^{Photo: CNBC}

In the rapidly evolving landscape of global technology and defense, rare earth elements (REEs) have emerged as indispensable components. These 17 metallic elements are critical in manufacturing everything from electric vehicles (EVs) and wind turbines to advanced military hardware. As the world pivots towards green energy and digitalization, the demand for REEs has surged. However, this growing dependence has spotlighted a significant vulnerability: China's near-monopoly over the rare earth supply chain.

China's Grip on Rare Earths

As of 2024, China controlled approximately 69% of global rare earth mine production and nearly half of the world's reserves. More strikingly, it dominates about 90% of the processing capacity for these elements, a critical step in making them usable for high-tech applications. This dominance isn't merely a product of resource abundance but also of strategic investments and policies that have positioned China as the linchpin in the global REE supply chain.

Western Recycling Initiatives: A Partial Solution

In response to this dependency, Western nations have ramped up efforts to recycle rare earth elements from end-of-life products. For instance, the U.S. Department of Defense invested $4.2 million in Rare Earth Salts, a company specializing in extracting REEs from recycled materials like fluorescent light bulbs. Similarly, Japan's Toyota has been developing technologies to reduce the use of rare earth elements in its vehicles.

While these initiatives are commendable, they face significant challenges. Recycling REEs is a complex, energy-intensive process that often yields limited quantities. Moreover, the infrastructure for large-scale recycling is still in its infancy, making it an insufficient counterbalance to China's dominance in the near term.

The EV Boom and Rare Earth Demand

The transition to electric vehicles has further intensified the demand for REEs. A typical single-motor battery electric vehicle contains about 550 grams of rare earth elements, compared to just 140 grams in a conventional gasoline-powered car. With more than half of new passenger cars sold in China being battery-only or hybrid-powered, the global appetite for REEs is only expected to grow.

China's Strategic Export Controls

China has not hesitated to leverage its control over rare earths for geopolitical advantage. In April 2025, it announced export controls on seven rare earth elements, including terbium and cerium, both vital for EV production. These controls require Chinese companies to obtain government approval before exporting these elements, effectively tightening the spigot on global supply.

Moreover, China has extended export restrictions to other critical minerals like gallium, germanium, and tungsten, which are essential for semiconductors, solar panels, and military applications. These moves have raised alarms in Western capitals about the security of supply chains for technologies deemed crucial for national security and economic competitiveness.

The Recycling Bottleneck

While recycling offers a pathway to mitigate dependency, it is not a panacea. The process is not only costly and technically challenging but also limited by the availability of recyclable materials. For example, tungsten, used in EV batteries and military applications, is difficult to recycle due to its low concentration in end-of-life products and the complexity of extraction. Experts estimate that it could take up to seven years before recycled tungsten can meaningfully contribute to supply, by which time demand may have further outstripped supply.

The Broader Implications

The ramifications of China's control over rare earths extend beyond the automotive and tech industries. The defense sector is particularly vulnerable; for instance, the F-35 fighter jet contains over 900 pounds of rare earth elements. Additionally, the healthcare industry relies on REEs for medical imaging and diagnostics, with gadolinium being a key component in MRI contrast agents.

The strategic importance of these elements has prompted countries like Australia to consider establishing critical minerals reserves. However, such measures are long-term solutions and do not address immediate supply concerns.

‍

While Western nations are making strides in recycling rare earth elements and diversifying supply chains, these efforts are currently insufficient to counterbalance China's entrenched dominance. The path forward requires a multifaceted approach, including investing in domestic mining and processing capabilities, fostering international partnerships, and accelerating research into alternative materials. Without such comprehensive strategies, the West will remain vulnerable to supply disruptions that could have far-reaching economic and security implications.