STUDY. Despite diversification initiatives worldwide global value creation in the rare earths sector remains heavily concentrated in China and is therefore fraught with geo-economic risks.

Executive Summary

When the prices of certain high-tech materials suddenly surged in the autumn of 2010, many industrial companies were abruptly confronted with how vulnerable their supply chains were. The trigger? Not an oil conflict, not a financial crisis – but a maritime dispute between China and Japan. At the center were metals that few people had heard of at the time: rare earths.

Today, rare earths are indispensable to everyday life. Without them, there would be no high-performance motors in electric vehicles, no efficient wind turbines, no smartphones, and no modern defense systems. What once primarily concerned mineralogists has since become the nervous system of modern economies.

As their technological importance has grown, so too has their geopolitical significance. Over the past decades, China has not only controlled large parts of global extraction, but – crucially – has built up and expanded the key stages of processing and refining. A state-directed industrial policy made it possible to transform geological resources into systemic influence. This became visible, for example, through export restrictions that trigger systemic market reactions and expose political dependencies.

Major economies have since responded. The United States is supporting new mining and processing projects. The European Union has adopted a Critical Raw Materials Act. Japan has pursued supply diversification for more than a decade. Finally, Australia has strengthened its role as an alternative producer. Nevertheless, global value creation in rare earths remains heavily concentrated in China and is therefore critical from both a geopolitical and geo-economic perspective.

This study examines the underlying fragility. It traces rare earth supply chains from the mine to highly refined industrial products, showing where strategic import dependencies have emerged and why they are so difficult to unwind. The analysis makes clear that this is no longer merely a question of geology. Industrial policy, environmental considerations, and geopolitical strategies intersect, turning seemingly ordinary minerals into a central instrument of geopolitical power.