For decades, China has held an unrivaled grip on the global supply of rare earth metals, essential for high-tech industries and the green energy transition. However, a study by the Chinese Academy of Sciences (CAS), reported by the South China Morning Post, warns that China’s dominance may be coming to an end within the next decade. The study projects that China’s share of the global rare earth market could shrink from 62% today to just 28% by 2035, and further to 23% by 2040, as new sources emerge across the globe.

Why China’s Lead Is at Risk

China’s rare earth industry has long benefited from vast reserves, government support, and its ability to process materials at lower costs. However, the CAS study highlights several factors that threaten its position:

• Diversification of Global Supply: New mining operations in Africa, South America, and Australia are expected to reduce reliance on Chinese exports.
• Heavy Rare Earths Competition: Even China’s stronghold in heavy rare earth production, centered in southern China, faces potential disruption from Greenland’s Kvanefjeld project and various South American developments.
• Refining Networks Outside China: Western nations, including the U.S. and Australia, are investing in refining facilities to bypass Chinese processing.
• Geopolitical Shifts and Trade Tensions: Nations wary of China’s dominance are actively seeking alternative suppliers to secure their supply chains.

Global Shifts Reshaping the Rare Earth Market

The CAS study used advanced modeling to simulate global mining decisions and industrial demand from 2025 to 2040. The findings suggest a profound transformation in the rare earth supply landscape:

• Africa’s Growth: Africa’s share of global rare earth production, currently negligible, is projected to rise to 6% by 2040, with mines in South Africa and Tanzania leading the way.
• Brazil’s Rising Role: Brazil’s Serra Verde and Amazonian deposits could supply up to 13% of global demand for heavy rare earths like dysprosium by 2040, although environmental and indigenous rights concerns remain hurdles.
• Australia’s Expansion: Major projects like Mount Weld and Olympic Dam are ramping up rare earth production and refining to compete with China.
• European Challenges: While Europe aims to become a bigger player, it faces delays in mining approvals and difficulty competing with China’s cost advantages.

Near-Term Market Volatility and Pricing Trends

Despite long-term diversification, the rare earth market remains highly volatile. Australian producer Lynas Rare Earths has warned of continued price fluctuations driven by uncertainty in the Chinese economy. The price of neodymium and praseodymium (NdPr), crucial for high-performance magnets, has seen significant declines—from $60.4/kg in June 2023 to $44.0/kg in June 2024—though recent signs suggest a potential recovery.

Lynas, one of the largest non-Chinese rare earth suppliers, is investing in refining capacity in Malaysia and Australia to strengthen its market position. It also aims to produce heavy rare earth elements, such as dysprosium and terbium, by 2025, further challenging China’s dominance.

Europe’s Struggles to Reclaim Rare Earth Independence

Europe has ambitious goals to reduce its dependence on China, but progress has been slow. The EU’s Critical Raw Materials Act sets targets for domestic mining, recycling, and processing by 2030. However, analysts suggest these goals may be unrealistic given current projects’ sluggish development.

Key challenges for Europe include:

• Lack of Domestic Mining: While Sweden and Finland have promising deposits, public opposition and lengthy permitting processes have delayed projects.
• Limited Processing Capacity: Solvay’s rare earth plant in France, once a global leader, now supplies only a fraction of Europe’s demand.
• Dependency on Chinese Imports: China still supplies 98% of Europe’s rare earth permanent magnet imports.
• Cost Barriers: European companies struggle to compete with China’s low-cost production, making it difficult to build a fully independent supply chain.

The Future of Rare Earths: A Volatile Road Ahead

The rare earth industry is entering a period of significant transformation. While China’s dominance is expected to erode over the next two decades, the transition will not be smooth. Key factors influencing the market include:

• New Technologies: Advances in recycling, alternative materials, and deep-sea mining could disrupt supply dynamics.
• Geopolitical Risks: Export restrictions, trade wars, and instability in emerging mining nations could impact supply security.
• Market Demand: The growing adoption of electric vehicles, wind turbines, and other high-tech applications will drive demand, but economic slowdowns could lead to temporary price crashes.

In the short term, China remains the dominant player, but its strategic position is weakening. Nations and companies investing in alternative sources and refining capacity today may reshape the global rare earth landscape by 2040. Whether China can adapt and maintain a strong role in this changing market remains to be seen.

ACZ Editor: While this is far from certain, it appears that the West’s response to China’s cornering the market on rare earth metals is being countered effectively. But is also could put pressure on China to act more aggressively while it still has the advantage.