In the desert plain of Inner Mongolia, in Baotou, a toxic black artificial lake stretches for miles, a remnant of decades of intensive mining. It is one of the largest rare earth complexes in the world, with giant pipes pouring out streams of mud laden with chemical and radioactive waste every day.
NYT
Cancer rates in the area are 70 times higher than the Chinese average, to the point that a 20-story hospital dedicated entirely to bone diseases has been built to treat local residents. These scenes illustrate the dark side of a sector that has become highly strategic: rare earths. Often invisible to the general public, these 17 metals with exotic names (neodymium, dysprosium, lanthanum, etc.) are nevertheless omnipresent in our daily lives—and at the heart of a global geopolitical and industrial battle dominated by China.
An article that takes an in-depth look at rare earths and China's dominance in this strategic sector: Beijing has the global tech industry by the throat with rare earths.
The global market and its key players
The rare earths market is characterized by extreme dependence on China. From the mine to the final magnet, the supply chain is largely dominated by Beijing. In 2023, China extracted around 69% of the rare earth minerals produced worldwide, far ahead of the United States (12%) and countries such as Burma/Myanmar (11%) and Australia (5%). However, this overwhelming position is even more striking at the processing stages: China represents between 85% and 90% of global rare earth refining capacity and produces around 90% of the world's rare earth permanent magnets. No other country has such an integrated value chain, from mining to the manufacture of high-tech components. In other words, even the few mines outside China often send their rare earth concentrate to China for refining.
Faced with this virtual monopoly, who are the other players? They can be counted on the fingers of a hand. Lynas Rare Earths, an Australian company, is the leading non-Chinese producer of separated rare earths. Based on the Mount Weld deposit (Australia) with a processing plant in Malaysia, Lynas supplies around 5% of global volumes.
The Pentagon considers it strategic and is currently co-financing the installation of a Lynas refining plant in the United States (Texas) for "light" rare earths. If this project is successful, Lynas estimates that it will be able to supply up to 25% of the world's rare earth oxides, which would significantly change the situation outside China.
In the United States, MP Materials reopened the Mountain Pass mine (closed since 2002) in 2017, making it the only American extraction site. MP currently sends its raw production to China for refining, but is building its own separation unit with public support. In July 2025, the US Department of Defense even injected $400 million in capital and $150 million in loans to accelerate this local industry. Despite this, US production remains less than 1% of Chinese volumes—a huge gap that experts warn will take 10 to 15 years of sustained investment to close.
In China, the sector is dominated by a few recently consolidated state-owned giants. These include China Northern Rare Earth Group High-Tech (parent company of the Baotou complex), which is the undisputed world leader. Another major Chinese player is Shenghe Resources, known for its holdings in mines abroad (Mongolia, North America) and also one of the main beneficiaries of global demand.
Outside China, in addition to Lynas and MP Materials, there are emerging projects in Australia (Iluka Resources, Arafura), Canada (Neo Performance Materials for magnets, Vital Metals, etc.), and Africa (Rainbow Rare Earths project in Burundi). However, none of these contenders are yet able to compete in terms of volume with the Chinese rare earth empire. For example, Myanmar (Burma) once supplied up to 10% of the world's ore through cross-border artisanal mining, but Beijing has gradually shut down this informal trade to maintain control over supply.
For investors, how can they take a position in the rare earths sector? Given the concentration of this industry, direct investment is not easy, but there are still several options for gaining financial exposure to this "strategic metal."
Specialized ETFs: The simplest way is undoubtedly to invest via an exchange-traded fund (ETF) that brings together the main players in the sector. One of the best known is the VanEck Rare Earth & Strategic Metals ETF, which tracks a global index of 21 companies active in the extraction, refining, or recycling of rare earths and other technological metals. Its top three positions are China Northern Rare Earth (11.37% of the fund), MP Materials (10.53%), and Lynas Rare Earths (7.17%). The fund also includes companies linked to "strategic" metals such as lithium (e.g., Albemarle, Pilbara Minerals, and Chile's SQM ), reflecting the fact that rare earths are often associated with other critical materials in investment funds. VanEck's ETF is listed in Europe (Euronext) and the United States.
Chinese dominance put to the test by geopolitics
China's near-monopolistic control over rare earths gives it powerful geopolitical leverage, which Beijing has not hesitated to use. A famous episode occurred in 2010: after a diplomatic incident with Japan (the arrest of a Chinese boat near the Senkaku Islands), China abruptly suspended its exports of rare earths to Japan. Japanese industry, which is 100% dependent on these imports, found itself in difficulty. Tokyo reacted vigorously: emergency investments in Lynas in Australia, R&D programs on recycling and rare earth-free magnets, the creation of strategic stockpiles, and diversification of supplies. Despite these efforts, more than 15 years later, Japan still imports more than 70% of its rare earths from China, proof of the resilience of the Chinese monopoly.
This precedent left a lasting impression in the West. Rare earths are now seen as a potential "trade weapon" in rivalries between major powers, just as oil was in the 20th century. Since 2018, the Sino-American trade war has reignited these tensions, with Beijing repeatedly threatening export restrictions. In 2023, at the height of tensions over semiconductors, China effectively tightened its export licensing regime for rare earths, requiring any foreign company wishing to purchase Chinese rare earths or use Chinese refining technologies to obtain government authorization. Officially justified on grounds of "national security," this draconian measure—which came into effect in 2025—created enormous friction in global supply chains. For several months, shipments of rare earths were stuck in Chinese customs awaiting licenses, causing shortages in the spring of 2025 that slowed down car factories in Europe due to a lack of magnetic components. Of more than 2,000 license applications filed by EU companies between April and September, barely half were approved by Beijing. The disruption was so severe that some electric vehicle production lines had to be shut down for a few days because suppliers ran out of neodymium for the motors.
Paradoxically, these Chinese warning shots have had a dual effect. On the one hand, they are causing anxiety among Western manufacturers, who are realizing their vulnerability. On the other hand, they temporarily boost the value of the few producers outside China, as we saw with the stock market surges of MP Materials and Lynas when rumors of quotas circulated. However, Western governments are well aware that relying solely on the market would be illusory, so the strategy is shifting toward "active defense" of this critical sector.
The latest sign of calm after the Trump-Xi handshake on October 30: Beijing has suspended its ban on exports of gallium, germanium, and antimony to the United States until November 27, 2026. These metals are crucial for LEDs, fiber optics, infrared sensors, batteries, and shielding, and Beijing has also relaxed its controls on "dual-use" graphite. The barriers are not disappearing: China still controls the tap and licenses remain key, but the gesture is enough to ease strained supply chains and seal, for a time, a technical truce in the techno-commercial dispute. This is more of a respite than peace: there is no guarantee of the scope of the authorizations or their duration beyond the timetable set by Beijing—proof that, in this market where the materials are not "rare earths" but just as strategic, diplomacy still dictates the pace of production.
Outlook: a delicate balance between opportunities and risks
For investors and strategists alike, the rare earths sector offers a fascinating mix of growth opportunities and geopolitical risks. On the one hand, global demand for these metals will only increase as the energy transition accelerates (consumption of neodymium could increase fivefold within 20 years, according to some projections). Companies that are well positioned in this niche could see their value grow significantly, especially as countries are willing to support (through subsidies, low-interest loans, and tax breaks) projects that strengthen security of supply. As we have seen, the stock prices of rare earth companies can skyrocket at the slightest announcement of restrictions or subsidies: the market incorporates a strategic premium.
On the other hand, this sector remains deeply dependent on political and diplomatic decisions. An unexpected trade agreement between Washington and Beijing could see China reopen its export floodgates. Conversely, a further deterioration in geopolitical relations could lead to a complete blockade, with unpredictable global economic consequences—but also huge potential gains for the few producers outside China, overnight. Volatility and uncertainty will therefore be the norm.
In any case, rare earths have emerged from the shadows to become a key strategic issue. The measures currently being implemented – diversification, recycling, innovation – will bear fruit, but gradually. Until then, China retains a formidable position as arbiter: it can influence prices and assert its primacy by adjusting its exports. For other nations, there is a fine line between preserving free trade (so as not to disrupt global industry in the short term) and investing in autonomy (to free themselves from this dependence in the long term). The rare earths sector thus perfectly embodies the challenges of our time: it brings together economics, technology, the environment, and geopolitics in a single melting pot, testing the ability of states and companies to cooperate—or compete—for the critical resources of the future.
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