Highlights
- China controls 92% of rare earth permanent magnet manufacturing, using exports as a strategic tool during geopolitical tensions.
- Study shows 1% rise in geopolitical risk correlates with 3.8-ton increase in rare earth permanent magnet exports.
- Urgent need for supply chain diversification and transparent markets to reduce dependence on Chinese REPM production.
A new peer-reviewed study from Energy Economics (opens in a new tab) (May 2025) delivers a sobering message for policymakers and industry alike: China’s grip on the global supply of rare earth permanent magnets (REPMs) tightens when geopolitical risks escalate. Led by Lisa Depraiter (opens in a new tab), PhD student, University Paris-Saclay (France), with co-authors Dr. Stéphane Goutte (opens in a new tab) and Dr. Thomas Porcher, (opens in a new tab) the study offers powerful statistical evidence that China increases REPM exports when tensions rise—particularly with key rivals like the United States and Australia.
Rare earth permanent magnets are the core components of electric vehicle motors and offshore wind turbines—technologies central to the global clean energy transition. The study’s key hypothesis is clear: rising geopolitical tensions drive up China’s exports of these critical components, not down. That finding flips conventional wisdom on its head. Instead of hoarding supply to punish rivals, China appears to be using high-volume exports as a power play to reinforce global market dominance.
Why This Matters
China currently controls 92% of REPM manufacturing, and 90% of rare earth element (REE) processing, which are essential steps in producing these high-strength magnets. While global demand for REPMs is surging—especially in offshore wind and EV sectors—China’s dominance has created a single-point failure in the global supply chain.
This study confirms that when geopolitical risks spike, like during the COVID-19 pandemic, the Ukraine war, or rising U.S.-China tech disputes, Beijing increases REPM exports.
Using regression models and exporting data from 2017 to 2024, the authors show that a 1% rise in geopolitical risk correlates with a 3.8-ton increase in REPM exports. Notably, the study found the effect strongest when risk rose in Australia and the U.S., China’s primary competitors in rare earth mining.
This suggests a sophisticated long game. When competitors like the U.S. or Australia move to build out domestic REE supply chains, China may strategically flood the market with magnets to lower global prices, discourage investment, and preserve its near-monopoly. This behavior is analogous to Saudi Arabia’s historic “swing producer” role in the oil market, but it is now applied to critical materials that will power the future of clean energy.
Supporting Data & Analysis
The authors analyzed Chinese customs data for REPM exports (HS code 85051110) alongside the widely recognized Geopolitical Risk Index (GPR) developed by Caldara and Iacoviello. Their statistical model used monthly trade data from January 2017 through June 2024, factoring in China’s GDP, raw material prices (especially neodymium-praseodymium alloys), and demand for REPM-intensive products like EVs, laptops, and wind turbines.
While other studies have linked geopolitical risk to rare earth price volatility, this research is unique in its focus on REPMs—finished, high-value components rather than raw materials. That distinction is critical: permanent magnets—not just rare earth ore—are what actually make the energy transition possible. Wind turbines don’t turn, and EV motors don’t spin, without them.
Conclusions and Implications
The study’s conclusions are double-edged. On one hand, geopolitical tensions may accelerate the adoption of low-carbon technologies, as nations race to secure critical components. On the other, China’s behavior suggests that Beijing may weaponize price and volume to retain its strategic control over the REPM market.
Two interpretations are possible:
- Demand-Pull: Countries increase orders to hedge against future supply shocks.
- Supply-Push: China increases volume to reinforce its dominance and suppress emerging rivals.
Both scenarios leave the West vulnerable. No other country currently matches China’s capability to mine, refine, and manufacture REPMs at scale, especially for high-performance offshore wind or electric drivetrain applications. The problem is compounded by the lack of a transparent global market for REPMs, as they are traded over-the-counter with opaque pricing, making forecasting and hedging nearly impossible.
Limitations
While robust in its methods, the study does not establish causality—only correlation. It also lacks granular insight into China’s internal policy decisions behind export shifts. Additionally, it assumes Chinese export data is accurate, despite widespread evidence of off-book production in Myanmar and illegal trade channels. The authors themselves note that the REPM market lacks reliable pricing benchmarks and regulatory oversight—a gaping hole that invites strategic manipulation.
Final Takeaway
Rare Earth Exchanges (REEx) believes this paper should serve as a wake-up call for U.S. and allied governments. Rising geopolitical risk doesn’t lead to REPM scarcity—it provokes a market maneuver. China may be playing chess while the West is still drawing up the board.
With REPMs at the heart of electrified transport, offshore wind, and even next-gen military technologies, the study’s findings reinforce the need for:
- Urgent supply chain diversification through friend-shoring and domestic investment.
- Strategic stockpiling of magnets, not just raw materials.
- Transparent, regulated markets to avoid price manipulation.
- Public-private partnerships to scale REPM manufacturing outside China.
Dr. Lisa Depraiter and her colleagues have made the data-driven case: China’s dominance isn’t just passive—it’s strategic, responsive, and built for control. The question is: will the rest of the world respond in time.
Study Citation:
Depraiter, L., Goutte, S., & Porcher, T. (2025). Geopolitical risk and the global supply of rare earth permanent magnets: Insights from China’s export trends (opens in a new tab). Energy Economics, 146, 108496. https://doi.org/10.1016/j.eneco.2025.108496 (opens in a new tab)
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