With China controlling the rare-earth market, investors are beginning to pay attention. Maybe that’s hard to believe given recent trends, which show an unprecedented increase in rare-earth stock prices. The U.S. controls nearly 40% of known global rare-earth reserves. It is number one in production and refining stages. Now, as tensions with the United States escalate, concerns over supply are mounting. Market participants are now wagering on whether or not China’s hegemony in this critical sector can be sustained.
China’s control over rare-earth elements is unparalleled. In fact, according to industry analysts, the country accounts for about 70% of rare-earth production worldwide. This has been true for the key ingredients that power many advanced industries, from electric vehicles to renewable energy technologies. Furthermore, China oversees most of the rare-earth refining operations, allowing it to dictate both raw material availability and processed supply.
In particular, the tensions between China and the United States have reached new heights. Such tensions increase concerns that we might face new supply chain shocks. Concerns over increased restriction on access to these crucial materials have sent rare-earth prices through the roof. As you can see, investors are understandably freaking out about this impending reality. The U.S. and its allies have been alarmed at their deep reliance on China for rare-earth supplies. This national security concern has still led to calls to diversify sourcing and enhance domestic production.
According to market analysts, as long as these conflicts continue, China’s monopoly hold on the rare-earth market will likely go unopposed. The continued threat of a potential trade war with China has already forced private industry and governments around the world to rethink their approaches to rare-earth procurement and usage. Some analysts believe this environment might spur more investments in domestic, stable sources. They know matching China’s production levels will be an uphill battle.
Beyond geopolitical influences, several technological innovations have contributed to the rare-earth element market dynamics. This trend is only predicted to grow, as industries look for more sustainable solutions and the demand for these materials continues to grow. Either way, this trend might make China a more competitive market leader. Given its large stockpiles and developed production and refining capacity, China is poised to take full advantage of this opportunity.