China’s rare earth clampdown backfired: CSIS analyst 

China’s decision to weaponize rare earth exports has accelerated the international cooperation that could ultimately weaken its grip on the sector, according to the head of the critical minerals security program at the Center for Strategic and International Studies.

The export restrictions extended beyond the US to Japan, the European Union, Australia and South Korea, prompting governments to coordinate investments in mining, processing and manufacturing outside China, Gracelin Baskaran told MINING.COM anchor Devan Murugan on Top of Mine.

She pointed to a February meeting convened by US Secretary of State Marco Rubio that brought together representatives from 55 countries for what she called the largest State Department ministerial focused solely on critical minerals. Malaysia has also become the first country outside China to separate heavy rare earths, with more projects expected to follow.

“China certainly retains leverage now, but that leverage will only go down,” Baskaran said.

China still controls about 90% of global heavy rare earth separation and produces roughly 93% of the world’s permanent magnets, leaving governments racing to build alternative supply chains. Baskaran said Beijing’s restrictions have encouraged unprecedented collaboration among allies, making long-term diversification more likely even if China remains dominant in the near term.

Two chokepoints

The United States faces two major challenges despite being a significant rare earth producer.

Baskaran said US deposits are dominated by light rare earths, forcing Washington to secure heavy rare earth supplies through partnerships with projects in countries including Brazil, Angola and Australia. At the same time, the US is attempting to develop mines, separation facilities and magnet manufacturing simultaneously after China banned exports of rare earth processing technology in 2023, requiring domestic producers to develop expertise while constructing new plants.

“We are flying the plane as we build it,” Baskaran said.

Rather than seeking complete independence from China, Baskaran argued the objective should be resilience. She said reducing China’s share of heavy rare earth separation from about 90% to roughly half would leave the US and its allies far less vulnerable to future export restrictions. That thinking underpins a G7 agreement reached in France last month under which members aim to source no more than 60% of their rare earths from any single non-G7 country by 2030.

The Pentagon has already backed that strategy by taking a 49% equity stake in a planned Saudi Arabian rare earth refinery while supporting domestic processing through MP Materials (NYSE: MP) and projects being advanced by Lynas (ASX: LYC) and Alkane Resources (ASX: ALK). Baskaran said the remaining gaps are securing sufficient heavy rare earth feedstock and expanding magnet manufacturing, warning that neither mines nor processing plants are viable without the other.

Japan’s lesson

Japan offers the clearest example of how long diversification can take.

China halted rare earth exports to Japan during a 2010 territorial dispute, forcing Tokyo to rethink its supply chains. Since then, Japan has acquired a 50% stake in Namibia’s Lofdal rare earth project, financed Lynas’s Malaysian separation facility and begun piloting deep-sea rare earth mining this year. Even so, it remains China’s largest importer of permanent magnets.

The experience illustrates that rebuilding integrated supply chains takes years rather than political cycles. Baskaran said China’s dominance stems from controlling every stage of the value chain, not simply mining or processing, meaning companies pursuing only one segment risk being left behind.

“A mine without a processing facility is a stranded asset,” Baskaran said. “A processing facility without a manufacturer to buy that is a stranded asset.”