Highlights

• China controls 85-90% of global rare earth processing and magnet manufacturing, giving Beijing strategic leverage over technology and defense supply chains despite producing only 60-70% of raw materials.
• The decisive constraint in rare earth competition is midstream separation chemistry and refining capacity, not access to ore bodies—making China's industrial ecosystem extremely difficult to replicate.
• China achieved a major milestone with its experimental thorium molten salt reactor in 2023-2025, though commercial thorium nuclear fuel deployment remains speculative and limited globally.

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A new analysis (opens in a new tab) from India’s Observer Research Foundation (opens in a new tab) (ORF), a think tank, argues that rare earth elements (REEs) have become a central arena of strategic competition between the United States and China. The author contends that China’s dominance across the rare earth production chain—from mining to refining to magnet manufacturing—gives Beijing significant leverage over global technology supply chains and military systems.

Valery Konyshev (opens in a new tab) notes demand for rare earth materials continues to rise. Permanent magnets made from neodymium, praseodymium, dysprosium, and terbium power electric vehicles, wind turbines, robotics, precision weapons, and advanced electronics. In that sense, the think tank’s core thesis is correct: control of rare earth supply chains increasingly intersects with industrial policy, national security, and technological leadership.

Where the Analysis Stands on Firm Ground

Several observations in the ORF piece align with well-established industry facts. China remains the largest rare earth miner, accounting for roughly 60–70 percent of global production, depending on the year. More importantly, it dominates the midstream refining and separation stages, where estimates often place China’s share between 85 and 90 percent of global capacity.

China also leads the NdFeB permanent magnet industry, producing the majority of the world’s high-performance magnets used in electric motors, industrial automation, and defense technologies.

The think tank also correctly identifies a deeper structural reality: processing technology—not simply access to ore—determines real supply chain power. Beginning in the 1990s, China invested heavily in solvent extraction separation capacity and downstream magnet manufacturing. That industrial ecosystem remains extremely difficult for competitors to replicate.

Where the Narrative Leans Toward Strategic Drama

However, several claims in the article require context.

The assertion that China supplies 94 percent of global permanent magnets likely overstates the figure. While China clearly dominates magnet manufacturing, credible estimates generally place its share closer to 85–90 percent depending on the specific magnet category. And with multiple magnet manufacturers operating now in the USA, the ex-China figure should directionally change within a couple of years.

The claim that U.S. high-tech production is 70 percent dependent on Chinese rare earth exports also oversimplifies the supply chain. The United States relies heavily on Chinese processing and magnet supply, but raw material flows increasingly involve partners such as Australia, Malaysia, and emerging projects in North America.

Another assertion—that thorium extracted from rare earth ores could replace uranium as the basis of nuclear fuel—remains speculative. True China recently announced the first thorium-based nuclear power plant.  Thorium fuel cycles have been researched for decades, but commercial deployment remains limited and uncertain.

Note: China has announced and developed the world’s first experimental thorium-based molten salt nuclear reactor (TMSR-LF1) in the Gobi Desert, which achieved first criticality in October 2023. As of April 2025, scientists have achieved a major milestone by successfully reloading fuel while the reactor was running. Situated in Wuwei, Gansu province, in the Gobi Desert and developed by Shanghai Institute of Applied Physics (SINAP) (opens in a new tab), the facility is a 2-megawatt experimental liquid-fuel thorium molten reactor, designed for higher safety, utilizing molten salt as both fuel carrier and coolant.

So while there is an experimental essential pilot running, we also note a recurring feature of policy commentary: geopolitical framing sometimes runs at least somewhat ahead of industrial reality.

The True Choke Point: Separation Chemistry

Despite the exaggerations, the broader warning remains valid.

Rare earth materials underpin critical technologies across the defense, semiconductor, and clean energy sectors. And governments across the United States, Europe, Japan, and India are increasingly seeking alternative supply chains.

Yet the decisive constraint remains the midstream separation to the refining stage. Discovering ore bodies in Greenland, Canada, Africa, or the Arctic will not fundamentally rebalance the market unless new large-scale separation plants and magnet manufacturing ecosystems emerge outside China.

In rare earths, geology opens the story.

As always, from the REEx perspective, chemistry—and industrial scale—write the ending.

Profile

Observer Research Foundation is an independent global think tank based in Delhi, India, with offices in Mumbai, Kolkata, and the United States. It provides non-partisan, independent, well-researched analyses and inputs to diverse decision-makers in governments, business communities, academia, and civil society.