Highlights

• China controls approximately 70% of rare earth mining and nearly 90% of processing, maintaining significant global market power.
• Western countries are actively developing alternative supply chains through government support, investments, and international partnerships.
• Beijing's export controls have paradoxically accelerated international efforts to diversify rare earth element production and processing.

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The Australian Financial Review (opens in a new tab) quoted today Xigang Zhang, head of Rising Nonferrous Metals (part of state-owned China Rare Earth Group), declaring that China’s “tech advances will consolidate price-setting power” and that global markets will “remain dependent on China’s supply chain for the foreseeable future.” On the numbers, he isn’t wrong. China still controls ~70% of mining, nearly 90% of processing, and most global magnet manufacturing. Decades of counter-cyclical investment—even when profits were thin—have entrenched that lead.

Where It Becomes Posture

Zhang’s assertion that Western diversification is “destined to fail” crosses from fact into spin. True, building non-Chinese supply chains is expensive and slow. Projects in the U.S. and Australia face scale and cost disadvantages. But failure is far from preordained. The U.S. Department of Defense has supported MP Materials and Lynas (though Lynas’ Texas project now looks uncertain). The EU’s Critical Raw Materials Act sets binding targets for local extraction, processing, and recycling. And Japan has spent more than a decade lining up alternatives in India, Vietnam, and most recently, Angola. These are small compared with Bayan Obo or China’s processing hubs, but they are real and growing.

And let's not forget the launch of Rare Earth Exchanges (REEx) and its commitment to accelerate ex-China rare earth element supply chain markets worldwide!

What Goes Unsaid

The boast omits that Beijing’s own export controls on certain rare earth technologies in 2023–2024 spurred urgency in Washington, Brussels, and Tokyo. Allies are experimenting with subsidies, price floors, and stockpiles to blunt China’s leverage. China’s near-term dominance is undeniable, but its grip has galvanized unprecedented policy action abroad.

Rare Earth Exchanges Take

Beijing’s claim of unshaken dominance is grounded in today’s market fundamentals, but the rhetoric leans nationalistic. For investors, the near-term reality is clear: pricing power still sits in Baotou and Ganzhou. The medium-term story, however, is more open. Western and allied diversification strategies—while costly—are not a fantasy. If anything, official boasts from China should be read less as inevitability and more as recognition that rival supply chains are finally stirring.

And look out if President Trump awakens even further, establishing critical mineral and rare earth industrial policy.  But on the other hand, a steep climb remains should America and allies seek true rare earth supply chain resilience.

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