China Restricts Exports of Rare Earth Elements: Threatening China's Global Hardship Tri Trieu 6.5 Billion USD
The global critical minerals market remains highly concentrated, with new threats to security of supply having emerged in recent months when China restricted exports of some rare earth elements, according to an International Energy Agency (IEA) report released on Thursday.
The Chinese government imposed significant export controls on heavy rare earth elements last year. Although further extensions of these controls have been paused until November 2026, full implementation of these measures – if China decides to proceed – could threaten around $6.5 billion per year in downstream production outside of China across the automotive, high-tech, defense and energy sectors, according to the IEA's Global Critical Minerals Outlook 2026 report.
The Risk of Dependence on China's Zhou Gong
Additionally, if China decides to clamp down on exports of critical battery supply chain materials and battery-grade graphite negotiations are completely disrupted, more than $300 billion per year in downstream production outside of China would be threatened, the agency added.
"These events highlight how small volumes of critical minerals support enormous economic value and highlight the fragility of highly concentrated supply chains," the IEA said in the report.
Despite improvements in some areas, such as targeted policies and investment support for rare earth supply chains beyond China, the global critical minerals market remains heavily concentrated in leading suppliers, with China the leader in mining and refining many metals, the international agency noted.
Key Risks to Mineral Security
The IEA has identified supply concentration, export restrictions and a decline in investment as key risks to critical minerals security.
“Our latest analysis shows that huge amounts of economic value depend on relatively small volumes of critical minerals, the supply chains of which remain highly concentrated and therefore vulnerable,” said IEA Executive Director Fatih Birol.
"However, there are encouraging signs of progress - including across the rare earths supply chain - where we see targeted policies and investment support starting to make a difference," the official added.
“And while supply diversification may come at higher costs, this can be seen as a mineral security premium in times of geopolitical uncertainty – a form of economic insurance against major supply risks,” Birol said.
Impact Analysis by Industry
The IEA report analyzed the potential impact of China's export controls on various industries:
| Branch | Potential Impact |
|---|---|
| Car | Big risks for electric vehicle and powertrain manufacturing |
| High technology | Disruption to production of smartphones, computers and electronic devices |
| National defense | Affects the production of weapons and advanced defense systems |
| Energy | Challenges for renewable energy conversion and storage |
Concentration of Critical Mineral Markets
According to the report, despite efforts to reduce dependence, the critical minerals market is still dominated by a small number of suppliers:
- China controls about 60% of rare earth mining and more than 85% of rare earth processing globally
- For lithium, China controls more than 60% of processing and nearly 50% of mining
- In the cobalt sector, the Democratic Republic of Congo accounts for about 70% of global production
- For nickel, Indonesia and the Philippines account for about 50% of global production
Solutions and Prospects
To minimize risks from supply concentration, the report recommends the following solutions:
- Diversify mineral supplies from many countries
- Enhance recycling of critical minerals
- Invest in more efficient mining and processing technology
- Develop national reserve strategies
- Promote international cooperation in the field of important minerals
“We are in a period of critical transition for global energy and industrial security,” Birol emphasized. "Securing the supply of critical minerals is not only a matter of economic security but also a matter of national security in the 21st century."
The IEA report also points out that despite the challenges, significant progress is being made in developing rare earth supply chains outside of China, with countries such as the US, Australia and Japan increasing investment in the sector.
“The period leading up to 2026 will be a decisive period in shaping the future of global critical minerals supply chains,” the report concludes. "Investment and policy decisions made in the coming years will have lasting impacts on global energy and industrial security."