Rare earth elements are now a frontline in the broader geopolitical contest between the United States and China.
In October 2025, China’s Ministry of Commerce tightened its grip on rare-earth exports, expanding national-security controls over more metals and related technologies. The new rules specifically restrict shipments to foreign defence industries, requiring special export licenses for materials that had previously moved freely.
Then, in early November, Beijing signalled a temporary easing of these restrictions. It announced plans to issue general export licenses for several key rare-earth materials including gallium, germanium, antimony, and graphite to approved U.S. buyers. This move, presented as part of a broader U.S.–China trade framework, suspended some of the tighter October controls for about one year, allowing civilian industries such as electric vehicles and electronics to resume smoother access to these critical inputs.
Still, uncertainty remains. Beijing has not disclosed which companies will qualify for these general licenses or how long the authorizations will last. U.S. and European firms have already reported delays and reduced access to key materials. These developments underscore Beijing’s intent to separate commercial cooperation from defence dependency, and to use rare earths as both a trade tool and a strategic safeguard.
What Exactly are Rare Earths?
Despite their name, rare earths are not truly rare. They are scattered across the globe, including deposits found deep beneath the ocean. The challenge is extracting and refining them economically and safely. This difficulty stems from the need for complex chemical processes to separate them into usable forms. This process is costly, difficult to scale, and produces significant toxic waste.
Rare earth elements are a group of seventeen metals, that are essential components in the production of modern technology. Found in EV magnets, smartphone displays, and advanced defence sensors, these elements form the backbone of innovation. Without them, there is no clean energy transition, no artificial intelligence, and limited modern defence capabilities. And yet, their importance is only now being understood.
China’s Commanding Lead
Over three decades, China built a commanding position in rare earths. It now produces about seventy percent of the world’s mined supply and processes ninety percent of it1. This dominance was no accident, resulting from deliberate industrial policy combining long-term vision, low production costs, and strong state support.
By investing early in refining technologies and tolerating the environmental costs, China effectively drove competitors out of the market. Western producers, constrained by tighter environmental rules, saw a persistent decline in rare earth output.
When Beijing briefly halted rare earth exports to Japan in 2010 after a dispute, it exposed a critical vulnerability in global supply chains. Fifteen years later, that vulnerability has only deepened. Whoever controls rare earths controls the pace of technological progress.
Today, China’s interest in controlling rare earth exports stems from their strategic and economic significance. As the world’s dominant producer and processor of these materials, China views rare earths as a national asset underpinning global supply chains for high-tech manufacturing, renewable energy, and defence. By tightening export controls, Beijing aims to safeguard its technological advantage, ensure domestic supply for its own industrial priorities, and strengthen its leverage in global negotiations, particularly with advanced economies that depend on Chinese rare earth exports.
The West Strikes Back
Recognising the risk of overreliance on China, the United States and its allies are accelerating efforts to rebuild domestic rare earth supply chains. In Washington, the Pentagon funded new processing facilities under the Defence Production Act and revived the Mountain Pass mine in California, operated by MP Materials (the only major rare earth producer in the U.S.). The Inflation Reduction Act provides major tax credits and subsidies for Electric Vehicles (EVs) and renewable energy components made without Chinese minerals.
Europe followed suit with its Critical Raw Materials Act, setting ambitious targets to process at least forty percent of strategic materials within the EU by 2030. Australia, Canada, and Japan are investing heavily in mining and refining projects, while Vietnam and Malaysia are emerging as alternative processing hubs.
For decades, the focus was on efficiency, regardless of where materials were sourced (leading to reliance on China). This new perspective acknowledges the geopolitical reality: control over critical raw materials is strategic leverage, determining future economic and military power. It views supply chains not merely as a matter of cost-efficiency, but of national and economic security.
The Investment Perspective
For investors, the implications of the rare earth race stretch beyond mining stocks. A structural realignment of global supply chains is unfolding, which is being shaped as much by governments as by markets. Across the U.S., Europe, Japan, and Australia, public funding flows into strategic mining, refining, and recycling initiatives designed to reduce dependence on China. This wave of industrial policy is likely to create long-term opportunities for companies positioned along the entire value chain: from extraction and advanced material processing to magnet manufacturing and clean energy components.
Alongside established producers, a new generation of firms is emerging: developing magnet substitutes, improving refining efficiency, and pioneering recycling technologies to lessen future supply bottlenecks.
However, investors must recognise that the path forward will not be linear. The strategic nature of rare earths means the sector remains exposed to policy intervention, trade disputes, and cyclical demand shifts. Prices may swing sharply as governments use tit-for-tat measures to gain technological and geopolitical advantage. Rare earths represent a theme of immense potential, but also inherent volatility. For this reason, any exposure to this space should be viewed in the broader context of a diversified portfolio, rather than through the lens of a single trade or company. This is a long-term journey defined by volatility and capital intensity, but also the potential to unlock enduring industrial and technological advantage.
Written by
Mark Muscat, CFA
Portfolio Manager, ReAPS Asset Management Ltd
- https://www.bloomberg.com/news/articles/2025-10-19/a-stock-trader-s-guide-to-navigating-china-s-curb-on-rare-earths ↩︎
The information contained in this article represents the opinion of the contributor and is solely provided for information purposes. It is not to be interpreted as investment advice, or to be used or considered as an offer, or a solicitation to sell/buy or subscribe for any financial instruments nor to constitute any advice or recommendation with respect to such financial instruments. This article was issued by ReAPS Asset Management Limited, a subsidiary of APS Bank plc. ReAPS Asset Management Limited (C77747) with registered address at APS Centre, Tower Street, Birkirkara BKR 4012 is regulated by the Malta Financial Services Authority as a UCITS Management Company and to carry out Investment Services activities under the Investment Services Act 1994 and is registered as an Investment Manager under the Retirement Pensions Act.
