Highlights

• China controls 47-87% of critical minerals refining, especially in downstream processing, separation, and magnet manufacturing, creating structural advantages that Western mining investments alone cannot overcome.
• U.S. and allied governments are deploying price floors, offtake agreements, and equity stakes in select projects, but lack the vertically integrated industrial ecosystems needed for true supply chain sovereignty.
• Breaking China's processing chokehold requires decades of coordinated investment in midstream refining, skills development, and recycling—not just mining announcements and symbolic deals.

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Lead author Grace Symes of Energy Intelligence Group (opens in a new tab), writing from London with editorial oversight by Ronan Kavanagh (opens in a new tab), delivers a sobering assessment (opens in a new tab) of Western efforts to reduce reliance on China across critical minerals supply chains.

Drawing on data from the International Energy Agency and expert interviews spanning academia, finance, and industry, the analysis finds that while the U.S., G7, and allied nations have accelerated deals, subsidies, and strategic investments since China’s October 2025 export controls, China’s near-monopoly over downstream processing—especially rare earth elements—remains structurally intact.

The core finding is blunt: mining investments alone will not break China’s advantage, which is rooted in decades of accumulated processing expertise, vertically integrated industrial clusters, and the ability to operate at losses downstream.

Study Scope and Methods

This analysis synthesizes market-share data, government deal tracking, and expert economic commentary. It relies heavily on International Energy Agency estimates showing China refines 47%–87% of key critical minerals, including rare earths, lithium, graphite, cobalt, and copper. The article then examines recent Western policy responses—government equity stakes, long-term offtake agreements, price floors, and tariffs—and evaluates their likely impact through interviews with economists and materials-market specialists.

Rather than a laboratory study, this is a policy-and-market intelligence assessment, designed to explain how supply chains actually function once minerals leave the ground and enter refining, separation, alloying, and magnet production.

Key Findings: Why Processing—not Mining—is the Bottleneck

1. China’s Advantage Is Downstream, Not Just Geological

China’s dominance in rare earths is often misunderstood. The country does not control all global ore, but it overwhelmingly controls separation, refining, and magnet manufacturing. These steps are technically complex, environmentally challenging, and capital-intensive—creating high barriers for late entrants.

2. Vertical Integration Allows China to Absorb Losses

As Adam Webb of Benchmark Minerals explains, Chinese firms can run mines or processors at a loss if profits are recovered later in batteries, electric vehicles, or electronics. Western firms, operating in fragmented markets, cannot easily replicate this model.

3. Government Backstops Are Growing—but Selective

The study highlights aggressive Western intervention, including:

• The U.S. Department of Defense is becoming the largest shareholder in MP Materials, with a 10-year magnet offtake and price floor.
• Canadian government fixed-price graphite offtakes.
• Allied investments in gallium, scandium, and tungsten projects across Australia and Central Asia.

These moves reduce risk for select companies—but do not yet constitute a full industrial ecosystem.

Rare Earths: A Special Case of Market Distortion

As Rare Earth Exchanges™ chronicles frequently, rare earth elements stand out because they are small markets with outsized strategic importance. Unlike lithium or copper, even modest government actions can distort prices. The MP Materials deal, for example, pushed North American rare earth prices above Chinese benchmarks, creating a two-tier market.

However, higher prices come with trade-offs: downstream manufacturers—EV makers, wind turbine producers, defense contractors—face increased costs, potentially slowing clean-energy deployment. Of course, Rare Earth Exchanges has called out the fact that in America, downstream demand dynamics were stripped out of the Big Beautiful Bill (e.g., EV incentives, etc.).

Implications: What This Means for Investors and Policymakers

• Short term: China’s processing chokehold persists. Stockpiling, tariffs, and selective subsidies will not dislodge it quickly.
• Medium term: A handful of Western firms may become “too strategic to fail,” protected by government offtakes and capital support. Sounds like a page from REEx.
• Long term: True diversification requires decades of sustained investment in midstream processing, skills development, recycling, and coordinated allied demand—exactly where current efforts remain fragmented. Again, concurring with many of our articles.

The analysis also notes a rising push toward material substitution and circular economy solutions, including rare-earth-free motors and alternative battery chemistries—signals that China’s leverage is already reshaping technology choices.

Limitations and Controversies

This assessment relies on expert opinion and current market data, not predictive modeling. It does not quantify future recycling breakthroughs or disruptive processing technologies that could alter the balance. Critics may also argue that government intervention risks overpaying for security, locking in inefficient producers, and inflating costs for consumers.

Note the group could highlight the marked lead President Trump has established for the USA as compared to the European Union. While not sufficient from an industrial policy standpoint, the impact has been material with America becoming a hub for ex-China.

Yet the central controversy remains unresolved: Is the West willing to tolerate higher prices and long timelines to secure supply-chain sovereignty—or not?

Conclusion: Strategy, Not Symbolism, Will Decide the Outcome

The study makes clear that breaking China’s rare earth processing dominance will not come from mining announcements or headline deals alone. It will require patient, coordinated, and politically durable industrial policy—especially in refining and magnet manufacturing. Until then, China’s grip on the rare earth value chain remains firm, and Western supply security remains conditional, costly, and incomplete.

Source: Symes, G. The West’s New Critical Minerals Playbook. Energy Intelligence Group / Energy Compass, December 30, 2025.

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