Rare Earth Elements: What They Are, Where They Come From, and Why the World Is Fighting Over Them

Key Takeaways

• China controlled over 69% of global rare earth mining and roughly 90% of refining capacity in 2024
• Demand for magnetic rare earths is projected to triple between 2022 and 2035, driven by EVs and wind power
• China’s 2025 export restrictions on seven rare earth elements disrupted supply chains across the US, Europe, and Asia

The Seventeen Elements Nobody Talks About

The phrase “rare earth elements” is one of the more misleading terms in materials science. These 17 metallic elements are not particularly scarce in the Earth’s crust. Cerium, one of the most common among them, is roughly as abundant as copper. Neodymium outstrips lead in average crustal concentration. What makes them functionally rare is that economically minable concentrations are uncommon, and once ore is extracted, separating individual elements from one another requires chemistry so complex and infrastructure so capital-intensive that most countries have never bothered to build it.

All 17 elements fall into two broad families. The light rare earth elements (LREEs) include lanthanum, cerium, praseodymium, neodymium, promethium, samarium, and europium. The heavy rare earth elements (HREEs) encompass gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium, plus scandium and yttrium, which share enough chemical behavior with the lanthanide series to be grouped alongside it for practical purposes. Heavy rare earths, produced in far smaller volumes than light ones, carry higher prices and greater strategic sensitivity. Dysprosium and terbium appear in the strongest permanent magnets ever produced. Samarium turns up in aerospace magnets where performance must hold at extreme temperatures. Scandium strengthens aluminum alloys used in aerospace and defense structures.

What ties all 17 together is their position in the periodic table and the nearly identical ionic radii they share within the lanthanide block. Separating one from another is, as materials scientists often describe it, like sorting sugar from salt by color. Their chemical similarity is not just a processing headache; it’s the reason their industrial applications are often substitution-proof. A manufacturer that relies on dysprosium for a specific magnet application generally can’t switch to a different element when supply tightens. The physical properties simply don’t transfer.

This substitution difficulty is also why the processing infrastructure built to handle rare earths carries so much strategic weight. China built that infrastructure over four decades. Most of the rest of the world is now scrambling to replicate even a fraction of it.

Where Rare Earth Elements Show Up

The applications for rare earth elements span virtually every segment of the modern economy, from the prosaic to the classified.

The most commercially consequential use is in permanent magnets, specifically the neodymium-iron-boron (NdFeB) variety, which are the strongest permanent magnets ever synthesized. These magnets sit at the heart of electric vehicle traction motors, offshore wind turbine generators, industrial servo motors, computer hard drives, and the vibration motors in smartphones. Each electric vehicle typically contains 1 to 2 kilograms of NdFeB magnets. A large offshore wind turbine may use hundreds of kilograms per megawatt of generating capacity. The magnet segment accounted for roughly 41 to 42 percent of global rare earth revenue in 2024, according to Grand View Research, and that share is expanding as EV adoption accelerates globally.

Defense and aerospace represent a separate high-stakes category. Samarium-cobalt magnets appear in jet aircraft navigation and actuation systems. Europium and terbium activate the phosphors in military displays and the transducers in naval sonar systems. Lanthanum compounds are found in night-vision goggles. Dysprosium is added to NdFeB magnets to maintain magnetic performance at elevated temperatures, making it indispensable in missile guidance systems, electric motor drives, and radar arrays. The U.S. Department of Defense recognized the rare earth supply chain as a strategic vulnerability well before Beijing made that vulnerability geopolitically visible in 2025.

The oil and gas industry is a significant and often-overlooked consumer. Lanthanum and cerium are used in fluid catalytic cracking catalysts at petroleum refineries to convert crude oil fractions into more useful products including gasoline and diesel. Cerium oxide is the compound behind the global glass and optical polishing industry, used on everything from camera lenses to smartphone screens. Healthcare depends on gadolinium chelates as contrast agents in MRI scanners, and holmium-YAG lasers are used in minimally invasive surgical procedures for conditions ranging from kidney stones to prostate disease.

Consumer electronics is the most visible category but not the largest by volume. A single smartphone contains trace quantities of several elements: neodymium in the speaker, lanthanum in the camera optics, europium in the display phosphors. Laptops, wireless earbuds, and electric bicycles each contribute marginal demand that, aggregated across billions of units, creates a substantial market.

The International Energy Agency projects that global rare earth demand will increase 50 to 60 percent between today and 2040 across its stated policy scenarios, with the sharpest growth tied to permanent magnets for EVs and wind power. McKinsey research placed global demand for magnetic rare earth elements at 59 kilotons in 2022 and projected it reaching 176 kilotons by 2035 — essentially a tripling driven by electrification and renewable energy deployment. Wood Mackenzie analysts forecast EV-related rare earth demand specifically could increase by more than 300 percent by 2030.

The Countries That Hold the Reserves

Global rare earth reserves are estimated at approximately 90 million metric tons of rare earth oxide (REO) equivalent, according to the U.S. Geological Survey’s Mineral Commodity Summaries published in January 2025. The distribution of those reserves is lopsided, but not nearly as extreme as the production picture that follows from them.

China sits at the top with approximately 44 million metric tons, roughly half the world’s total. The single largest concentration is the Bayan Obo mining district near Baotou in Inner Mongolia, a deposit covering about 10 square kilometers that holds roughly 83 percent of China’s national rare earth reserves and is considered the largest known REE deposit anywhere on Earth. As of 2021, that deposit alone held an estimated 36 million tons in REO equivalent, according to the Guangzhou Institute of Geochemistry. China’s southern provinces, particularly Jiangxi, host ionic clay deposits that are disproportionately rich in heavy rare earths, a geological advantage that competitors have found exceptionally difficult to replicate through any other deposit type.

Brazil holds the second-largest reserves globally, yet produced only about 20 metric tons in 2024 — a number that barely registers against total global output. The gap between what Brazil contains in the ground and what it extracts illustrates a pattern visible across several resource-rich nations: reserves and production are separated by decades-long timelines for environmental permitting, infrastructure construction, and processing facility development. Vietnam holds a large reserve base, with some estimates placing its resources above 22 million metric tons, yet commercial production remains limited relative to its geological endowment. Russia holds substantial resources, with the Tomtor deposit in the Sakha Republic representing one of the world’s richest concentrations of heavy rare earths. Development there has proceeded slowly under TriArk Mining, a joint venture involving the Rostec conglomerate, and in late 2024, President Putin publicly accused the company of delays and floated the idea of greater state involvement.

India holds approximately 6.9 million metric tons, primarily in monazite-bearing beach sands along its coastline. In October 2024, the engineering firm Trafalgar announced plans to build India’s first rare earth metals, alloy, and magnet plant. Australia holds 5.7 million metric tons, concentrated at the Mount Weld deposit in Western Australia. The United States holds approximately 1.9 million metric tons of rare earth reserves, centered on Mountain Pass in California, while the USGS notes North American measured and indicated resources at 3.6 million tons in the United States and more than 14 million tons in Canada, suggesting the continent’s total resource base is considerably larger than domestic production figures imply.

The top six countries by reserve base — China, Brazil, Vietnam, Russia, India, and Australia — together control roughly 92 percent of known global rare earth reserves. The remaining 8 percent is distributed across smaller deposits in Greenland, South Africa, Tanzania, Madagascar, and elsewhere, several of which have attracted significant exploration capital in recent years as buyers seek supply routes that bypass China.

Who Produces What

The production picture is far more concentrated than even the reserve picture suggests. The USGS estimated global mine production at approximately 390,000 metric tons of REO equivalent in 2024, a threefold increase from 132,000 metric tons in 2017. That surge reflects rising quota allocations in China, accelerating output in Myanmar and Thailand, and Nigeria’s rapid emergence as a new producer.

The following table summarizes 2024 production figures based on USGS Mineral Commodity Summaries data:

China’s 270,000 metric tons came from the Bayan Obo district and various southern ionic clay mines, operating under a quota system administered through the Ministry of Natural Resources. That quota increased 5.9 percent in 2024 relative to the prior year, a more modest rise than the double-digit annual increases that characterized much of the preceding decade. The quota system matters well beyond China’s borders: when Beijing raises output allowances generously, global prices soften; when it tightens them, prices climb regardless of what other producers do.

The United States drew almost entirely from MP Materials‘ Mountain Pass mine in California’s San Bernardino County, the only operating rare earth mine of significant scale in the Western Hemisphere. Mountain Pass is a light rare earth deposit, meaning its ore profile skews toward lanthanum, cerium, neodymium, and praseodymium. MP Materials holds the capacity to produce approximately 40,000 metric tons of total rare earth oxides annually, representing around 11.5 percent of the global market. The company began stockpiling a heavy rare earth concentrate (internally designated SEG+) from late 2023, containing samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, and yttrium, pending construction of a dedicated heavy rare earth separation facility planned for commissioning in mid-2026.

Myanmar’s 31,000 metric tons came almost entirely from ionic clay deposits in the Kachin State, centered on Chipwe and Pangwa near the Chinese border. Nearly all of that material crossed into China for processing through border crossings at Pangwa and Kan Paik Ti. Myanmar functions primarily as a raw material feeder for Chinese refining operations rather than as an independent supply chain actor. The political instability in Kachin State makes flows from this corridor unpredictable: a crackdown on illegal mining in early 2025 was sufficient to cause a 20 to 25 percent increase in NdFeB magnet input costs for producers across Asia and Europe.

Australia’s output came almost entirely from Lynas Rare Earths‘ Mount Weld mine, with processing carried out at its refining facility in Kuantan, Malaysia. Lynas is the world’s largest rare earth producer outside China, a position it has held since beginning production in 2011. The company is expanding its upstream concentration capacity at Mount Weld and building a cracking and leaching facility in Kalgoorlie, Western Australia that would shift more of the chemical processing stage onto Australian soil, reducing logistics complexity and Malaysian regulatory exposure.

Thailand and Nigeria, each producing 13,000 metric tons, represent two of the more striking recent entries in global production data. Thailand’s output jumped 261 percent year-over-year in 2024. Nigeria’s rose more than 80 percent in the same period, and the Nigerian government signed a memorandum of understanding with France in late 2024 to jointly develop its rare earth and broader minerals sector. The transparency of production methods and environmental compliance standards in both countries remains limited compared to Western producers, a gap that increasingly draws scrutiny from downstream manufacturers with sustainability commitments.

Who Consumes What

Global consumption of rare earth elements is even more geographically concentrated than production. Asia Pacific dominated the market with a revenue share of over 86 percent in 2024. China is simultaneously the world’s largest producer and its largest consumer, absorbing roughly 150,000 metric tons of REO equivalent per year in apparent consumption and converting it into refined materials, alloys, and finished components that flow through global manufacturing supply chains.

Japan is the second-largest consumer. Its permanent magnet industry, anchored by manufacturers including Shin-Etsu Chemical and TDK, depends heavily on rare earth inputs. Japan consumed close to 30 percent of global rare earth demand at its historical peak in the 2000s and has spent the years since systematically reducing that exposure through recycling programs, strategic stockpiling, and investment in overseas supply diversification. JOGMEC (Japan Organization for Metals and Energy Security) backed more than 100 overseas projects with combined financial support exceeding $600 million over two decades, maintaining offices in 15 countries by 2024.

The United States is the third-largest consumer, though apparent import figures understate true domestic consumption substantially. The USGS estimated U.S. imports of rare earth compounds and metals at $170 million in 2024, down from $186 million in 2023. The dominant domestic end use was catalysts, followed by permanent magnets, ceramics and glass, and metallurgical applications. But a large share of U.S. rare earth consumption arrives embedded in finished goods — electric motors, wind turbine components, hard drives, and consumer electronics containing magnets — that are never captured in raw mineral import data. Between 2020 and 2023, China accounted for 70 percent of U.S. rare earth compound and metal imports directly, with Malaysia (13 percent), Japan (6 percent), and Estonia (5 percent) supplying most of the remainder, though those materials typically originated from Australian or Chinese ore processed offshore.

Europe’s position is structurally similar to the United States, though in some ways more exposed. In 2024, China accounted for 46.3 percent of total EU rare earth element imports by weight, followed by Russia at 28.4 percent and Malaysia at 19.9 percent, according to Eurostat. Economists at the European Central Bank estimated that over 80 percent of large European firms are no more than three supply-chain intermediaries away from a Chinese rare earth producer. That proximity, invisible under normal trading conditions, became financially painful within weeks of China’s 2025 export restrictions taking effect, with REE prices in the EU reaching up to six times normal levels for some elements.

South Korea, a major producer of consumer electronics, electric vehicles, and industrial motors through companies including Samsung, Hyundai, and LG, is another significant consumer sitting well inside China’s supply web. In 2024, South Korea accounted for 10 percent of Chinese rare earth magnet exports by value.

China’s Processing Stranglehold

Mine production percentages do not capture the full depth of China’s position. Even more consequential is what happens after ore leaves the ground. China processes approximately 85 to 90 percent of all refined rare earth products globally. Every ton of ore that enters the separation and refining stage — whether it came from California, Western Australia, or the Kachin State — must contend with the reality that China spent four decades building and subsidizing the infrastructure to handle it while competitors largely chose not to.

The separation of rare earth oxides from ore requires large quantities of chemical reagents, sophisticated solvent extraction systems that cycle individual elements through hundreds of sequential separation stages, and significant environmental management capacity for the radioactive and acidic waste streams the process generates. China’s dominance in this work reflects not only geological fortune but also decades of state subsidy, underpriced chemical inputs, historically lower environmental compliance costs, and accumulated technical expertise at a scale competitors are only beginning to approach.

In permanent magnet manufacturing, the concentration is even more extreme. China produced approximately 138,000 metric tons of NdFeB magnets per year in recent production periods, representing roughly 90 percent of global output. In 2024, it exported 58,142 metric tons of rare earth magnets, generating nearly $2.9 billion in export value. Germany was the single largest buyer at 18.8 percent of Chinese magnet exports, followed by the United States at 12.8 percent, South Korea at 10 percent, and Vietnam at 8.1 percent. The downstream manufacturers of EVs, wind turbines, robotics systems, and defense hardware in all those countries were structurally dependent on Chinese magnet supply, regardless of what their governments said about supply chain independence.

Neo Performance Materials, operating a rare earth separation facility in Sillamae, Estonia through its subsidiary Silmet, represents one of the very few operating rare earth processing facilities in Europe. Silmet processes mixed rare earth concentrates from a range of sources and has operated as a processing site since the Soviet era. It is a useful illustration of what rare earth processing capacity looks like at non-Chinese scale: meaningful in the European context but a fraction of what Chinese facilities handle.

The Web of Controversy

Rare earth elements sit at the intersection of environmental damage, labor rights, geopolitical leverage, and strategic competition. The controversies across each dimension are substantial, and they don’t resolve neatly.

Environmental Costs and Community Health

Mining and processing rare earths generates a particularly toxic waste stream. For every metric ton of rare earth oxide produced, the process yields approximately one metric ton of radioactive residue, around 13 kilograms of dust, and thousands of cubic meters of waste gas and wastewater. Some assessments put the total waste generated at up to 2,000 tons of toxic material per ton of rare earth output, though the figure varies by deposit type, extraction method, and processing technology. The underlying problem is consistent: rare earth ores are frequently co-mingled with thorium and uranium, both radioactive, and separating the commercially valuable minerals from the radioactive ones is inherently messy.

The environmental record at Bayan Obo is the most documented case study of what decades of production without adequate environmental enforcement produces. The mine’s main tailings reservoir, the Weikuang Dam, holds over 70,000 tons of radioactive thorium. Pollutants have migrated into surrounding soils and groundwater over decades, affecting agricultural land and raising health concerns for herder communities in the area. China’s State Council has publicly described the country’s rare earth operations as causing “increasingly significant” environmental damage. Scientists have monitored thorium-laced sludge moving toward the Yellow River at a pace of 20 to 30 meters per year.

In Ganzhou, Jiangxi Province, known informally as the Rare Earth Kingdom, in-situ leaching operations historically flooded hillsides with ammonium sulfate to dissolve rare earth ions from clay. The process left behind elevated ammonia and nitrogen compounds in groundwater, along with heavy metals including cadmium and lead. China’s Ministry of Industry and Information Technology estimated the cleanup bill for southern Jiangxi Province’s ionic clay mining operations at 38 billion yuan — roughly $5.5 billion — as far back as 2011, with only a fraction of that amount spent since.

In Malaysia, Mitsubishi Chemical spent more than $100 million cleaning up its Bukit Merah rare earth processing site, which the company shut in 1992 amid community protests. The site is considered one of Asia’s largest radioactive waste remediation projects. Local physicians documented elevated leukemia rates in the surrounding area attributed to thorium contamination. The legacy of Bukit Merah shaped years of sustained community opposition to Lynas Rare Earths‘ nearby Kuantan facility, where approximately 1.5 million metric tons of residue accumulated without a permanent containment solution, triggering regulatory and legal disputes that ran for years.

Mountain Pass in California carries a comparable historical burden. Under prior ownership, the site experienced multiple spills of radioactive and hazardous wastewater in the 1980s and 1990s, resulting in fines totaling up to $1.4 million from the San Bernardino County District Attorney and eventually the suspension of processing operations. MP Materials, which acquired and recommissioned the site, operates it today as a zero-net-discharge facility with closed-loop water recycling and on-site tailings management, but the site’s past continues to inform community and regulatory expectations.

The broader environmental profile of rare earth production consistently surfaces the same risks: soil acidification through nitrification processes, radioactive contamination from co-associated thorium and uranium, heavy metal diffusion into aquatic ecosystems, and acid mine drainage affecting water quality for communities downstream. What makes these risks particularly difficult to manage is that rare earth ores are relatively dilute. Enormous volumes of rock must be processed to yield useful quantities of any individual element, amplifying waste volumes per unit of output compared to most other mining commodities.

Recycling is frequently proposed as the cleaner path forward, and the energy math genuinely favors it: recovering NdFeB magnets from end-of-life products requires 75 to 85 percent less energy than primary production. But recycling currently accounts for less than 1 percent of global rare earth supply. Collection infrastructure is sparse in most markets, concentrations in individual consumer devices are low, and separating individual elements from complex assemblies remains technically demanding at commercial scale. Companies including Cyclic Materials in Canada, HyProMag in the United Kingdom, and Noveon Magnetics in the United States are building commercial-scale magnet recycling operations, but scaling to industrial relevance will take years regardless of available capital.

Labor and Governance in Source Regions

Myanmar’s rare earth sector operates in a governance environment that has drawn sustained attention from human rights organizations. The Kachin State operations supplying heavy rare earth feedstock to China take place in an active conflict zone controlled by a mix of armed factions and military forces. Environmental oversight is minimal, working conditions are poorly documented, and revenues from mining have been associated with financing armed groups. The International Crisis Group and various international NGOs have flagged Myanmar rare earths as a supply chain integrity concern for downstream buyers in Japan, Europe, and the United States, though few manufacturers have publicly disclosed their exposure or changed procurement practices accordingly.

Nigeria, now among the top six producing countries globally, has similarly limited institutional infrastructure for environmental or labor oversight of its rapidly expanding mining sector. Its more-than-80-percent year-over-year production growth in 2024 outpaces the pace at which governance frameworks typically develop.

China’s Export Controls as Economic Leverage

The sharpest and most politically consequential controversy is the degree to which China has converted its refining position into a tool of economic coercion.

The first recorded instance came in September 2010, when China effectively halted rare earth exports to Japan for roughly two months following a diplomatic dispute over the Senkaku Islands. Neodymium prices jumped from around $10 per kilogram to $500 per kilogram in the months that followed, paralyzing supply-dependent manufacturers including Toyotaand Panasonic. Japan’s government responded by formalizing its Rare Metal Security Strategy and activating four pillars of supply resilience: overseas resource acquisition, domestic recycling, substitute materials development, and strategic stockpiling, all implemented through JOGMEC.

In the period between 2023 and 2025, China imposed export restrictions on a sequenced range of strategic materials before escalating to rare earths, including gallium, germanium, antimony, graphite, and tungsten. The most significant escalation came in April 2025. As part of a broader response to the Trump administration’s tariff increases, China’s Ministry of Commerce introduced licensing requirements for the export of seven medium and heavy rare earth elements: scandium, yttrium, samarium, gadolinium, terbium, dysprosium, and lutetium, along with related compounds, metals, and magnets. Exporters were required to apply for licenses and disclose end-user information. The process was widely described by exporters as deliberately opaque, selectively slow, and purposefully unpredictable.

Dysprosium prices in Europe tripled to approximately $850 per kilogram within weeks of the announcement, according to Argus Media. Automotive manufacturers outside China began partially suspending production. Defense contractors in the United States and Europe scrambled to assess their exposure to affected elements.

A second wave of restrictions followed in October 2025 under MOFCOM Announcement No. 61, which added five more rare earth elements and extended controls to equipment, technology, and any products manufactured outside China that incorporated Chinese-origin rare earths or used Chinese processing technology at any stage. That second wave also applied the Chinese version of the foreign direct product rule to rare earth items — a mechanism the United States had previously used to restrict semiconductor exports to China — creating extraterritorial reach over supply chains far beyond those with direct China exposure.

Diplomacy produced a temporary reprieve. Following negotiations in London in June 2025 attended by U.S. Treasury Secretary Scott Bessent, both governments reached a trade framework that restored access to rare earth supplies for U.S. companies. China’s rare earth magnet exports to the United States reportedly jumped 660 percent month-over-month in June 2025 following the agreement, though they remained 38 percent below the same month in 2024. The October restrictions were suspended until November 2026 through MOFCOM Announcements No. 70 and 72. The April controls remain in force: the seven elements added to China’s Dual-Use Items Control List continue to require export licenses regardless of the suspension. The October 2024 Rare Earth Management Regulations, which formalized state ownership of all Chinese rare earth resources and established a comprehensive traceability system, remain fully operative.

The practical lesson from the 2025 episode is that access to these materials is contingent on geopolitical conditions, not simply on commercial relationships of long standing. A European Parliament Think Tank analysis noted that even a partial suspension of Chinese exports caused REE prices in the EU to reach up to six times their pre-restriction levels for some elements. Whether Beijing is willing to escalate to a complete supply cutoff is genuinely uncertain — the mutual economic damage of a full embargo would constrain China as much as its targets. But the 2025 restrictions demonstrated that Beijing is willing to accept meaningful short-term economic disruption to signal long-term resolve.

What Comes Next

The future of rare earth elements is shaped by three dynamics playing out simultaneously: surging demand from clean energy and advanced manufacturing, substantial investment in supply chain diversification outside China, and persistent structural obstacles that prevent those investments from closing the processing gap quickly.

Demand is the most predictable part of the picture. The IEA’s Global Critical Minerals Outlook 2025 projects a 50 to 60 percent increase in rare earth demand by 2040, with permanent magnets for EV motors and wind turbines driving the bulk of growth. Each EV requires 1 to 2 kilograms of NdFeB magnets. Global EV sales are estimated to have exceeded 17 million in 2024, pushing EVs above 20 percent of global car sales for the first time. At that scale, the compound math of vehicle production volume against magnet content per unit produces demand figures that overwhelm anything the non-Chinese supply chain currently delivers.

The global rare earth elements market was valued at approximately $3.95 billion in 2024 and is projected to reach $6.28 billion by 2030 at a CAGR of 8.6 percent, according to Grand View Research. Research and Markets placed the 2024 figure at $5.40 billion and projected it reaching $7.79 billion by 2030 at a 6.3 percent CAGR. The divergence between those estimates reflects different methodologies and definitional scope, but the directional consensus holds: the market is growing faster than most industrial commodities, and the growth is structural rather than cyclical.

The investments flowing into non-Chinese capacity are real but not yet sufficient to close the processing gap within the near term.

In July 2025, the U.S. Department of Defense announced a $400 million equity investment in MP Materials alongside a 10-year commitment to purchase 7,000 metric tons per year of rare earth magnets for defense and commercial use. JP Morgan Chase and Goldman Sachs separately committed $1 billion in debt financing for MP’s planned 10-X magnet expansion facility. Within a week of the DoD announcement, Apple invested $500 million in MP’s Independence facility in Fort Worth, Texas, to fund a recycling line for magnets and components used in Apple devices. General Motors committed to purchasing 1,000 metric tons annually from the Independence facility, making it one of the first major automakers to publicly commit to a domestic rare earth magnet supply agreement in the United States. The Independence facility is targeting an initial annual production of around 1,000 metric tons of NdFeB magnets — less than 1 percent of China’s annual output of approximately 138,000 metric tons. The 10-X expansion, if fully executed, would raise that to approximately 10,000 metric tons.

Japan’s supply diversification program is the most institutionally mature of any non-Chinese effort. Beyond JOGMEC’s extensive overseas portfolio, the country’s most consequential bet is on the seafloor near Minamitorishima, Japan’s easternmost island, roughly 1,950 kilometers east of Tokyo. Researchers from the University of Tokyo first identified rare-earth-rich mud deposits there in 2013. The area contains approximately 6.8 million metric tons of rare earth mud within Japan’s Exclusive Economic Zone, including dysprosium at concentrations sufficient to supply roughly 730 years of global demand at current consumption rates, and terbium for approximately 420 years. The ore grade runs approximately 5,000 to 8,000 parts per million, roughly 20 times higher than typical land-based Chinese mines, and the material contains minimal radioactive elements, which would simplify processing considerably.

Extracting that material from depths of 5,700 meters using the deep-sea drilling vessel Chikyu involves engineering challenges not previously solved at commercial scale. The Japanese government invested approximately 40 billion yen through its Strategic Innovation Promotion (SIP) program since 2018, with an additional 16.4 billion yen allocated in the 2025 supplementary budget. Test extraction has been conducted, and the technical development trajectory is credible, even if commercial production at scale remains years away.

The European Union is moving on a legislative track. The Critical Raw Materials Act, which entered into force in 2024, sets binding targets for the EU to domestically extract at least 10 percent of its annual consumption of strategic raw materials, process at least 40 percent domestically, and ensure no single non-EU country supplies more than 65 percent of any strategic raw material by 2030. Rare earth elements have appeared on all five EU lists of strategic raw materials published since 2014. The 2025 Chinese export restrictions exposed how far the EU is from meeting those benchmarks.

In March 2025, President Trump signed an executive order on “Immediate Measures to Increase American Mineral Production,” directing federal agencies to accelerate permitting for domestic mineral projects. The following month, the United States signed a minerals resources agreement with Ukraine, granting the U.S. preferential access to Ukrainian mineral resources — which include documented rare earth deposits — in exchange for continued military support. The extent to which Russian-controlled territories overlap with economically important Ukrainian mineral zones complicates the commercial timeline, but the agreement reflects a formal acknowledgment by Washington that resource access and security policy are now inseparable.

Russia has signaled interest in a corresponding conversation. In late February 2025, Russian officials indicated to the Trump administration that they were open to a rare earth development deal, with the Tomtor deposit as the most obvious asset to offer. Western sanctions and the ongoing war in Ukraine make any near-term commercial cooperation difficult to structure, but the overture suggests that rare earth access has become a variable in a wider geopolitical negotiation whose parameters are still being established.

Venture capital flowing into U.S. rare earth startups reached a record $628 million in 2025, reflecting a private-sector assessment that supply chain diversification is becoming a durable commercial opportunity rather than a short-term policy story. Whether that capital translates into operating facilities is a separate question. The minimum timeline from resource discovery to commercial rare earth production is typically 10 to 20 years, and even well-funded projects face environmental permitting timelines, community opposition, and technical development challenges that don’t shorten simply because governments announce support.

In January 2025, USA Rare Earth produced its first sample of dysprosium oxide purified to 99.1 percent from the Round Top deposit in Texas, processed at a research facility in Wheat Ridge, Colorado. The company described it as a breakthrough for the domestic rare earths industry. It was — and the distance between a purified laboratory sample and full-scale commercial production capable of reducing national import reliance is also very large. Both things can be true simultaneously.

China, for its part, is not retreating from its position while competitors catch up. The October 2024 Rare Earth Management Regulations formalized state ownership of all Chinese rare earth resources, prohibited the destruction of REE deposits, required companies involved in mining, smelting, and trading to maintain detailed records of all product flows, and established a mandatory traceability system integrating that data into government databases. These are the moves of a country systematically deepening its control over an asset it has decided is strategically indispensable.

Summary

Rare earth elements are a group of 17 metallic elements whose magnetic, luminescent, and catalytic properties make them difficult or impossible to substitute across a growing list of applications in clean energy, consumer electronics, defense systems, and industrial manufacturing. China dominates both the extraction and processing of these materials, producing approximately 69 percent of global mine output in 2024 and refining roughly 85 to 90 percent of all finished rare earth products. The rest of the world mines the remaining third of ore but largely lacks the refining infrastructure to convert it to usable form without engaging China at some point in the chain.

Global production reached 390,000 metric tons in 2024, a threefold increase from 2017 levels, led by China, the United States, Myanmar, Australia, Thailand, and Nigeria. Consumption is similarly concentrated in Asia Pacific, with China and Japan the dominant end markets and the United States and Europe following. The global market, valued at roughly $3.95 to $5.40 billion in 2024 depending on methodology, is forecast to reach $6 to $10 billion by 2030 as EV adoption and wind power expansion continue their steep trajectories.

The controversies surrounding rare earth elements range from severe environmental damage at mining and processing sites documented across China, Malaysia, and Myanmar, to governance and labor rights concerns in key source regions, to the increasingly explicit weaponization of rare earth export controls by Beijing. China’s April and October 2025 export restrictions demonstrated that access to these materials is contingent on geopolitical conditions, not simply on commercial relationships. The subsequent diplomatic suspension of the October wave through late 2026 eased pressure temporarily without resolving the underlying structural dependency.

The path forward involves new mine development in the United States, Australia, Canada, and Africa; expanded refining capacity through MP Materials, Lynas, and European facilities; Japan’s deep-sea program at Minamitorishima; the EU’s materials legislation; and growing private investment in magnet recycling. These are genuine developments representing a meaningful shift in both political will and capital allocation compared to five years ago. They are also, by most serious assessments, insufficient to close the processing gap with China within the next decade. The world will remain substantially dependent on Chinese rare earth refining for the foreseeable future, and the degree to which Beijing chooses to use that position as leverage will continue shaping the economics of clean energy, defense, and advanced technology in ways that are only beginning to be priced into industrial strategy.

Appendix: Top 10 Questions Answered in This Article

What exactly are rare earth elements?

Rare earth elements are a group of 17 metallic elements comprising the 15 lanthanides plus scandium and yttrium. Despite the name, most are relatively abundant in the Earth’s crust but rarely occur in economically minable concentrations, and separating individual elements from ore requires complex, capital-intensive chemistry that most countries have not developed. They are divided into light rare earths and heavy rare earths based on atomic number, electron configuration, and chemical properties.

Why are rare earth elements so strategically important?

Rare earth elements are embedded in permanent magnets, catalysts, fluorescent phosphors, and specialized alloys used in electric vehicles, wind turbines, defense systems, consumer electronics, and medical equipment. The neodymium-iron-boron magnets produced using several of these elements are the strongest permanent magnets available and cannot be replicated at performance-equivalent cost using substitute materials in most high-demand applications. Their substitution-proof properties make supply disruptions disproportionately damaging.

Which country produces the most rare earth elements?

China is the world’s dominant producer, accounting for approximately 69.2 percent of global mine production in 2024 at 270,000 metric tons of rare earth oxide equivalent, according to the USGS Mineral Commodity Summaries. The United States ranked a distant second at 45,000 metric tons, followed by Myanmar at 31,000 metric tons.

Which country holds the largest rare earth reserves?

China holds approximately 44 million metric tons of rare earth reserves, the largest of any country and roughly half the estimated global total of 90 million metric tons. Brazil holds the second-largest reserve base globally, followed by Vietnam and Russia, though all three produce well below their geological potential due to limited processing infrastructure.

Which countries consume the most rare earth elements?

China is both the largest producer and largest consumer of rare earth elements, absorbing roughly 150,000 metric tons of apparent annual consumption and processing it into finished components for domestic and global manufacturing. Japan is the second-largest consumer, followed by the United States and the European Union, with the Asia Pacific region accounting for over 86 percent of the global market by revenue in 2024.

Why does China dominate rare earth processing so completely?

China built its rare earth refining infrastructure over four decades with extensive state subsidies, historically lower environmental compliance costs, and accumulated technical expertise at a scale that took decades to develop. It controls approximately 85 to 90 percent of global rare earth refining capacity, meaning that ores mined in other countries frequently require Chinese-controlled processing at some stage before they can be used in manufacturing.

What controversies surround rare earth elements?

The major controversies include severe environmental damage from mining and processing — including radioactive contamination, soil acidification, and groundwater pollution documented at sites in China, Malaysia, and Myanmar — labor rights and governance concerns in source regions including Myanmar’s Kachin State, and China’s use of export licensing controls as a geopolitical instrument, most significantly in April 2025 when it imposed licensing requirements on seven rare earth elements in response to U.S. tariffs.

What happened with China’s 2025 rare earth export restrictions?

In April 2025, China imposed licensing requirements on seven medium and heavy rare earth elements in response to U.S. tariffs, immediately causing dysprosium prices in Europe to triple to approximately $850 per kilogram. A second wave of broader restrictions followed in October 2025. Following diplomatic negotiations in London, a trade framework reached in June 2025 restored some supply access, and the October measures were subsequently suspended until November 2026, though the original April licensing requirements remained in force.

What is the future demand outlook for rare earth elements?

The International Energy Agency projects that global rare earth demand will grow 50 to 60 percent by 2040, driven primarily by permanent magnets for electric vehicles and wind turbines. McKinsey research projected that demand for magnetic rare earth elements would triple between 2022 and 2035. The global market is forecast to reach between $6 and $10 billion by 2030 depending on the forecasting source, reflecting consistent compound annual growth rates in the 6 to 11 percent range.

What is being done to reduce dependence on Chinese rare earth supply?

Efforts include new mine development and refinery expansion by MP Materials in the United States and Lynas in Australia; Japan’s deep-sea extraction program targeting rare-earth-rich mud near Minamitorishima; the EU’s Critical Raw Materials Act setting domestic sourcing targets; a U.S.-Ukraine minerals agreement signed in April 2025; and growing private investment in magnet recycling technology by companies including Cyclic Materials, HyProMag, and Noveon Magnetics. None of these initiatives, individually or in combination, are expected to close the processing gap with China within the next decade.