Tensions are mounting in the international trade arena. Most recently, China has expanded its export restrictions to seven rare earth elements, deepening its control over these vital resources. Rare earths are a set of 17 chemically related elements that are critical to all advanced technology. These dots have become a major sticking point in international trade frictions. In addition, China has a virtual monopoly on rare earth refining, as the country undertook 90% of the world’s rare earth refining activity. This control has massive ramifications for sectors dependent on these strategic materials, from electric vehicles to fighter jets to robotics.
The retaliatory restrictions from China are widely considered to be a retaliatory move against U.S. tariffs that were enacted by President Donald Trump. As the world’s largest producer of rare earths, China’s actions raise questions about the stability of the supply chain and the implications for nations dependent on these materials for their technological advancements.
Rare earth elements are incredibly tricky materials to extract and refine, so much so that they have deservedly received the moniker “rare.” This complexity contributes to China’s dominance in the sector, where it not only mines approximately 23% of the world’s lithium but refines over 57% of it. By comparison, while Australia produces about a third of the world’s lithium, it does little lithium refining. This troubling state of play points to the importance for Australia to build its own refining base.
Australia has the fourth largest current reserves of rare earths. The country is making huge strides to quickly ramp up its processing capacity. In November, the country ceremoniously opened its first rare earths processing plant, located in Western Australia. These announcements follow Arafura Rare Earths’ recent success in raising A$840 million to fund their Nolans Project. This investment will enable the construction of Australia’s first integrated rare earths mine and refinery, greatly decreasing our dependence on Chinese processing.
Even with these steps, experts have been cautioning that Australia will remain overly dependent on China for rare earths refinery. Nationally, this dependence is projected to continue at least through 2026. Philip Kirchlechner, industry analyst with Aerotropolis Consulting, added that it was the strategic importance of that dependency that mattered most. He remarked, “China has its foot on the blood vein… of US and European defence systems,” illustrating how critical rare earths are to national security and technological prowess.
These events have led to intense debate among policymakers in Australia and other allied countries. As a result, they are reversing course and revisiting their long-term plans to acquire rare earths. There is a growing recognition that the U.S. and EU have “dropped the ball” in acknowledging the importance of rare earths over recent decades. This negligence has made it possible for China to take advantage of the economic volatility, made worse by trade tensions.