BEIJING, July 7 — Seventeen chemically similar metallic elements, known collectively as rare earth elements, are the subject of intensifying global competition as demand surges for clean energy technologies and defense systems. The group includes the 15 lanthanides plus scandium and yttrium. These materials are essential for permanent magnets used in electric vehicle motors, wind turbines, consumer electronics, and defense applications such as guided missiles and radar.
According to figures from 2023, China dominates the sector, accounting for approximately 60% of global mining and over 85% of processing capacity. That concentration has spurred action from major economies.
The United States, through its Department of Defense and Department of Energy, has launched initiatives to secure domestic supply chains. In 2022, the U.S. awarded a $35 million grant to MP Materials to process rare earth elements at its Mountain Pass facility in California. The European Union and Japan have established strategic partnerships and stockpiling programs of their own.
Key geopolitical tensions, particularly between the U.S. and China, have intensified the race for alternative sources, with projects under development in Australia, Greenland, and Africa. The global rare earth market was valued at around $7.5 billion in 2022.
Projections show it reaching $12.3 billion by 2030, driven primarily by demand from the clean energy and electric vehicle sectors.
Supply chain vulnerabilities
China’s dominance in processing is the critical bottleneck. Even when rare earth ore is mined elsewhere, much of it still flows to China for separation and refining. The Mountain Pass facility in California, for example, historically shipped its concentrate to China for final processing before the MP Materials grant aimed to change that.
The U.S. initiatives represent an attempt to rebuild domestic processing capability that was largely lost over the past two decades. The $35 million grant to MP Materials was a targeted step in that direction.
Japan and the European Union have taken different approaches. Both have established stockpiling programs to buffer against supply disruptions. Strategic partnerships with producer countries have also been formed, diversifying the sources of supply beyond China.
Market trajectory
The projected growth from $7.5 billion to $12.3 billion by 2030 reflects the central role these elements play in the energy transition. Electric vehicles and wind turbines are the primary drivers, as both technologies rely heavily on powerful rare earth magnets. Consumer electronics remain a steady demand source.
Defense systems, while a smaller volume market, represent a strategic imperative for countries that produce their own military hardware. Projects in Australia, Greenland, and Africa are at various stages of development.
Each faces significant technical and financial hurdles, from building processing facilities to securing long-term offtake agreements. The geopolitical pressure, however, continues to push these projects forward. What to watch next is whether the alternative supply projects can move from development to production before demand outstrips available supply.
The gap between mining capacity and processing capacity remains the industry’s most persistent challenge.
