An introduction to start export-import of your products with China

By Tanmay Goel, Researcher at Nitisara

Rare Earth Elements (REEs) represent critical inputs for modern technology infrastructure, from electric vehicles and renewable energy systems to advanced defense applications. China’s overwhelming dominance across the entire REE value chain—controlling 69% of global mining, 90% of processing, and 99% of heavy REE refining—has created unprecedented global supply vulnerabilities. China’s April 2025 implementation of comprehensive export restrictions on seven strategic REEs, including samarium, dysprosium, terbium, and yttrium, has disrupted international supply chains and exposed the fragility of global dependencies on concentrated mineral sources. 

Rare Earth Elements constitute a group of 17 metallic elements with unique magnetic, optical, and catalytic properties that make them indispensable for contemporary technological applications. Despite their name, these elements are relatively abundant in Earth’s crust, but economically viable deposits are geographically concentrated and require sophisticated processing infrastructure to separate and refine into usable forms. According to the U.S. Geological Survey (USGS) Mineral Commodity Summaries 2024, global REE production reached 350,000 metric tons in 2023, with applications spanning clean energy technologies, electronics, automotive systems, and defense equipment 1. The strategic importance of REEs has intensified with the global transition toward renewable energy and electric vehicles, where these materials are essential for permanent magnets in wind turbines and electric motor assemblies.

China’s strategic positioning in REE markets extends far beyond its substantial mineral reserves, encompassing sophisticated downstream processing capabilities and integrated manufacturing networks. While China holds approximately 44 million metric tons of REE reserves—roughly 40% of global deposits according to USGS data—its true leverage lies in controlling nearly the entire global processing infrastructure 1. The Center for Strategic and International Studies (CSIS) reports that China maintains 90% of global REE processing capacity and 90% of permanent magnet production, creating systemic dependencies that extend across multiple industries and national economies 2. China’s April 2025 implementation of export licensing requirements for seven critical REEs represents the most significant disruption to global REE trade since the 2010 embargo against Japan, affecting everything from smartphone manufacturing to military weapons systems production.

Global rare earth elements production showing China’s dominant position with 240,000 metric tons in 2023, representing 69% of total global production, Source: Author’s Own

How does China’s dominance in REE supply chains create global vulnerabilities for international trade security?

China’s control across multiple stages of the REE value chain creates systemic vulnerabilities that extend far beyond traditional commodity dependencies. The concentration of supply is particularly acute in downstream processing, where China’s monopolistic position in heavy REE refining reached 99% until 2023, according to CSIS analysis. This processing monopoly is especially critical because heavy rare earth elements like dysprosium and terbium are essential for high-performance applications in electric vehicles, wind turbines, and military systems, yet cannot be economically separated and refined outside of specialized facilities.

China’s market dominance across REE supply chain stages, showing near-monopoly control in heavy REE processing (99%) and significant market shares in mining, processing, and magnet production, Source: Author’s Own

The strategic implications become evident when examining the multi-stage REE processing workflow, which requires substantial capital investment, specialized technical expertise, and environmental management capabilities that take decades to develop. Even countries with significant REE reserves, such as the United States (1.8 million metric tons) and Australia (105.7 million metric tons), typically export raw materials to China for processing, creating dependencies even within apparently independent supply chains 1. The USGS reports that U.S. net import reliance for REE compounds and metals exceeds 95%, highlighting the depth of this dependency 1. China’s integration of state-owned enterprises further amplifies these vulnerabilities through coordinated pricing strategies and supply management that can influence global markets independent of traditional market mechanisms. The 2021 consolidation under China Rare Earth Group Co. Ltd brought 62% of national heavy rare earth supplies under direct state supervision, enabling strategic decisions that align commercial operations with national policy objectives 3.

What are the immediate impacts of China’s 2025 export restrictions on global industries and supply chains?

The immediate impacts of China’s April 2025 export restrictions have created acute supply chain disruptions across multiple critical industries. The restrictions apply to seven medium and heavy rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—requiring companies to secure special export licenses for these materials and related magnets. These restrictions are particularly significant because they target heavy REEs where China maintained a virtual monopoly until 2023.

Rare Earth Element	Key Applications	Primary Import Destination
Samarium	Military-grade magnets, nuclear applications	United States
Gadolinium	MRI scanning, nuclear reactor control rods	Global (medical industry)
Terbium	Smartphone displays, aircraft magnets	Japan (85%), United States (5%)
Dysprosium	Electric vehicle motors, wind turbines	Japan, South Korea
Lutetium	Oil refining catalysts, medical applications	United States (93%)
Scandium	Aerospace alloys, fuel cells	United States (no domestic production)
Ytrrium	Medical lasers, superconductors	United States (93% dependence)

List of the restricted minerals, their applications, and their primary import destination, Source: Author’s own

The automotive sector faces the most severe immediate challenges, with electric vehicle manufacturers experiencing supply bottlenecks for permanent magnet assemblies that incorporate REE materials. Dysprosium and neodymium magnets are essential for high-efficiency electric motors, while terbium enables advanced driver assistance systems and display technologies. The restrictions have forced manufacturers to reassess production schedules and supplier relationships, with some European automotive suppliers reporting potential production shutdowns according to recent industry assessments.

Defense applications represent perhaps the most strategically significant impact area. CSIS research indicates that REE materials are crucial for military technologies including F-35 fighter jets (which contain over 408 kilograms of REEs), Virginia-class submarines (requiring approximately 4700 kilograms), and precision-guided munitions systems 4. The U.S. Department of Defense has invested $439 million since 2020 in domestic REE supply chain development, targeting a complete mine-to-magnet capability by 2027, but current production capacity remains insufficient to meet defense requirements 5.

Price volatility of critical rare earth elements from 2019-2023, showing dramatic spikes in 2021-2022 with Terbium reaching over $2,000/kg during supply chain disruptions, Source: Author’s Own

The restrictions have also triggered significant price volatility in REE markets, with historical precedents demonstrating the potential for dramatic price increases during supply disruptions. USGS price data shows that during the 2010 embargo, Cerium prices soared from $5 to $67 per kilogram, while Neodymium increased from $42 to $142 per kilogram. The current restrictions have renewed concerns about similar price shocks affecting industries dependent on these critical materials.

How are countries and international organizations responding to reduce dependence on Chinese REE supplies?

Global efforts to reduce Chinese REE dependence encompass multiple complementary strategies, from developing alternative supply sources to advancing recycling technologies and implementing strategic policy frameworks. International policy coordination has intensified through frameworks like the European Union’s Critical Raw Materials Act, which entered force in May 2024. The EU legislation establishes ambitious 2030 targets: 10% of annual consumption from domestic extraction, 40% from EU processing, and 25% from recycling, with no more than 65% of any strategic raw material sourcing from a single third country 6. These benchmarks directly address the concentration risks posed by Chinese supply dominance.

The International Energy Agency (IEA) has integrated critical minerals into its global energy modeling framework, supporting international cooperation through initiatives like the Voluntary Critical Minerals Security Programme 8. According to IEA analysis, demand for critical minerals could triple by 2040 under current energy transition scenarios, making supply diversification efforts increasingly urgent. The agency’s Critical Minerals Data Explorer provides policymakers with quantitative projections to inform strategic planning and investment decisions.

Recycling initiatives represent another crucial component of supply diversification strategies. The World Bank’s Climate-Smart Mining Initiative estimates that scaling up recycling could reduce new mining requirements by 25-40% by mid-century, though current REE recycling rates remain extremely limited 7. Research indicates significant potential for urban mining from electronic waste, though commercial-scale operations require substantial technological advancement and policy support.

Conclusion

China’s export restrictions on rare earth elements represent a watershed moment in global resource geopolitics, exposing critical vulnerabilities in concentrated supply chains that underpin modern technological infrastructure. The immediate disruptions across automotive, electronics, and defense industries demonstrate how REE dependencies extend far beyond simple commodity relationships to encompass fundamental questions of economic security and technological sovereignty. The crisis has catalyzed unprecedented international cooperation and investment in REE supply chain diversification, from the European Union’s Critical Raw Materials Act to the U.S. Department of Defense’s mine-to-magnet initiative. However, the technical complexity of REE processing, substantial capital requirements, and China’s accumulated expertise mean that complete independence from Chinese supplies appears neither feasible nor economically optimal in the near term.

The long-term implications extend beyond immediate supply disruptions to reshape global trade patterns and industrial policies, signaling a fundamental shift toward supply chain resilience considerations in international trade and investment decisions. While the World Trade Organization previously ruled China’s export restrictions inconsistent with international trade rules, the current measures demonstrate the continued strategic value of resource leverage in geopolitical competition. Countries and companies that effectively balance cost efficiency with supply security while advancing technological alternatives through research, recycling, and substitution will emerge stronger from the current disruption. The REE crisis thus represents both a significant challenge and a catalyst for innovation in global supply chain management, international cooperation frameworks, and resource governance systems that will influence technological development and economic security for decades to come.

The views expressed do not represent the company’s position on the matter.

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References: 

https://iea.blob.core.windows.net/assets/ee01701d-1d5c-4ba8-9df6-abeeac9de99a/GlobalCriticalMineralsOutlook2024.pdf 

https://pubs.usgs.gov/periodicals/mcs2024/mcs2024-rare-earths.pdf

https://www.csis.org/analysis/what-chinas-ban-rare-earths-processing-technology-exports-means

https://www.iea.org/policies/15513-sasac-announcement-on-the-establishment-of-china-rare-earth-group

https://data.usgs.gov/datacatalog/data/USGS:65b7d85dd34e36a39045b50b

https://pubs.usgs.gov/publication/mcs2024

https://single-market-economy.ec.europa.eu/sectors/raw-materials/areas-specific-interest/critical-raw-materials/critical-raw-materials-act_en

https://www.worldbank.org/en/programs/climate-smart-mining