Geopolitical Instability & Tariff Hikes- Reshaping the Rare Earth Elements Landscape

China: The near-monopoly supplier of rare earths

China has established a dominant position globally in extracting and refining REEs. Over the past several decades, the country has emphasized building its strong position in the global REE market with a long-term goal of expanding its downstream industry and becoming the leader in refined rare earth technologies. As per IEA, in 2023, China’s global share of mined rare earth and refined REE production soared over 60% and 90%, respectively.

Trade turmoil in the global REE sector

Amid the recent tariff announcements, the global rare earth elements (REE) industry continues to bear concerns pertaining to risk and volatility. Regarded as the strategic levers of modern industries, the shift in tariffs coupled with strengthening export restrictions on REEs may send major ripples across the global economy in the coming months.

Timeline of events: A series of reciprocal tariffs

Major announcements pertaining to the REE industry during April are highlighted below-

• April 2: Steep tariff rates were imposed in several countries by the U.S., including an additional 34% in China.
• April 4: China’s government ordered immediate export restrictions on seven critical REEs, including samarium, terbium, yttrium, gadolinium, dysprosium, scandium, and lutetium. They are vital for manufacturing high-performance magnets for aerospace & defense, as well as green energy technologies.
• April 14: Amid escalating trade tensions, China has suspended exports of a broad range of critical minerals and magnets while the government drafts a new regulatory system.
• April 15: The U.S. government ordered a trade-related probe into the risks to the country’s national security from dependence on critical minerals and their derivatives.

Efforts to mitigate REE scarcity

Currently, no separation activity is conducted in the U.S. and developing full-scale commercial mining & processing capabilities needs long-term planning. Thus, to combat the REE shortage in the foreseeable future, the country has started looking for alternative sources of supply both domestically and internationally. The U.S. is exploring efforts to create potential deals with Ukraine and Greenland to attain supplies.

MP Materials, the only operator of a REE mine in the U.S., is leveling up supplies of the critical materials and magnets. NioCorp is also eyeing potential opportunities to build a mine in Nebraska.

Moreover, growing interest in accelerating domestic recycling initiatives may offer a path toward self-reliance for the U.S.

Looming Threat on the Global Supply Chain

REE export controls by China are prompting fears across dependent industries such as automotive, aerospace & defense, and renewables. Supply shortages, delays, price hikes, and permanent supply curbs for a few companies are likely to occur in the coming months. U.S.-based giants, including Tesla, Apple, Lockheed Martin & others that source rare earths from China, are likely to be impacted by the current supply chain bottlenecks.

Although, the existing stockpile may address the immediate supply shortage. However, if trade uncertainty continues, this may severely impact the heavily reliant industries.

Countries featuring ongoing initiatives and investments to boost REE mining, processing, R&D, and magnet manufacturing, such as Japan, South Africa, Australia, Brazil, Saudi Arabia, and Vietnam, may attract attention from stakeholders in the global REE supply chain. However, their current mining capacity and recoverable reserves are too limited compared to that of China.

Strategic Recommendations for Industry Leaders

The dynamic market scenario is demanding companies emphasize both downstream and upstream stages to combat the effects of the current REE export halt and upcoming disruptions.

Recommended Actions:

• Emphasis on supply chain diversification
• Strengthening domestic capabilities for REE recycling
• Tracking global tariff rates and export restrictions announcements
• Monitoring China’s upcoming new regulatory system encompassing issuance of special export licenses for REEs
• Boosting public-private partnerships to promote funding and explore recoverable reserves.

How BCC Research Can Support Your Strategy

BCC Research offers reliable, data-driven intelligence that aids companies in the REE sector to navigate global trade volatility. Our strategic insights are developed to support decision-makers as they navigate through market fluctuations and economic consequences in a dynamic world.

Our Services Include:

• Custom analysis on the impact of tariffs and trade shifts.
• Forecast modeling for supply chain costs and risks.
• Reshoring and manufacturing opportunity evaluation.
• Market positioning insights across technology, materials, and manufacturing.

In a world of growing trade uncertainty, BCC Research offers a steady hand to help you turn disruption into direction.