Highlights

• The US launched a 54-nation summit excluding China.
• Aim: Reduce dependence on Chinese critical mineral processing.
• Methods: Preferred trading blocs, reference pricing, and new resource agreements.
• China currently holds 90% dominance in refining.
• Policy framework acknowledges urgent need for rebuilding Western processing capacity.
• Risk: Enforcing price floors across fragmented democracies may lead to higher input costs.
• Higher costs could potentially strengthen China's competitive advantage.
• Investors should focus on monitoring processing plants, magnet factories, and binding offtake agreements.
• Political announcements are less significant compared to the real indicators.
• Supply security is incomplete without engaging the dominant processor.

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By February 4, 2026, the United States unveiled a sweeping plan to reduce dependence on China for critical minerals by forming a preferred trading bloc with allies, introducing reference prices and potential price floors, and signing new resource agreements. The goal: protect Western supply chains from low-cost competition and improve long-term security. The idea is bold—but execution remains uncertain, especially given China’s near-total dominance in mineral processing.

At the Washington summit—attended by representatives from 54 countries and the EU—China was absent. That absence may be symbolic, but it is also the plan’s central vulnerability.

Where Reality Backs the Rhetoric

The factual core is solid. China dominates roughly 60% of global rare earth mining and close to 90% of separation, refining, and downstream processing. This is not merely a mining issue; it is an industrial one. Western nations, particularly in Europe, have allowed processing capacity to atrophy—an erosion explicitly flagged by the European Court of Auditors.

Matthias Rüth, Managing Director of TRADIUM GmbH (opens in a new tab)

In this context, comments from Matthias Rüth, Managing Director of TRADIUM GmbH (opens in a new tab), align with industry reality: processing expertise accumulated over decades cannot be rebuilt on a political timetable.

Where Policy Starts Floating Free of Hardware

Minimum price mechanisms and reference pricing sound orderly, but commodity markets are neither static nor obedient. Enforcing price floors across multiple value-chain stages would require sustained coordination, compliance, and enforcement—historically rare in fragmented democracies.

Tariffs as an enforcement backstop risk collateral damage. Higher input costs for downstream manufacturers may undermine the very industries the policy aims to protect, inadvertently reinforcing China’s competitive advantage in finished goods.

The Narrative Tilt No One Mentions

The proposal frames China primarily as a distortion to be countered, not a system to be reckoned with. This is a strategic choice—but also a bias. China’s absence from the summit does not reduce its leverage; it highlights it. Any near-term supply security strategy that excludes the dominant processor is, by definition, incomplete.

Why This Actually Matters

What’s notable is not the elegance of the framework—it’s the admission of urgency. Western governments are finally acknowledging that rare earth security requires industrial policy, capital discipline, and downstream rebuilding, not just new mines and friendly communiqués.

For investors, the signal is clear: watch processing plants, magnet factories, and binding offtake agreements—not speeches.

Source: TRADIUM Market Insight, February 6, 2026