IEA Warns China's Rare Earth Curbs Threaten $6.5 Trillion in Global Production

The full implementation of China's export restrictions on rare earth minerals could put $6.5 trillion of downstream industrial production outside the country at risk, the International Energy Agency (IEA) warned on Thursday. The assessment was published in the agency's latest Global Critical Minerals Outlook report.

Scope of the Economic Risk

According to the IEA, if the controls take full effect, industries including automotive, high-tech, defence, and energy would face significant supply disruptions. The report specified that the United States and Europe would account for nearly half of the total economic value exposed.

"Our latest analysis shows that vast amounts of economic value depend on relatively small volumes of critical minerals, whose supply chains remain highly concentrated and are therefore vulnerable," said IEA Executive Director Fatih Birol.

Broader Mineral Controls

China, the world’s largest producer of rare earths, expanded its export controls in October of last year to cover additional materials and introduce new licensing requirements, though it later agreed to delay implementation for one year. Rare earths are a group of 17 metals used in small but essential quantities in products from electric vehicles and smartphones to advanced weapons systems.

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The IEA report also warned of risks from China's planned export controls on graphite, a key material in electric vehicle batteries. Full implementation of these postponed measures could put about $300 billion of downstream production at risk. China currently accounts for more than 90% of global processed graphite output.

Western Response and Shifting Supply Chains

In response to these supply chain vulnerabilities, Western governments have been actively working to build alternative sources. The IEA noted a significant increase in investment, with public financing commitments for new critical mineral projects quadrupling to $65 billion between 2023 and 2025.

These efforts are already having an impact. New rare earth refining projects in the U.S. and Malaysia helped reduce China’s share of the global market to 85% last year from 90% in 2023, the agency said. If all planned projects proceed as scheduled, the IEA projects that China's share could fall to 70% by 2035.