Building a Global Rare Earths Supply Chain Beyond China’s Dominance

Global supply chain for rare earths illustrated.

Building a Global Rare Earths Supply Chain: Beyond China's Dominance

Rare earth elements (REEs) have become increasingly critical to modern technology, despite their misleading name. These 17 elements—including neodymium, praseodymium, dysprosium, and terbium—are essential components in everything from smartphones to wind turbines and electric vehicles.

The Strategic Value of Rare Earths in Modern Technology

Rare earths possess unique magnetic, luminescent, and electrochemical properties that make them irreplaceable in many high-tech applications. Neodymium and praseodymium (NdPr) are crucial for manufacturing permanent magnets used in electric motors, while heavy rare earths like dysprosium and terbium enhance magnet performance at high temperatures.

These elements enable the miniaturization of electronics while maintaining powerful performance characteristics. Without rare earths, many modern technologies would be significantly larger, less efficient, or even impossible to manufacture.

Current Market Dynamics and Projected Growth

The global rare earths market is experiencing significant growth, with demand projected to double by 2050. This surge is primarily driven by the renewable energy transition and electrification of transportation. Permanent magnets, which require substantial amounts of rare earths, account for approximately 38% of total rare earth usage and represent the fastest-growing application segment.

Industry experts anticipate particularly strong growth in demand for neodymium, praseodymium, dysprosium, and terbium due to their critical role in high-performance magnets. As electric vehicle production increases and renewable energy capacity expands, securing reliable supplies of these elements becomes increasingly important for manufacturers and national economies.

How Did China Gain Control of the Rare Earths Market?

China's dominance in the rare earths sector didn't happen by accident. Through strategic planning and investment spanning decades, China now controls approximately 70% of global rare earth ore extraction and 90% of processing capacity.

Strategic Investments and Government Policies

Since the 1980s, China has implemented policies designating rare earths as strategic resources. The country invested heavily in research, processing technology, and production capacity while other nations neglected these minerals. This long-term approach allowed China to develop comprehensive expertise across the entire supply chain.

Chinese research institutions and companies focused on developing expertise in rare earth separation, refining, and application technologies while Western companies and governments largely ignored the sector. This decades-long commitment to developing rare earth capabilities has created a significant knowledge and infrastructure gap that other countries now struggle to overcome.

Cost Advantages and Environmental Considerations

China's competitive advantages include lower labor costs and historically less stringent environmental regulations. Processing rare earths generates significant waste, including radioactive materials, and China's willingness to manage these environmental impacts gave it a substantial cost advantage over Western competitors.

The environmental footprint of rare earth processing is considerable, with some operations generating up to 2,000 tons of waste material for each ton of rare earth oxides produced. Traditional processing methods require large quantities of chemical reagents and generate acidic wastewater that must be carefully managed to prevent environmental damage.

Export Controls and Trade Restrictions

In April 2025, China added seven rare earths—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—to its export control list. This move came in response to US tariffs and represents an escalation in critical minerals energy transition competition. Other materials on the list include tungsten, lithium, and gallium.

The export control system includes regulations for dual-use items (effective December 2024) and specific controls for military products, nuclear materials, and sensitive technologies. These measures effectively limit the availability of critical rare earth elements to non-Chinese manufacturers, potentially disrupting supply chains for high-tech products worldwide.

As Eric Vesel, CEO of Enova Mining notes, "China has suppressed global prices to maintain control of the market, but these prices aren't reflective of what end-users pay at volume." This market distortion makes it difficult for non-Chinese producers to compete effectively, further cementing China's dominant position.

What Are the Different Types of Rare Earth Deposits?

Understanding the various deposit types is crucial for developing alternative supply chains, as each presents different extraction and processing challenges.

Hard Rock Deposits

Traditional hard rock deposits, such as those found in Mountain Pass (USA) and Mt. Weld (Australia), contain rare earths in minerals like bastnäsite and monazite. These deposits typically require extensive crushing, grinding, and complex processing to extract the rare earths.

Hard rock operations generally involve drilling and blasting, followed by multiple stages of crushing and grinding to reduce the ore to a fine powder. This energy-intensive process is followed by flotation, chemical leaching, and multiple purification steps to produce a mixed rare earth concentrate. The capital costs for these operations can exceed $500 million for medium-sized facilities.

Mineral Sands

Some rare earths occur in heavy mineral sand deposits, where they can be recovered as byproducts of titanium and zirconium mining. These deposits generally have lower concentrations but can be economically viable when rare earths are recovered alongside primary products.

Mineral sand operations typically use water-based gravity separation methods to concentrate heavy minerals, followed by magnetic and electrostatic separation to isolate specific mineral fractions. The rare earth-bearing minerals are then processed using chemical methods to extract the valuable elements. This approach offers the advantage of distributing processing costs across multiple valuable products.

Clay-Hosted Deposits

Clay-hosted rare earth deposits, predominantly found in southern China, are becoming increasingly important. These deposits form when weathering processes break down primary rare earth minerals, allowing the elements to adsorb onto clay minerals. They typically contain higher proportions of valuable heavy rare earths and can be processed using simpler leaching techniques.

Clay deposits often require no crushing or grinding, as the rare earth elements are already in an easily extractable form. Processing typically involves simple acid leaching followed by precipitation steps to recover a mixed rare earth product. This simplified approach can reduce capital requirements by 30-50% compared to hard rock operations.

As Brendan Clark, CEO of Victory Metals explains: "Other rare earths projects in Australia typically comprise hard rock or mineral sands. These projects require a lot of capital because the processing phase is complex and resource-intensive. With North Stanmore, mother nature has done all the hard work for us, dating back around 45 million years ago."

How Are Australian Companies Building Alternative Supply Chains?

Several Australian companies are working to establish rare earth production outside China's control, with varying approaches to mining and processing.

Victory Metals: Leveraging Clay-Hosted Deposits

Victory Metals' North Stanmore project in Western Australia represents one of the world's most advanced clay-hosted heavy rare earths projects outside China. Located approximately 6km north of Cue, the project benefits from:

  • Natural weathering processes: The clay-hosted mineralization formed approximately 45 million years ago through natural breakdown processes, eliminating the need for energy-intensive crushing and grinding.
  • Simple processing: North Stanmore utilizes low-cost leaching techniques without additional processing stages, significantly reducing capital requirements.
  • High heavy rare earth content: The deposit contains elevated levels of valuable heavy rare earths like dysprosium and terbium, which command premium prices.
  • Existing infrastructure: The project's proximity to the Great Northern Highway and regional airport reduces development costs and operational complexity.

"We've got high ratios of heavy rare earths, which are in high demand and provide strength to the magnets used in renewable batteries," notes Brendan Clark. This advantageous composition improves the project's economic potential even at modest production volumes.

In December 2024, Victory signed a memorandum of understanding with Japanese corporation Sumitomo, potentially securing offtake for 30% of North Stanmore's annual mixed rare earth carbonate (MREC) production. This partnership could provide funding for project development while establishing a non-Chinese supply chain.

Enova Mining: Developing Brazilian Resources

Enova Mining is developing multiple rare earth projects in Brazil's Minas Gerais and SĂ£o Paulo regions, offering geographic diversification in the global supply chain.

Key projects include:

  • Coda Project: Comprising 15,000 hectares near power and infrastructure, Coda's 2024 maiden drilling program identified thick horizons of saprolite-hosted mineralization over 40km² with elevated grades of titanium, rare earths, niobium, and scandium.

  • East Salinas Project: A recent discovery spanning 22,719 hectares, East Salinas features granitic outcrops with grades of 1.33-1.87% total rare earth oxide (TREO). The system potentially extends 4km in length and 600m in width, with notable characteristics including NdPr content up to 38.8% and heavy rare earth oxide content exceeding 9%.

Eric Vesel, Enova's CEO with almost 40 years of industry experience, describes their exploration success: "Our 2024 maiden drilling program (at Coda) intersected thick horizons of saprolite-hosted mineralisation over an area exceeding 40km², with elevated grades of titanium, rare earths, niobium and scandium."

Enova benefits from its connection to Malaco Mining, which constructed a pilot rare earth separation plant in Perak, Malaysia in November 2024. This facility processes rare earth carbonates and oxides into high-value product groups, potentially offering Enova access to downstream processing capabilities outside China. Malaco has also secured MOUs with POSCO of Korea and Carester of France for downstream processing collaboration.

What Are the Processing Challenges in Creating Independent Supply Chains?

The rare earths supply chain involves multiple processing stages, with increasing complexity and technical barriers at each step.

From Mine to Mixed Concentrate

The initial processing stage converts mined material into a mixed rare earth concentrate, typically in carbonate (MREC) or oxide (MREO) form. While technically straightforward, this stage requires careful management of radioactive elements like thorium and uranium that often accompany rare earth deposits.

This process generally involves:

  1. Physical beneficiation (for hard rock deposits)
  2. Chemical leaching to dissolve rare earth elements
  3. Precipitation of a mixed rare earth product
  4. Removal of impurities and contaminants

While this stage is well-understood technically, it requires careful environmental management and substantial capital investment, particularly for hard rock deposits that need extensive physical processing facilities.

Separation and Refining Bottlenecks

The most significant technical barrier in the supply chain is separating mixed concentrates into individual rare earth elements. This process involves hundreds of solvent extraction stages and requires substantial expertise and specialized equipment. Outside China, very few facilities can perform these separations at commercial scale.

As Eric Vesel explains: "Outside China, very few companies can separate rare earths to high purity. Even those that do often send their material back to China for final processing."

Separation facilities typically cost $100-200 million to construct and require 2-3 years to commission properly. The process is technically complex due to the chemical similarities between rare earth elements, requiring precisely controlled conditions and extensive technical expertise to achieve high-purity products.

Magnet Manufacturing Expertise

Converting separated rare earths into high-performance magnets represents another technical challenge. Manufacturing neodymium-iron-boron (NdFeB) magnets requires precise control of alloy composition, microstructure, and magnetic alignment—expertise largely concentrated in China and Japan.

The magnet manufacturing process involves:

  1. Creating a precise alloy of neodymium, iron, and boron
  2. Pulverizing the alloy into a fine powder
  3. Aligning the powder particles in a strong magnetic field
  4. Pressing and sintering to create a solid magnet
  5. Machining to final dimensions
  6. Coating to prevent oxidation

Each step requires specialized equipment and technical knowledge, creating significant barriers to establishing new production facilities. Companies must invest in both physical infrastructure and personnel training to develop these capabilities.

How Are Countries Addressing Supply Chain Vulnerabilities?

Nations are implementing various strategies to reduce dependence on Chinese rare earths, ranging from government funding to international partnerships.

Government Initiatives and Funding

Many countries have designated rare earths as critical minerals, making projects eligible for special funding and regulatory support. In Australia, the Critical Minerals Strategy provides financial backing for projects through the Critical Minerals Development Program and export finance facilities.

Similar initiatives exist in the United States, European Union, Japan, and South Korea, with governments offering:

  • Direct project funding and loans
  • Tax incentives for domestic production
  • Expedited permitting processes
  • Research and development grants
  • Offtake guarantees for domestic producers

These support mechanisms help address the economic challenges facing new rare earth projects, particularly in their early development stages.

International Partnerships and Vertical Integration

Companies are forming international partnerships to create integrated supply chains outside China. These collaborations often link mining operations in resource-rich countries with processing expertise in technologically advanced nations.

Victory Metals' partnership with Sumitomo exemplifies this approach, connecting Australian resources with Japanese processing capabilities and end-user markets. Similarly, Enova Mining benefits from connections to separation facilities in Malaysia through Malaco Mining.

Brendan Clark emphasizes this necessity: "We need to partner with the likes of France, Japan and US in the meanwhile, who are pouring investment into downstream processing."

These partnerships distribute technical and financial risks across multiple entities while ensuring that each participant contributes their specific expertise to the supply chain.

Research and Development Investments

Developing alternative processing technologies is crucial for establishing competitive non-Chinese supply chains. Research focuses on more environmentally friendly separation methods, recycling techniques, and substitution of the most supply-constrained rare earths.

Key research areas include:

  • Continuous flow solvent extraction systems
  • Membrane-based separation technologies
  • Electrochemical separation methods
  • Improved recycling processes for end-of-life magnets
  • Reduced-dysprosium magnet formulations

These technological innovations aim to reduce capital requirements, improve environmental performance, and decrease dependence on the most supply-constrained elements.

What Are the Economic Challenges in Establishing New Supply Chains?

Building rare earth supply chains outside China faces significant economic hurdles that must be overcome to ensure long-term viability.

Capital Requirements and Development Timelines

Developing rare earth projects requires substantial capital investment, with processing facilities often costing more than the mines themselves. Projects typically take 5-10 years from discovery to production, creating financing challenges in volatile commodity markets.

This extended timeline complicates project financing, as investors must commit capital years before receiving any return. Traditional mining finance models often struggle with rare earth projects due to their complex processing requirements and technical risks.

Clay-hosted deposits like Victory's North Stanmore offer advantages in this regard, potentially reducing both capital requirements and development timelines due to their simplified processing needs.

Price Volatility and Market Manipulation

The rare earths market has experienced extreme price volatility, with prices for some elements fluctuating by factors of 10 or more over short periods. This volatility complicates project financing and discourages long-term investments.

Eric Vesel notes that "China has suppressed global prices to maintain market control, making it difficult for non-Chinese producers to compete profitably. These artificially low prices don't reflect what end-users pay for volume purchases, creating market distortions."

This price manipulation creates a challenging environment for new producers, who must convince investors that their projects can remain economically viable despite potential future price suppression by dominant market players.

Environmental Compliance Costs

Meeting stringent environmental standards significantly increases production costs outside China. Proper management of radioactive byproducts and process chemicals adds substantial expenses that Chinese producers have historically avoided.

Modern rare earth operations in Western countries typically include:

  • Lined tailings storage facilities
  • Water treatment systems
  • Radioactive waste management protocols
  • Air quality control systems
  • Comprehensive monitoring programs

These environmental protection measures add 15-30% to operating costs compared to operations with less stringent requirements, creating an uneven competitive landscape.

How Can Companies Overcome China's Market Dominance?

Despite China's entrenched position, several strategies can help companies establish viable alternative supply chains.

Focus on Heavy Rare Earths

Companies like Victory Metals are targeting deposits with high proportions of heavy rare earths (dysprosium, terbium) that command premium prices and face the most severe supply constraints. These elements can support project economics even at relatively small production scales.

Heavy rare earths typically sell for 5-10 times the price of light rare earths like cerium and lanthanum, improving project economics substantially. Projects with favorable heavy rare earth content can achieve profitability at production volumes of 3,000-5,000 tonnes per year, compared to 15,000-20,000 tonnes for light rare earth-dominated projects.

Simplify Processing Requirements

Projects utilizing clay-hosted deposits or innovative processing methods can significantly reduce capital requirements and accelerate development timelines. Victory's North Stanmore project exemplifies this approach, bypassing traditional crushing and grinding stages through naturally weathered materials.

As Brendan Clark explains: "With North Stanmore, mother nature has done all the hard work for us, dating back around 45 million years ago." This natural processing advantage reduces both capital and operating costs, improving project economics and shortening the path to production.

Secure Offtake Agreements and Strategic Partnerships

Early-stage partnerships with end-users or downstream processors provide crucial financing support and market access. Victory's MoU with Sumitomo and Enova's connection to Malaco Mining demonstrate how these relationships can accelerate project development.

Offtake agreements typically include:

  • Guaranteed purchase volumes
  • Pricing mechanisms
  • Product quality specifications
  • Development funding provisions
  • Technical collaboration opportunities

These arrangements reduce market risk for producers while ensuring supply security for end-users, creating mutually beneficial relationships that can overcome financing challenges.

Government Support and Strategic Positioning

Positioning projects as strategic national assets can unlock government support through grants, loans, and expedited permitting. As countries prioritize supply chain security, rare earth projects increasingly benefit from policy interventions designed to counter China's dominance.

Successful projects combine multiple strategies, leveraging geological advantages, innovative processing approaches, strategic partnerships, and government support to overcome the economic and technical challenges of establishing new rare earth supply chains.

What Does the Future Hold for Rare Earth Supply Chains?

The rare earth market is evolving rapidly as geopolitical tensions and technological changes reshape supply and demand dynamics.

Emerging Production Centers

New production centers are emerging in Australia, the United States, Canada, and parts of Africa and South America. These developments will gradually diversify supply, though China will likely remain the dominant producer for at least the next decade.

Key regions developing alternative supply include:

  • Australia's clay-hosted and hard rock deposits
  • Brazil's saprolite and granitic resources
  • Canada's alkaline complexes
  • Africa's carbonatite-hosted deposits
  • Greenland's multi-element resources

This geographic diversification reduces concentration risk and creates multiple supply options for end-users seeking to reduce dependence on Chinese sources.

Technological Innovations

Research into recycling, substitution, and alternative processing methods continues to advance. These innovations may eventually reduce dependence on primary rare earth production and minimize environmental impacts.

Promising technologies include:

  • Direct extraction methods for clay deposits
  • Bio-leaching using specialized microorganisms
  • Hydrogen reduction processes for rare earth metals
  • Improved magnet recycling techniques
  • Advanced separation membranes

These innovations could reduce processing costs by 20-40% while improving environmental performance, making non-Chinese production more competitive with traditional Chinese operations.

Shifting End-Use Applications

While permanent magnets currently drive demand growth, new applications in catalysts, electronics, and energy storage could reshape consumption patterns. Companies developing flexible processing capabilities will be best positioned to adapt to these changing markets.

Emerging applications include:

  • Solid-state batteries with rare earth components
  • Hydrogen storage materials
  • Quantum computing materials
  • Advanced optical devices
  • Next-generation catalysts

These diverse applications will create more balanced demand across the rare earth element spectrum, potentially reducing price volatility for individual elements.

Geopolitical Considerations

Rare earths have become pawns in broader trade and security disputes, with export controls and tariffs increasingly affecting market access. Companies with production and processing capabilities in multiple jurisdictions will have advantages in navigating these geopolitical challenges.

As Eric Vesel notes: "The biggest challenge countries are facing in building defence critical minerals supply chain is a limited understanding in the factors needed to reach production, including commercialisation and technical capability."

Successful supply chain development requires coordinated action across multiple domains—technical, financial, regulatory, and diplomatic—to overcome the complex challenges of establishing viable alternatives to Chinese production.

FAQ: Rare Earth Supply Chain Development

What are the most critical rare earth elements for future technology?

Neodymium, praseodymium, dysprosium, and terbium are considered the most critical rare earths due to their essential role in permanent magnets for electric vehicles, wind turbines, and defense applications. These elements face the most severe supply constraints and command premium prices.

Neodymium and praseodymium (NdPr) typically represent 20-30% of the total rare earth content in magnets, while dysprosium and terbium are added in smaller quantities (2-8%) to improve high-temperature performance. As electric vehicle and renewable energy deployment accelerates, demand for these elements is expected to grow at 8-12% annually through 2030.

How long does it take to develop a new rare earth mine?

Developing a new rare earth project typically takes 5-10 years from discovery to production. Clay-hosted deposits may have accelerated timelines due to simpler processing requirements, potentially reaching production in 3-5 years under favorable conditions.

The development timeline typically includes:

  1. Exploration and resource definition (2-3 years)
  2. Metallurgical testing and process development (1-2 years)
  3. Feasibility studies and environmental permitting (2-3 years)
  4. Construction and commissioning (1-2 years)

Projects with simpler geology and processing requirements, particularly clay-hosted deposits, can potentially compress this timeline by simplifying several stages of the development process.

Can recycling help reduce dependence on Chinese rare earths?

While recycling will play an increasing role, current recovery rates remain low due to technical challenges and the dispersed nature of rare earth applications. Most industry experts believe primary production will remain essential for meeting growing demand through at least 2040.

Current recycling efforts focus primarily on:

  • End-of-life wind turbine magnets
  • Electric vehicle motors
  • Hard disk drives
  • Industrial motors and generators

These concentrated sources of rare earth magnets offer the best economics for recycling, but consumer electronics and other dispersed applications remain challenging to recover economically with current technologies.

What role do governments play in developing rare earth supply chains?

Governments increasingly view rare earths as strategic resources and support development through research funding, financial incentives, and expedited permitting. Some countries are also establishing Australia's critical minerals reserve and mandating domestic content requirements for critical industries.

Government support mechanisms include:

  • Direct project financing through loans and grants
  • Tax incentives for domestic production
  • Research funding for processing technologies
  • Defense procurement preferences for domestic sources
  • Export finance facilities for international projects

These policy interventions help overcome market failures and economic barriers that would otherwise prevent development of non-Chinese supply chains.

Are there viable substitutes for rare earths in key applications?

Limited substitution possibilities exist for some applications, but rare earths remain essential for high-performance permanent magnets. Research continues on alternative magnet compositions, but these typically offer lower performance or require other critical materials facing similar supply constraints.

Alternative technologies include:

  • Induction motors (replacing permanent magnet motors)
  • Ferrite magnets (for less demanding applications)
  • Samarium-cobalt magnets (reducing neodymium needs but requiring cobalt)
  • Wound field electromagnets (higher energy consumption)
  • Reluctance motors (lower power density)

These alternatives generally involve performance trade-offs in terms of efficiency, size, weight, or cost, limiting their adoption in many high-performance applications.

Further Exploration:

Readers interested in learning more about global rare earths supply chains can also explore related educational content, such as Australian Mining's feature article "Building a global rare earths supply chain" which offers additional perspectives on rare earth production and processing outside China. For those interested in industry events, the upcoming global mining innovation expo will feature presentations on the latest developments in rare earth processing technologies and mineral deposit tiers guide for evaluating project potential.

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Discovery Alert does not guarantee the accuracy or completeness of the information provided in its articles. The information does not constitute financial or investment advice. Readers are encouraged to conduct their own due diligence or speak to a licensed financial advisor before making any investment decisions.

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