Highlights

• Europe faces a geopolitical trap as China controls 70% of rare earth mining and 90% of refining capacity, threatening the EU's green transition and defense capabilities through supply chain dominance.
• Professor Ralph Wrobel's study documents how China has weaponized rare earth exports through historical restrictions, while Europe's demand surges for wind turbines, EVs, and military systems.
• Despite the EU's Critical Raw Materials Act setting diversification targets, implementation remains too slow to offset China's strategic advantage in processing critical minerals essential for modern technology.

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A new working paper (opens in a new tab) by Ralph M. Wrobel, (opens in a new tab) professor of economics and economic policy at the University of Applied Sciences Zwickau, (opens in a new tab) delivers a stark assessment of Europe’s vulnerability in the global rare earth elements (REE) supply chain. Published in Ordnungspolitische Diskurse (opens in a new tab) (No. 2025-12) and hosted by the OrdnungsPolitisches Portal, the study asks a blunt question: Has Europe fallen into a geopolitical trap created by China’s dominance in rare earth markets?

Wrobel’s answer is cautiously but unmistakably affirmative.

While Europe’s green transition, digital economy, and defense capabilities increasingly depend on rare earths, the EU remains heavily reliant on China—especially for refining and processing. The paper argues that this structural dependence exposes Europe to supply shocks, price manipulation, and geopolitical coercion, as demonstrated by both historical and recent export restrictions imposed by Beijing.

Why Rare Earths Matter—In Plain Terms

Rare earth elements are a group of 17 metals essential to modern life. They are critical for permanent magnets used in wind turbines and electric vehicles, for electronics and semiconductors, and for military systems such as radar, missiles, and night-vision equipment. While rare earths are not truly “rare” in the Earth’s crust, they are difficult, costly, and environmentally challenging to extract and refine.

According to Wrobel, the problem for Europe is not just mining. It is processing. China controls roughly 70% of global rare earth mining and close to 90% of refining and separation capacity—particularly for heavy rare earths like dysprosium and terbium, which are vital for high-performance magnets. This gives Beijing leverage far beyond simple trade.

Study Methods: How the Analysis Was Conducted

The study uses a qualitative, policy-economic approach. Wrobel synthesizes data from academic literature, EU and international statistics, policy documents, and well-documented case studies. Rather than modeling prices or ore grades, the paper examines market structure, trade flows, industrial policy, and geopolitical behavior.

Two case studies anchor the analysis:

• The 2010 Senkaku crisis, when China informally restricted rare earth exports to Japan.
• In 2024–2025, China imposed restrictions on multiple rare earths and related technologies amid escalating trade tensions.

These cases illustrate how rare earths can function as strategic tools, not just commodities.

Key Findings: Europe’s Structural Weakness

The study identifies several core findings:

1. Europe’s demand is rising fast. Clean energy, electric mobility, digital infrastructure, and rearmament all require more rare earths, intensifying dependence at precisely the wrong time.
2. Supply is dangerously concentrated. Nearly half of EU rare earth imports come directly from China, with much of the remainder still processed in Chinese-controlled facilities, even when mined elsewhere.
3. China’s dominance is policy-driven. Beijing consolidated its rare earth sector into state-controlled champions, invested heavily in refining, and tolerated environmental damage when Western countries stepped back. Europe, by contrast, outsourced refining while tightening regulations at home.
4. Europe faces a “geopolitical trap.” The green transition reduces dependence on fossil fuels but replaces it with dependence on Chinese-controlled minerals—potentially limiting Europe’s freedom of action in crises involving Taiwan, trade, or security.

Implications: Can Europe Escape?

Wrobel reviews Europe’s main response: the European Union’s Critical Raw Materials Act (CRMA). The Act sets targets for domestic extraction, processing, and recycling, and aims to diversify imports so no more than 65% of any strategic raw material comes from a single non-EU country.

Progress exists—projects in Sweden, Norway, Estonia, and France, and early recycling initiatives—but Wrobel finds implementation slow, bureaucratic, and insufficient to offset China’s dominance in the near to medium term. Recycling remains nascent, and substitution technologies are costly and incomplete. Rare Earth Exchanges™ validates the general findings, based on our reporting since launch in October 2024.

Limitations and Contested Issues

The study is deliberately cautious. It does not claim Europe can quickly replace China, nor that alternative suppliers will be geopolitically risk-free. Environmental concerns, high costs, and long permitting timelines remain real barriers. Moreover, diplomacy with China may temporarily ease supply pressure, but risks delaying necessary structural reforms.

Conclusion: A Strategic Wake-Up Call

Wrobel’s paper concludes that Europe is moving in the right direction—but far too slowly. Without faster implementation, deeper investment in processing and recycling, and more flexible, market-oriented industrial policy, Europe will remain exposed to supply disruptions and political leverage. Rare earths, once a technical niche, have become a first-order geopolitical issue.

For investors, policymakers, and industry, the message is clear: rare earth security is no longer optional—it is strategic infrastructure.

Citation

Wrobel, R. M. (2025). China’s Dominance in Rare Earth Markets: A Geopolitical Trap for Europe? Ordnungspolitische Diskurse, No. 2025-12. OrdnungsPolitisches Portal (OPO).

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