A major international energy watchdog is sounding the alarm that China’s restrictions on rare earth exports could put $6.5 trillion worth of industrial production outside the country in jeopardy, according to a report released Thursday.
China, which leads the world in rare earth production, broadened its export controls back in October of last year to include additional materials and added new licensing requirements. The country later agreed to hold off on full enforcement for one year.
Rare earths are a collection of 17 metals that, while used in relatively small amounts, are critical components in a wide range of products — from automobiles and aircraft to consumer electronics and military weapons systems.
Should those export controls go fully into effect, roughly $6.5 trillion in production across the automotive, high-tech, defense, and energy industries could face serious supply disruptions, according to the International Energy Agency’s Global Critical Minerals Outlook report. The U.S. and Europe together would absorb close to half of that economic blow.
“Our latest analysis shows that vast amounts of economic value depend on relatively small volumes of critical minerals, whose supply chains remain highly concentrated and are therefore vulnerable,” said IEA Executive Director Fatih Birol.
The agency also raised concerns about China’s separate planned restrictions on graphite, a material essential for electric vehicle batteries. Those controls were announced alongside the rare earth measures and have also been postponed. If they take full effect, approximately $300 billion in production outside China could be at risk. China currently controls more than 90% of the world’s processed graphite supply.
Western governments have been working to establish alternative supply chains for critical minerals. The IEA noted that public financing commitments for new development projects more than quadrupled between 2023 and 2025, reaching $65 billion.
New rare earth refining facilities in the United States and Malaysia have already helped chip away at China’s dominance, reducing its share of the global market from 90% in 2023 to 85% last year. If additional planned projects move forward on schedule, China’s market share could drop further to around 70% by 2035.
