The story begins beside a conference stage in Singapore, where a veteran mining executive said the quiet part out loud. “Clearly, China is the leader, and the U.S. is far behind,” Mick McMullen told a Fortune reporter on March 10, on the margins of the U.S. Capital Access Forum, a Singapore event run by the business advisory firm Hall Chadwick. What unfolded around his comment is a supply story three decades in the making, one that now reaches from Japanese car plants to American weapons programs.
At its heart is a distinction most shoppers have never had reason to learn: digging rare earths out of the ground is one business, and turning them into usable material is another. China produces roughly 70% of the world’s rare earths, but it holds close to 90% of global refining and processing capacity, and that second number is the one that gives Beijing leverage over the metals inside electric vehicles, wind turbines, advanced semiconductors and precision-guided munitions. “It’s a bit unbelievable that it’s taken so long for everyone to realize that maybe we should have some of these things in house”, McMullen said, noting that the Chinese program runs back more than 30 years, to state spending that began building the chain in the 1980s.
For those involved at the receiving end, the leverage has been demonstrated twice. In 2010, after a maritime dispute over islands in the East China Sea, China cut Japan off from rare earth shipments for two months, choking industries that depended on high-tech materials. “Japan has had multiple occasions where China turned the taps of rare earth off,” McMullen explained, and earlier this year Beijing tightened export restrictions on gallium, germanium and graphite to Japan after comments on Taiwan by Prime Minister Sanae Takaichi. The American turn came in 2025, when Beijing restricted samarium, dysprosium and terbium, metals crucial to defense, vehicles and chips, in retaliation for President Donald Trump’s tariffs. Auto executives worried aloud that production lines would stop within weeks; several of those controls were later suspended under the tariff truce struck last November.
The scrambling that followed was years late but real. The European Union passed its Critical Raw Materials Act in 2024, setting 2030 benchmarks of 10% of annual consumption met by domestic extraction, 40% by domestic processing and 25% by recycling. Australia, Canada, Japan and France are pouring money into processing plants. Last October, the United States signed a pact worth $8.5 billion with Australia on rare earths, plus two deals with Malaysia and Thailand, to give American manufacturers somewhere else to buy.
Whether any of it closes the gap is the open question, and the honest answer is not soon. “The processing process requires specialized technology, which China currently controls,” McMullen said, allowing that South Korea has some good technology of its own, all of it small-scale for now. Dulguun Erdenebaatar, chief executive of Singapore-based Boroo Mining Company, made the same point from the buyer’s side: the world obsesses over where the resources sit and how to secure them, but “the processing capabilities are very important to unlock supply chain constraints internationally.” The optimistic case, per McMullen, is a decade to build a rival industry. “I’m not sure how long it takes to solve it, and whether it can get done in one administration term,” he said, with a forecast attached: “The rest of Asia probably just has to keep taking it off China for now.”
Sources
- Beijing's dominance in rare earth processing leaves others scrambling to close the gap | Fortune
- China’s Rare Earth Dominance Sparks Global Supply Chain Concerns – The Financial Analyst
