According to a recent report by the International Energy Agency (IEA), the accelerating pace of digitalization, the rapid adoption of electric vehicles, and advanced automation are driving an unprecedented surge in demand for rare earth elements. Concurrently, supply chains remain highly concentrated, posing severe vulnerabilities and real economic risks to global markets. China’s dominance across the value chain—from extraction to magnet manufacturing—remains firmly entrenched, while global diversification efforts currently fall well short of the required pace.
Surging Demand in the “Age of Electricity”
The 17 rare earth elements, which serve as foundational components for a wide array of modern technologies—including electric vehicles, AI data centers, robotics, and defense systems—are moving rapidly to the forefront of global energy and industrial policy. The primary driver of this technological expansion is the growing use of high-performance permanent magnets.
The new IEA report, developed to inform discussions under France’s 2026 G7 Presidency, highlights that demand for magnet rare earths—specifically neodymium, praseodymium, dysprosium, and terbium—has doubled since 2015. Furthermore, projections indicate this demand will increase by more than 30 percent by 2030. Fatih Birol, the IEA Executive Director, emphasized that while these elements are indispensable to the “Age of Electricity,” their supply chains remain among the most concentrated of all critical minerals.
China’s Dominance and the Peril of Export Controls
Among all the critical minerals analyzed by the IEA, rare earths exhibit the most extreme geographic concentration across every stage of the value chain. The current figures starkly illustrate this imbalance:
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China accounts for approximately 60 percent of the global mined production of magnet rare earths.
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In the refining (processing) sector, China’s share surpasses 90 percent.
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The most severe imbalance is seen in the downstream segment: almost 95 percent of the world’s permanent magnet production is concentrated in China (up from only about half just two decades ago).
These vulnerabilities have recently translated into tangible market impacts. Export controls introduced by China in 2025 led to significant short-term disruptions, causing some manufacturers outside China to struggle with securing key inputs, which in certain cases forced production cuts. The report estimates that if such controls were fully implemented, up to $6.5 trillion of economic activity outside China could be at risk each year, heavily impacting the automotive, electronics, and broader transport sectors.
A Significant Shortfall in Diversification
Despite a growing awareness of these risks, progress toward building more diversified supply chains outside of the dominant supplier has been limited. The IEA analysis reveals that current and planned projects fall well short of what is needed to meet projected demand. By 2035, existing and announced capacities outside China are expected to cover:
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Only around half of global mining requirements.
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A mere quarter (25 percent) of refining needs.
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Less than a fifth (under 20 percent) of magnet demand.
This points to a widening gap unless investments accelerate. Currently, there is a notable imbalance: the pipeline of magnet production projects outside China accounts for only about a third of the planned mining capacity, representing a critical bottleneck.
Closing this gap will require substantial growth. The report estimates that approximately $60 billion in investment will be needed over the next decade to develop diversified supply chains, particularly in refining and magnet manufacturing. While significant, this investment is relatively modest when compared to the potential multi-trillion-dollar economic losses associated with supply disruptions.
Complementary Pathways: Recycling and International Cooperation
Alongside new mining and processing projects, recycling and innovation offer crucial complementary pathways. The report notes that effective recycling alone has the potential to reduce the need for primary supply by up to 35 percent by 2050. Meanwhile, advances in innovative production and substitution technologies could ease the pressure on the most constrained elements.
However, diversification is not merely about planning new projects; it requires addressing broader ecosystem challenges, including bottlenecks in technology, equipment, machinery, and skills. The IEA warns that given the geographic distribution of resources and industrial demand, no single country can build fully integrated value chains in isolation. Achieving secure and resilient rare earth supply chains will absolutely require strengthened, coordinated international cooperation to align investments and support project development.
References and Sources:
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Primary Source and Data (Official portal of the International Energy Agency – IEA): New projects, partnerships and policies are needed to address supply chain risks for rare earth elements