Rare earth elements, once considered a niche concern in the global mining sector, have now moved to the very heart of international economic and security strategies. Recent years have seen these strategic metals become the focus of intense diplomatic, industrial, and legal maneuvering, as the United States, Europe, Canada, and Japan scramble to reduce their dependence on China—the world’s dominant player in rare earth processing and high-performance magnet production. As of December 2025, China controls more than 80% of rare earth processing, a fact that has left Western nations feeling vulnerable, especially as Beijing tightens export controls and approval requirements, most recently in April 2025.
According to a new analysis by consulting firm Wood Mackenzie, rare earths now sit at the core of energy and technology security. The metals of the lanthanide series, along with scandium and yttrium, are indispensable for electric motors in electric vehicles (EVs), permanent magnets in wind turbines, advanced electronics, robotics, and a broad range of defense systems. The report describes rare earths as wielding "extraordinary leverage" in global trade negotiations. China’s dominance in refining and magnetic materials has granted Beijing growing geopolitical influence, compelling other major economies to accelerate the creation of resilient, non-Chinese supply chains. This shift is evident in the significant uptick in offtake agreements, government partnerships, and G7 initiatives seen throughout 2024 and 2025.
The urgency of this transition became especially clear after China introduced additional approval requirements for selected rare earths and magnet products in April 2025. The move underscored just how dependent Western industries remain on Chinese supply chains, and it galvanized a swift political and industrial response. The United States, for instance, has taken a leadership role in diplomatic efforts to secure rare earths. In 2024, Washington signed a memorandum on critical minerals with Norway. The following year saw the launch of a G7 action plan, the creation of a G7 alliance to coordinate investments, and a framework agreement with Japan focused on mining and processing these vital materials. The so-called Trump–Takaichi Pact, encompassing lithium, cobalt, nickel, and rare earths, further expanded the scope of US engagement. Additional memoranda with Malaysia, along with the designation of Australia as a key partner, aim to reduce China’s overwhelming influence in the rare earth sector.
Ironically, the United States was once the world’s leading producer of rare earths. Today, however, much of the value chain has shifted to Asia. As a result, Washington enters negotiations from a position of structural disadvantage—a reality that has only intensified the drive to forge new supply relationships. Canada, meanwhile, is positioning itself as a democratic supplier of rare earths and other critical raw materials. In August 2025, Ottawa and Berlin signed a declaration to deepen cooperation on critical minerals. Canada is also exploring frameworks with Japan and South Korea, linking rare earth supply to security-relevant technologies.
Europe, too, is integrating rare earths into a broader network of partnerships on critical raw materials. Agreements with Canada, Norway, Argentina, the Democratic Republic of Congo, Namibia, Kazakhstan, and Australia are designed to give the European Union preferential access to concentrates and separated oxides. Some African agreements even include provisions for local processing, though implementation has been gradual. Japan, for its part, is advancing its own initiatives through the state raw materials agency JOGMEC, which is collaborating with Namibia Critical Metals on the Lofdal heavy rare earths project.
On the industrial front, concrete projects and supply relationships have intensified. In Australia and North America, efforts are underway to build complete value chains. For example, ABx Group and Ucore Rare Metals signed a letter of intent for a joint Australia–USA supply chain. Iluka Resources and Tronox are expanding their processing capacities, backed by export credit agencies. Arafura Rare Earths is pushing forward with the Nolans project, which is expected to supply about 4% of the global rare earth market once operational. In Brazil, Serra Verde secured a US$465 million development loan and is focusing future deliveries on Western and Asian customers, while also expanding separation capacities.
Recycling is also coming to the fore. The Canadian company Cyclic Materials has inked an offtake agreement with Solvay to deliver recycled mixed oxides from Kingston, Ontario, to France. A planned US$25 million research center will support the circular supply of the European magnet industry with recycled rare earths. Governments and industry are increasingly financing mines and refineries directly, with companies like Lynas Rare Earths, Iluka, MP Materials, and the Saskatchewan Research Council receiving support to build capacities outside China.
Contract structures are evolving as well. Western customers are now willing to pay price premiums for non-Chinese material, signing long-term offtake agreements that include price floors and take-or-pay clauses. Projects such as the Solvay expansion in France and the SRC–ReAlloys agreement in Canada demonstrate how political directives are translating into tangible trade flows for both primary and recycled rare earths.
The automotive industry, in particular, finds itself at a crossroads. As reported by Squire Patton Boggs and The New York Times, US and European automakers face mounting challenges in accessing Chinese rare earths essential for EV motors, largely due to trade tariffs and geopolitical tensions. Automakers are pursuing two main strategies: developing rare-earth-free motor technologies and securing alternative supply sources outside China. One client is working on a motor that generates a magnetic field using electric current instead of permanent magnets, eliminating the need for rare earths. Another is localizing its supply chain through long-term partnerships with energy companies. While both strategies offer promise, they face significant hurdles in scaling for mass production and meeting the durability standards required for automotive use. Most are still years away from widespread adoption.
Legal and strategic planning have become crucial. As Squire Patton Boggs highlights, securing new alliances, negotiating complex commercial agreements with resource developers, and navigating a thicket of trade and environmental regulations are now central to maintaining competitiveness. Key considerations include compliance with mining laws, export controls, sanctions, pricing formulas, risk allocation, sustainability and ESG standards, logistics, dispute resolution, confidentiality, and termination rights.
Meanwhile, Washington is backing large-scale projects to secure strategic metals amid China’s export curbs. On December 15, 2025, Korea Zinc announced plans to build a massive facility in Clarksville, Tennessee, to process critical materials, including rare earths. The US$7.4 billion investment, requested by the US government, is seen as a strategic move to strengthen domestic supply chains and reduce reliance on China. The facility, to be constructed in phases from 2027 to 2029, will be developed through a joint venture with the US Department of War and private companies. Once operational, it is expected to produce a range of vital minerals, including zinc, lead, copper, and rare and strategic metals essential for semiconductors, defense, and renewable energy technologies.
As the world races to secure the building blocks of the energy transition and next-generation technologies, rare earths have shed their niche status. They are now a strategic key raw material shaping the reorganization of global supply chains and industrial policy. Whether the flurry of new projects and partnerships will be enough to loosen China’s grip remains to be seen. For now, the competition for secure, diversified, and politically stable sources of rare earths is set to remain a defining theme in international markets—impacting everything from EV innovation to national security.
