforms to improve price discovery, and accelerated support for magnet substitutes like ferrite and superconductors. Still, they caution that many such technologies remain in early stages.
With climate goals demanding hundreds of gigawatts of new offshore wind and tens of millions of EVs, the pressure to secure rare earth supply is mounting. “REPMs are the Achilles’ heel of the energy transition,” the authors conclude. “And right now, China has its foot on it.”
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