Who Controls Rare Earths Controls the Future

As the global economy accelerates toward electrification, automation, and advanced defense systems, a quiet yet high-stakes battle is unfolding beneath the surface — literally. Rare earth elements, the obscure yet indispensable materials behind everything from fighter jet engines to electric vehicle motors, have become a critical lever of geopolitical and industrial power.

While nations rush to secure mineral resources, the true choke point is not what lies underground, but what happens after extraction. Refining, separating, and transforming these elements into usable materials requires a level of technological sophistication and infrastructure that only a few countries currently possess.

At the center of this global supply chain imbalance sits China, which still controls more than 85% of the world's rare earth refining capacity and over 90% of its permanent magnet production. Attempts by the U.S., EU, and allies to catch up have made progress — but major technological hurdles remain, and the gap is widening where it matters most: at the midstream.

Now, as tensions deepen across trade, security, and energy fronts, rare earths are being redefined not just as industrial inputs, but as strategic assets. Their scarcity is not in quantity — but in who has the capability to refine, apply, and weaponize them.

Despite the name, rare earth elements (REEs) are not geologically scarce. In fact, they’re found across continents — in Mongolia, Brazil, Vietnam, and even North Korea. But turning these metals into the high-performance magnets used in electric vehicles, wind turbines, and precision weaponry requires a transformation process that is anything but simple.

The bottleneck lies in the midstream — the refining and separation stage known as solvent extraction (SX), followed by metalization and magnet production. These processes are not only technically complex, but also environmentally burdensome and capital intensive.

In solvent extraction, hundreds of chemical stages are required to separate the 17 chemically similar rare earth elements. This process generates radioactive waste, demands extreme chemical precision, and requires multi-million-dollar facilities to ensure safety, throughput, and purity. While mining can be outsourced or subsidized, SX expertise cannot be improvised.

Even fewer facilities exist for transforming oxides into metal alloys and fabricating high-performance magnets — particularly NdFeB (neodymium-iron-boron) magnets, which are essential for everything from F-35 fighter jets to Tesla motors.

Today, China still commands over 85% of global refining capacity and more than 90% of global magnet production, according to the International Energy Agency (IEA) and industry tracking groups. Though countries like the U.S., Australia, and Japan have made strides to rebuild their supply chains — MP Materials in California, Lynas in Texas and Malaysia, and Hitachi Metals in Japan — none yet possess fully autonomous, closed-loop production at scale.

Moreover, even where midstream infrastructure is under construction, bottlenecks persist in skilled labor, environmental permitting, and chemical sourcing. These constraints mean that building a resilient rare earth supply chain is not just a matter of mining — it’s about mastering one of the most demanding industrial processes in modern metallurgy.

The Geopolitical Fragmentation of Rare Earth Supply Chains

As the technical challenges of rare earth processing persist, a second transformation is underway — this one geopolitical. What was once a relatively obscure materials market is now fracturing into distinct strategic blocs, with supply chains being reshaped not by geology, but by diplomacy, defense alliances, and export controls.

At the center of this fragmentation is China, which has spent decades building not only its own integrated rare earth value chain — from mine to magnet — but also the regulatory leverage to weaponize it. In April 2024, Beijing announced new export licensing rules for seven heavy rare earth elements used in defense and high-temperature applications, such as dysprosium and terbium. Companies now require state approval to ship these abroad — a move widely interpreted as retaliation against U.S. semiconductor restrictions.

Meanwhile, a Western coalition of rare earth suppliers and consumers — including the United States, European Union, Japan, and Australia — has begun to coalesce into what some analysts are calling a “critical minerals alliance.” This emerging bloc is advancing a multipronged strategy: forging bilateral agreements such as the U.S.–Australia Critical Minerals Partnership; establishing public financing mechanisms through institutions like the U.S. Development Finance Corporation (DFC) and the Export–Import Bank (EXIM) to support projects by firms like Lynas and MP Materials; and facilitating technology-sharing initiatives aimed at localizing solvent extraction and permanent magnet production. While these efforts signal growing political will and strategic coordination, they have yet to overcome the deep technological and industrial inertia that still favors China.

But while these alliances diversify access to ore deposits — from Vietnam to Canada — the midstream gap remains. Most new facilities outside China are either under construction or running well below capacity, with limited specialization in heavy rare earths, which are crucial for defense-grade magnets.

Caught between these blocs are a set of “resource-rich but capacity-poor” countries — including Brazil, India, Kazakhstan, and potentially North Korea — all of which have sizeable reserves but lack refining infrastructure or face political risk.

In this bifurcated environment, resource location is no longer destiny. What matters is not just who owns the minerals, but who controls the means to process and deploy them. Like semiconductors, rare earths are becoming a strategic substrate of national security, clean energy, and technological sovereignty.

Strategic Demand Is Rising — And So Are the Stakes

Rare earth elements are no longer niche industrial inputs. They have become embedded in the core architecture of modern power — both electrical and geopolitical. Their role spans across sectors that are not only rapidly expanding, but also increasingly mission-critical to national security, climate targets, and global competitiveness.

In the defense sector, demand is driven by the need for lightweight, high-precision materials in advanced weapons systems. A single F-35 fighter jet requires over 400 kilograms of rare earths, used in guidance systems, actuators, radar arrays, and electric drive components. Submarines, drones, and missile platforms also rely heavily on dysprosium, terbium, and other heavy rare earths to maintain high performance under extreme conditions.

Meanwhile, the clean energy transition is rewriting the global mineral map. The International Energy Agency (IEA) projects that rare earth demand for electric vehicle (EV) motors will grow 2.5 to 3 times by 2030, while offshore wind turbines — which require large neodymium-based magnets — will drive demand up to fourfold by 2035. This makes the availability of refined rare earths a direct bottleneck for achieving net-zero targets.

Beyond defense and energy, the next wave of demand is coming from AI, robotics, and aerospace — industries where motor efficiency, weight-to-power ratio, and compact design are paramount. From autonomous drones to surgical robots, the push toward miniaturization and performance makes rare earths indispensable, especially NdFeB magnets that deliver high torque in small spaces.

These sectoral shifts are not just quantitative — they are qualitative. It's not simply more rare earths that are needed, but higher-purity, application-specific materials produced under traceable, ESG-compliant conditions. As OEMs and governments move to de-risk their supply chains, the importance of provenance, recycling, and regulatory alignment is becoming as critical as the material itself.

The global economy is moving toward a future where rare earths are not just volume commodities, but strategic enablers — and the ability to secure them, refine them, and deploy them intelligently may well define who leads in defense, climate technology, and advanced manufacturing.

Innovation, Substitution — and the Limits of Escape Velocity

As pressure mounts to reduce dependency on China and diversify supply chains, a wave of innovation has been unleashed across academia, industry, and government. From advanced recycling technologies to next-generation motor designs, engineers are racing to rewrite the rare earth playbook. Yet despite promising developments, most solutions remain partial — and far from displacing rare earths at scale.

Among the most viable alternatives is urban mining, or the recovery of rare earths from electronic waste. Countries like Japan and Germany are investing in automated disassembly systems and chemical recovery techniques for NdFeB magnets found in hard drives, motors, and appliances. Some commercial facilities now achieve recovery rates above 80% for neodymium — an impressive figure, but one that still faces scalability, cost, and contamination challenges. Moreover, current global e-waste streams cannot meet rising demand on their own.

Material substitution is another line of attack. Ferrite and ceramic magnets, while abundant and cheaper, offer significantly lower performance and are unsuitable for high-efficiency EV motors or military systems. Some automakers, including Tesla and BMW, have experimented with rare-earth-free motor designs using induction or switched reluctance motors. While these designs eliminate supply risk, they often sacrifice power density, energy efficiency, or thermal resilience — trade-offs that limit their use in premium or high-stress applications.

Efforts are also underway to reduce rare earth usage per device, such as by optimizing magnet geometry, enhancing magnetic anisotropy, or introducing hybrid composite materials. These innovations can incrementally ease pressure on supply chains, but do not eliminate dependence.

At the edge of research, labs are exploring entirely new magnetic materials based on iron-nitride compounds, metamaterials, or even quantum-engineered lattices. While breakthroughs in these areas could one day redefine magnetism, they remain decades away from commercial readiness.

The underlying truth is that rare earths are not easily replaced — not because they are magical, but because they are efficient, compact, and highly optimized for the physical constraints of modern technology. The world may someday invent its way past them. But until then, innovation is best seen not as an escape hatch, but as a strategic supplement to supply diversification and processing capacity.

North Korea, Greenland, and the Politics of Untapped Potential

As governments and corporations scramble to build rare earth supply chains, attention is increasingly turning to untapped or geopolitically sensitive reserves — resources that are vast on paper but effectively unreachable due to technical, political, or legal constraints. At the top of this list are North Korea, Greenland, and the deep seabed — each a symbol of unrealized potential, and each locked behind a different kind of gate.

North Korea is often cited as holding some of the largest undeveloped rare earth reserves in East Asia, with estimates ranging from 6 to 20 million tons of total rare earth oxides (TREO). Sites like Ryongpho, Deokdal, and Kimhwa are believed to contain high-grade ores, including dysprosium and terbium — elements crucial to military and high-temperature applications. But despite the geological promise, the country has no refining capacity, no solvent extraction plants, and no verified industrial-scale output. Moreover, UN sanctions and export controls make legal off-take agreements all but impossible, leaving these resources economically stranded and politically radioactive.

Greenland, meanwhile, has become a flashpoint for strategic competition between the U.S., China, and the EU. Projects like Kvanefjeld and Kringlerne hold significant quantities of rare earths — especially heavy REEs — and have drawn investor interest since the early 2010s. However, domestic opposition and environmental concerns have halted most progress, particularly after Greenland’s 2021 decision to ban uranium mining, which impacts many REE-bearing deposits. While the United States has supported alternative projects on the island, progress remains slow.

The deep seabed offers perhaps the largest long-term resource potential, with polymetallic nodules containing not only rare earths but also cobalt, nickel, and manganese. The Clarion–Clipperton Zone (CCZ) in the Pacific alone holds trillions of tons of mineral-rich sediment. But here, the barrier is not geology — it’s governance. The International Seabed Authority (ISA) has yet to finalize a legal framework for commercial extraction, and growing calls for a moratorium from scientists and environmental groups have further delayed any deployment. While some nations, including the U.S. and China, are accelerating deep-sea exploration, meaningful production is unlikely before the 2030s.

Together, these cases highlight a critical fact often overlooked in rare earth narratives: reserves mean little without infrastructure, legal clarity, and diplomatic alignment. Whether locked behind sanctions, environmental regulation, or legal gray zones, vast mineral deposits alone are no guarantee of supply. In this sense, rare earth security is not just about digging deeper — it's about building smarter.

Power Lies Not in the Ground, but in the System

In the global race for rare earth elements, the defining advantage is no longer geological — it is systemic. The countries that will lead are not those that possess the most untapped ore, but those that can convert minerals into materials, and materials into strategic capability. This requires more than mining licenses and favorable deposits. It requires sustained investment in refining infrastructure, technology transfer, regulatory interoperability, and above all, political coordination across allies and industries.

China understood this early, leveraging patient state investment, loose environmental controls, and strategic export policy to secure its place at the center of the rare earth economy. The West — and its partners like South Korea — are now playing catch-up, but the outcome will not be determined by headline reserves or new discoveries. It will depend on whether they can build the midstream capacity and cross-border trust necessary to close the processing gap.

Innovation will help — through recycling, substitution, and cleaner processing — but it will not eliminate the need for a robust rare earth infrastructure. And while underdeveloped regions like North Korea and Greenland may feature in future strategies, they remain, for now, outside the operational core of global supply chains.

In the end, rare earths are not just a commodity — they are a capability. And in a world increasingly defined by technology-driven rivalry, capabilities — not resources — are the true currency of power.