The critical role of rare earth elements in strategic applications, ranging from energy technologies and advanced electronics to aerospace and defence systems, combined with their highly concentrated supply chains, has elevated their importance in both energy and broader economic security discussions in recent years. This report assesses the current state of the rare earth elements market, examining demand and supply dynamics and key technological developments. It analyses the full value chain from mining to permanent magnet production, evaluates vulnerabilities across supply chains, and highlights the implications of potential supply disruptions. Based on these analyses, the report outlines eight targeted policy recommendations that can pave the way for more secure, diversified and resilient rare earth element supply chains. The analysis is founded on the work of the IEA Critical Minerals Security Programme and aims to inform the discussions at the G7 meetings under the French Presidency in 2026.
Rare earth elements play a crucial role in a wide range of strategic applications, from energy, transport and artificial intelligence (AI) technologies to aerospace, medical and defence systems. The wide range of applications, combined with highly concentrated supply chains, has elevated their importance in both energy and broader economic security discussions. Though relatively plentiful in the Earth’s crust, this set of 17 elements have garnered the label “rare” because economically viable concentrations are uncommon and they are seldom found in pure form. Their chemical similarities make them hard to separate during the extraction process, but their different physical and magnetic properties give individual rare earth elements distinct value for various technological applications.
Permanent magnets represent the fastest-growing and most strategically important applications, accounting for around 95% of total rare earth consumption by value. High-performance neodymium-iron-boron (NdFeB magnets) – primarily composed of neodymium and praseodymium, often with dysprosium and terbium as performance-enhancing additives – are among the strongest permanent magnets in the industry. These magnets underpin a wide range of critical technologies, including electric vehicles (EVs), wind turbines, industrial motors and AI data centres, as well as medical, aerospace and defence applications.
Demand for magnet rare earth elements (neodymium, praseodymium, dysprosium and terbium) has doubled since 2015 and is set to expand further by a third by 2030 under today’s policy settings, thanks to growing electrification and the rapid deployment of new energy technologies such as EVs and wind turbines. Growth in automation, robotics and digital technologies plays an increasing role in driving demand beyond 2030, as permanent magnets enable precision motion control, miniaturisation and energy efficiency improvement for these applications.
The rare earth value chain spans a series of technically demanding stages, each adding distinct value as materials move from geological deposits to refined products and permanent magnets. These stages include extraction, Rare earth elements Executive summary Pathways to secure and diversified supply chains PAGE | 8 IEA. CC BY 4.0. beneficiation, chemical upgrading, separation into oxides, metal refining, alloying and magnet manufacturing. After extraction, ores are crushed and milled to liberate minerals, which are then concentrated. Separation – the technical core of processing – converts mixed rare earth feeds into individual oxides. Refined oxides are then transformed into metals, and then into alloy powders, the primary inputs for magnet production.
Among the strategic minerals analysed by the International Energy Agency (IEA), rare earths exhibit one of the highest levels of geographical concentrations across the value chain. In 2024, the People’s Republic of China (hereafter, “China”) accounted for 60% of global mined production of magnet rare earths. For refining, the level of concentration is more pronounced, as the country represented 91% of global refined output. Its share is even higher for permanent magnet production. In 2005, China accounted for around 50% of the production of sintered permanent magnets, but its share expanded significantly to reach 94% in 2024. China’s extensive magnet production activity generates substantial economies of scale and provides a strong and stable demand base for upstream raw materials.
In April 2025, China introduced export controls on seven heavy rare earth elements, related compounds and magnets. Export volumes of these rare earth elements and permanent magnets containing them fell sharply in April and May, leaving many automakers in the United States, Europe and beyond struggling to source permanent magnets. Some automakers were forced to cut utilisation rates or even temporarily shut down production. Licences were eventually granted and export volumes recovered in the following months, but a significant premium remained for magnets produced outside China, reflecting an increasingly prominent role of security considerations in sourcing decisions.
In October 2025, China announced major new rare earth export controls, posing significant risks to global economic security. The list of rare earth elements subject to controls was expanded to include five additional elements. Beyond expanded controls on individual elements and processing equipment and technologies, these controls included a new licence requirement covering the trade of any internationally made "parts, components and assemblies" containing Chinese-sourced rare earth materials or produced using Chinese technologies. This new constraint marked a major escalation of scope, with significant potential implications across a wide range of strategic downstream sectors, including energy, transport, defence, aerospace, semiconductors and data centres. In November 2025, these controls were suspended for a year. In January 2026, China tightened export controls on dual‑use goods destined for Japan, suggesting that underlying risks to economic security remain. Rare earth elements Executive summary Pathways to secure and diversified supply chains PAGE | 9 IEA. CC BY 4.0.
If these rare earth export controls were implemented in full, the economic value of downstream production at risk would reach USD 6.5 trillion per year for countries outside China. The United States and Europe face the greatest exposure with potential direct economic losses estimated at over USD 1.5 trillion each. The automotive sector is set to face the single greatest impact with over USD 3 trillion in potential direct losses outside China, followed by electronics and other transport (aviation, trucks and trains) sectors. Additional vulnerable sectors include defence and data centres. The impacts of a disruption extend far beyond the loss of direct product sales, given the wide range of high-value services that depend on rare earth-enabled products.
A fundamental starting point for diversifying rare earth supply chains is a clear understanding of demand outside the dominant supplier, both current and future. Without this, it is difficult to take a view on the need for capacity expansion, gauge the scale of required investment, and agree targets or coordinate policy efforts. Under today’s policy settings, demand for magnet rare earths outside China is projected to rise by 50% by 2035, with the largest contribution coming from EV deployment. However, existing ex-China capacity across mining, refining and magnet manufacturing falls short of meeting these needs. Even with planned expansions, expected production from existing capacities meets only a fraction of projected needs in 2035: it accounts for about 50% of the demand for mining, 25% for refining and well below 20% for magnets.
Meeting the projected demand outside the dominant supplier from diversified capacities would require significant expansion in mining, refining and magnet production capacity – by a factor of two, four and six respectively, on top of planned expansions from existing projects in the case of full coverage. Several planned projects across the supply chain could help narrow supply gaps if successfully implemented. However, even with these projects, existing and announced capacities in geographically diverse regions would remain insufficient, highlighting the need for additional greenfield developments, particularly in refining and magnet manufacturing.
The project pipeline across different stages of the supply chain is uneven. Existing and announced projects point to a notable expansion of magnet rare earth supply chains outside China in the coming decade. Mining capacity shows the largest potential increase, crossing 50 kilotonnes (kt) of rare earth element content by 2035, led by Australia and the United States, with additional contributions from Brazil, Lao People’s Democratic Republic, Tanzania, India and other smaller Rare earth elements Executive summary Pathways to secure and diversified supply chains PAGE | 10 IEA. CC BY 4.0. producers. By contrast, refining and separation capacity amounts to less than 40 kt, with activity concentrated in Malaysia and the United States, followed by Australia, Viet Nam, Japan, the United Kingdom, France and Estonia. Downstream capacity is even more limited: cumulative planned production of metals, alloys and finished magnets from projects announced as of early 2026 amounts to around 18 kt on a rare earth element content basis, representing only about one third of diversified mining capacity. This reflects a relatively modest pipeline led by the United States, and with contributions from Europe, Japan, Korea and Viet Nam.
Magnet production remains the main bottleneck for supply diversification. While resource development is advancing in several regions, the slower build-out of refining and magnet production is a key concern. Without accelerated investment in these parts of the value chain, many regions are likely to remain dependent on the dominant producer for processing and magnet manufacturing even as domestic extraction capacity expands. Constraints are most acute in magnet manufacturing and the “metallisation” stage, where refined rare earth oxides are converted into metallic alloys or powders.
Meeting demand for magnet rare earths outside the dominant supplier requires around USD 60 billion of investment over the next decade from both public and private sources. This includes financing for announced projects that have yet to secure funding, as well as additional new capacity needed to close the remaining supply gaps. Refining accounts for nearly half of total investment needs while magnet manufacturing represents around one-third. Although significant, this investment requirement is modest compared with other energy minerals and dwarfed by the USD 6.5 trillion potential economic cost of supply disruptions.
Financing diversified rare earth supply chains is constrained by a combination of structural cost and market factors. Projects outside the dominant supplier face higher capital and operating costs, driven by smaller scale, higher input prices, complex permitting processes and stricter environmental requirements. These challenges are most acute at early project stages, where developers must commit significant capital before revenue certainty is realised. At the same time, downstream customers typically require demonstrated technical feasibility before committing to long-term offtake, creating a structural mismatch between financing needs and demand certainty. By contrast, projects in the leading producing country often benefit from established industrial ecosystems, access to low-cost energy and inputs, skilled labour, vertical integration, shared infrastructure, strong balance sheets, and large domestic offtake bases that provide robust demand signals. Rare earth elements Executive summary Pathways to secure and diversified supply chains PAGE | 11 IEA. CC BY 4.0.
Co-production of various elements further complicates investment decisions. Magnet rare earths are typically co-produced with abundant, lower-value elements such as cerium and lanthanum, creating structural imbalances between supply and demand across individual elements. Without sufficient end-use markets for these co-products, the economics of producing higher-value magnet rare earths can be undermined.
Rare earth supply chains generate various environmental impacts across multiple stages of the supply chains, which persist even after mines are decommissioned. In situ leaching – the dominant extraction method for ionic adsorption clay deposits – produces acidic leachate and radioactive tailings that, if improperly managed, contaminate water bodies, soils and surrounding ecosystems. Processing introduces further pressures through air emissions, toxic sludge and community health impacts from high-intensity chemical operations. Many rare earth containing ores frequently co-occur with thorium and uranium, and extraction activities can concentrate these naturally occurring radioactive materials (NORMs) into tailings and process residues, requiring careful efforts to minimise the environmental impact.
Recycling can play a pivotal role in strengthening rare earth supply security by lowering the need for primary supply by up to 35% by 2050. Manufacturing scrap currently accounts for the majority of secondary supply and is heavily concentrated in China where most permanent magnets are produced. However, rapidly growing end‑of‑life volumes from EV motors, wind turbines and electronic waste offer a major opportunity in regions with higher levels of technology deployment. Europe is particularly well positioned, projected to generate half of global magnet scrap from wind and a quarter from EVs by 2030. Emerging industry players and new technologies are improving the prospects for rare earth magnet recycling, supported by stronger circularity policies and expanding regional magnet manufacturing initiatives.
1. Understand rare earth needs and risk exposure. A clear picture of national demand outlooks is crucial to set realistic targets, estimate investment needs and calibrate policy interventions. Data and information gathering through close industry engagement, statistical surveys or trade data is a fundamental step to understanding rare earth needs. Equally important is an assessment of countries’ Rare earth elements Executive summary Pathways to secure and diversified supply chains PAGE | 12 IEA. CC BY 4.0. vulnerability to potential disruptions, including a detailed understanding of rare earth use across sectors and the potential economic consequences of supply interruptions.
2. Increase preparedness for potential disruptions and establish a buffer to mitigate short-term supply risks. An effective emergency response ecosystem includes market monitoring to rapidly identify and assess disruptions, clear procedures to enable swift and coordinated actions, regular exercises to strengthen response capacity, and measures capable of delivering meaningful market impacts when disruptions occur. These measures are most effective when developed in close collaboration with international partners. Among emergency preparedness tools, strategic stockpiling can play a critical role by providing a buffer during severe supply disruptions. The net operating cost of a strategic stockpile covering one year of exposed imports of magnet rare earth oxides, metals, alloys and magnets for countries outside China amounts to around USD 200 million, modest relative to the potentially far greater economic consequences of a major supply shock.
3. Adopt a whole supply chain and ecosystem approach. Diversification is not simply a question of developing new projects; there is a much broader ecosystem issue that needs to be addressed for projects to become competitive. Rare earth value chains rely on a range of complex technical processes, requiring specialised equipment, machinery, skills to produce outputs that conform to strict industry specifications. In many cases, there are very few equipment and machinery suppliers outside China, making them much more expensive, and the time required to obtain the equipment can often span several years. Some key equipment bottlenecks include stainless steel cells for separation processes, alloy strip casters, high-efficiency electrolysis cells for metallisation, and magnet production equipment such as alignment pressers and grain boundary diffusion equipment. There are also key knowledge gaps in leaching processes for ionic adsorption clay, equilibrium data for separation, empirical knowledge for industry-specification magnet production. There is an urgent need to address these issues, as export controls are increasingly being applied not only to materials but also to the associated technologies and equipment. The first priority is to address the gap in costs and lead times for equipment and machinery, through supply-side support and demand-side measures (incentives or mandates for diversified sourcing).
4. Strengthen financial and policy support to strategic projects through supply- and demand-side measures. Diversifying rare earths supply chains requires coordinated policy and market mechanisms that reduce investment risk, support project viability and ensure demand for diversified supply. On the supply side, governments can support projects through targeted public finance such as equity, grants, concession loans or loan guarantees. They could also consider complementary measures to reduce price risks (e.g. contracts for differences or price cap-and-floor mechanisms) or provide a degree of volume certainty (e.g. offtake backstops), although these tools need to be designed carefully to Rare earth elements Executive summary Pathways to secure and diversified supply chains PAGE | 13 IEA. CC BY 4.0. balance the impacts on project economics and fiscal costs. On the demand side, governments can help generate predictable demand by introducing policies that encourage or require diversified sourcing, enabling projects to secure long-term offtake agreements and investment. These measures need to be supported by key enablers, including a broader pool of accessible financing, streamlined permitting, international public-private partnerships and enhanced supply chain traceability.
5. Promote supply-side technology innovation. Across mining, separation, refining and magnet production, innovation is increasingly emerging as an essential element for diversification. A number of promising innovation opportunities are emerging, such as smart mining, novel separation and refining technologies, and new recovery pathways from unconventional or secondary sources. However, the transition from laboratory innovation to commercial operation remains a major hurdle. Public support mechanisms – including grants, loan guarantees and support for shared testing facilities – can accelerate commercialisation. International collaboration can also play a role by facilitating knowledge transfer, establishing common standards and supporting workforce development. The recently established IEA Technology Collaboration Programme on Critical Minerals and Materials Recovery provides a platform for countries to identify technology gaps and accelerate the deployment of innovative solutions.
6. Embrace demand-side technology innovation. Demand-side innovation represents a powerful complement to supply‑side innovation, providing a pathway to alleviate supply constraints and geopolitical risks. Demand‑side innovation can take three distinct forms: reducing the amount of heavy rare earth elements (HREEs) required within existing magnet chemistries; substituting one HREE for another that is less supply‑constrained; and developing entirely new technologies that minimise drastically or eliminate rare earth use altogether. Co-ordinated action across the value chain can accelerate both reduction and substitution strategies. Collaboration among end users (such as motor manufacturers), magnet producers and public authorities is particularly effective in overcoming technical barriers. Following the 2010 export controls, Japan implemented demand-side policies in close co-ordination with industry, resulting in 30% lower total rare earth demand compared with 2010 levels, highlighting the substantial potential of targeted demand-side measures.
7. Develop targeted policies to unlock the full potential of recycling. Key measures include boosting collection and sorting, especially for EV motors and wind turbines; harmonising extended producer responsibility schemes; and introducing rare earth-specific recovery and labelling requirements. De-risking investment in recycling infrastructure through grants, feedstock‑access programmes and recycled‑content incentives is essential to scale emerging recyclers and technologies. Industrial clustering, integration with refining capacity and predictable waste‑trade regulations can further strengthen circular supply chains and reinforce long‑term resilience. Rare earth elements Executive summary Pathways to secure and diversified supply chains PAGE | 14 IEA. CC BY 4.0.
8. Accelerate efforts to enhance price transparency. Limited price transparency in the rare earth market makes it more difficult for market participants to manage long-term contracts and hedge price risks. Governments can consider starting efforts to enhance price transparency through a range of targeted measures. They can facilitate market development by supporting audited price reporting agencies and increasing liquidity through standardisation. Governments can also draw on complementary data sources, such as trade data. Public purchasing schemes or tender-based mechanisms can also support price discovery.
Building diversified rare earth supply chains requires a wide array of efforts, including financial capital, access to geological resources, advanced processing and separation technologies, specialised skills, supportive infrastructure, and a robust downstream industrial base. Few regions possess this full suite of capabilities domestically. Many resource-rich regions lack processing capacity or technological expertise, while advanced manufacturing economies often depend on imported concentrates, intermediates or semi-finished components. This uneven distribution of assets, technology and skills implies that no single country or region can develop resilient, end-to-end value chains in isolation. There is significant scope for international collaboration, including cross-border investment, technology partnerships, long-term offtake agreements and co-ordinated policy frameworks to reduce risk and mobilise capital. Such co-operation can help align upstream development with downstream demand, accelerate project timelines and support the emergence of diversified supply networks.
Additionally, efforts to nurture and expand downstream industries – such as EVs, new energy technologies and high-tech manufacturing – outside China can play a critical role in supporting the development of diversified rare earth supply chains. In the absence of parallel growth in downstream capabilities, upstream and midstream projects may face weak or uncertain demand. Strengthening downstream industries can help build a robust demand base, reinforce market confidence and support the long-term competitiveness of emerging supply chains. Addressing environmental risks in mining and processing rare earths also requires international co-ordination on regulatory standards and support for technological development, particularly as production expands into jurisdictions with varying frameworks. Regulatory standards for NORM management in particular remain fragmented across producing jurisdictions and would benefit from greater international coordination.
As international collaboration is central to build secure and resilient rare earth supply chains, the IEA Critical Minerals Security Programme provides a structured platform to advance co-ordinated policy action, underpinned by data-driven analysis and practical emergency preparedness tools.
Source: IEA
Write a comment
Các trường bắt buộc được đánh dấu *