China’s Dominance in Rare Earths: A Technical Reevaluation
By Zeyi Yang
Updated May 2025
Introduction: The Illusion of Scarcity
As geopolitical tensions between China and the United States intensify, Beijing has once again wielded its leverage over the global supply of critical minerals by tightening export controls on heavy rare earth elements (HREEs). This move, announced in April 2025, threatens to disrupt supply chains for high-performance magnets, semiconductors, and emerging clean energy technologies. Yet despite China’s near-monopoly on processing, these “rare” earth elements are neither geologically scarce nor strategically unchallenged. In this deep dive, we explore the technical underpinnings of the rare earth sector, assess the real impact of China’s export restrictions, and examine the breakthroughs—both commercial and regulatory—that could reshape the market.
China’s Export Controls: Scope and Mechanisms
In April 2025, China expanded its export licensing regime to include seven HREEs—samarium (Sm), gadolinium (Gd), terbium (Tb), dysprosium (Dy), lutetium (Lu), scandium (Sc), and yttrium (Y). These elements are processed at advanced facilities using solvent extraction and ion-exchange technologies, which enable phase-selective separation of lanthanides with purity levels exceeding 99.5%. The new policy mandates that all exporters globally obtain permits from China’s Ministry of Commerce, effectively centralizing supply oversight.
Key technical thresholds in the licensing framework:
- Minimum purity requirement: ≥ 99.5% REO (rare earth oxide) per batch
- Export quota cuts: 30% reduction versus 2024 levels
- Mandatory Environmental Compliance Certificates, verifying wastewater pH, radionuclide levels, and tailings stability
Why Rare Earths Aren’t Actually Rare
Geologically, the 17 rare earth elements (REEs) are as abundant in the Earth’s crust as copper or lead. Their “rarity” stems from two factors:
- Dispersed mineralogy: REEs typically occur in complex polymetallic ores such as bastnäsite, monazite, and ion-adsorption clays, requiring multi-stage hydrometallurgical processing.
- Separation challenges: The lanthanides exhibit nearly identical ionic radii, demanding solvent extraction systems—often using di(2-ethylhexyl) phosphoric acid (D2EHPA) or quaternary ammonium reagents—to achieve high selectivity.
Worldwide, recoverable reserves exceed 130 million metric tons of rare earth oxides (REO). Australia’s Mount Weld deposit and the U.S.’s Mountain Pass mine (operated by MP Materials) alone account for over 20% of known reserves. Canada’s proposed Nechalacho project and Greenland’s Kvanefjeld site further diversify potential sources.
Short-Term Impact: Stockpiles, Recycling, and Intermediary Trade
In the immediate term, U.S. and European firms have turned to existing stockpiles and recycling streams. Advances in urban mining—particularly automated disassembly and acid‐leaching of neodymium-iron-boron (NdFeB) magnets—can recover up to 95% of Nd, Dy, and Tb content. Fluorination and calciothermic reduction methods enable direct separation from electronic scrap at pilot scales.
Moreover, third‐party intermediaries in Belgium, Malaysia, and the UAE continue to serve as re-export hubs. According to recent customs data, more than 60% of germanium shipments destined for U.S. semiconductor fabs pass through Antwerp, rendering China’s direct embargo less effective.
Emerging Extraction Methods and Recycling Technologies
Breakthroughs in molecular recognition and bioleaching are poised to transform REE recovery:
- Ligand‐engineered membranes: Graphene oxide composites functionalized with phosphonic acid groups exhibit 10× higher separation factors for Dy/Fe compared to conventional SX processes.
- Extremophile bioleaching: Acidithiobacillus ferrooxidans strains adapted to high-lanthanide concentrations can selectively solubilize monazite in 72 hours under controlled pH 1.5 conditions.
- Hydrogen reduction furnaces: Pilot reactors at Oak Ridge National Laboratory achieve 90% REO yields using hydrogen atmospheres at 500 °C, eliminating the need for fluorinating agents.
Alternative Magnet Technologies
To reduce dependency on Dy and Tb, major OEMs are exploring novel magnet compositions:
- Ferrite-composite magnets: Ceramic ferrites blended with nanostructured cobalt particles achieve energy products (BHmax) of 25–30 MGOe.
- Iron‐nitride (Fe₁₆N₂) magnets: Experimental thin films demonstrate coercivities above 15 kOe without any rare earth content.
- High-entropy alloys: Multicomponent alloys containing Fe, Ni, Co, and Mn show promise for moderate temperature applications (≤ 150 °C) with <5% performance degradation.
Environmental and Regulatory Challenges
While the U.S. Geological Survey reports significant reserve volumes, domestic mining faces hurdles:
- Permitting timelines: Under the National Environmental Policy Act (NEPA), approval for new mine sites can exceed five years, factoring in EIS (Environmental Impact Statement) and public comment periods.
- Tailings management: REE processing generates thorium-bearing residues, requiring engineered disposal cells with clay liners and groundwater monitoring for up to 30 years.
- Community consent: Local opposition in regions like Wisconsin and Alaska has stalled several projects on grounds of water usage and landscape impact.
Geopolitical and Economic Outlook
China’s strict enforcement could cut global HREE supply by up to 15% in 2025, driving spot prices on the Shanghai Futures Exchange (SHFE) for Dy2O3 up by 20% year-on-year. However, mounting investments in Australia, Canada, and the U.S.—backed by $3 billion in public and private funding—signal a pivot. The European Union’s Critical Raw Materials Act aims to secure 10% of its consumption from domestic or Allied sources by 2030.
Conclusion: A Turning Tide
China’s one‐shot strategy underscores the fleeting nature of its monopoly. Through advanced extraction, recycling innovations, and strategic stockpiles, the U.S. and its partners are building resilience. While the current pinch may drive price volatility in the short term, technical ingenuity and diversified supply chains suggest China’s market share of heavy rare earths is poised to peak—and potentially recede—in the next five years.