Signal
In 2025 China continued to expand export restrictions on seven critical rare earth elements (REEs), including samarium, dysprosium, and scandium. Exporters must now obtain licences, slowing shipments and adding compliance barriers. China already refines over 90% of global REEs, which are essential for defence systems, electric vehicles, wind turbines, and advanced electronics. The new rules extend earlier curbs on gallium and germanium, signalling a broader resource control strategy. Immediate disruptions are being reported in defence, automotive, and energy manufacturing supply chains.
Implications
Beijing’s refining dominance gives it leverage across multiple industries. Restricting REE exports can delay allied defence procurement, inflate clean-energy costs, and disrupt electronics manufacturing timelines. Allies will accelerate diversification strategies like recycling, alternative sourcing, and new refining capacity, but these take years to scale. Until then, China can use its chokehold on refining as a bargaining tool in wider geopolitical contests.
Strategic Takeaway
Control of refining is control of capability. Without it, capacity is borrowed, not owned.
Investor Implications
Expect rising capital in non-Chinese rare earth refining, particularly in the US, EU, and Australia. Recycling technologies will attract investment as faster-to-scale alternatives. Defence primes and EV manufacturers may pursue long-term contracts to secure supply, boosting upstream mining and refining ventures. Investors should monitor firms working on REE substitutes and magnet innovation, which could shift dependency patterns over the next decade.
Source: csis.org
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