Rare earths have been thrust into the spotlight as a deal granting the US access to Ukraine’s mineral resources edges closer to being signed even after the collapse of talks last week between Volodymyr Zelenskyy and Donald Trump.
The American president has pressed his Ukrainian counterpart to sign a deal that would let the US benefit from Ukraine’s untapped resources — a deal that, he says, would be worth hundreds of billions of dollars encompassing Ukraine’s oil and gas as well as mineral resources.
But the president has expressed particular enthusiasm for the country’s rare earth metals, which are used in products ranging from mobile phones to electric cars.
Trump’s interest in rare earths is not new. The president in 2017 signed an executive order on securing supplies of critical minerals, following that up in 2020 with another focused on China’s dominance in the supply of rare earth elements. The president’s recent interest in gaining control of Greenland also stems from the country’s mineral resources.
But the rare earths sector was only worth about $7bn globally in 2023, according to research group Project Blue. And in Ukraine, there are no commercial reserves of rare earths, according to the US Geological Survey.
Still, Trump is determined to capture a bigger share of the rare earths market. Chinese dominance of these elements’ refining and production, say industry experts, poses a threat to the US, western companies and their supply chains.
What are rare earths metals?
There are 17 rare earths elements that, despite their name, are not especially rare. They are vital for the clean energy transition and used in an array of industries and products, such as smartphones, televisions, wind turbines and the catalytic converters in cars.
The metals are found in some igneous rocks and clay deposits all over the world, but extracting them is expensive and involves a complicated mining process.
They are crucial in the production of permanent magnets that are used in fighter jets and missiles. As a result, they appear on both the EU and US lists of critical minerals that include lithium, nickel and cobalt.
Where in the world are they found?
China has a little under half of the world’s rare earths reserves, with Brazil, India and Australia also hotspots, according to the US Geological Survey.
The biggest rare earths mine is Bayan Obo in the Chinese region of Inner Mongolia, which produces the metals alongside iron ore.
Although rare earths are not considered rare, the concentration of metals found in any given deposit is often not enough to make the site economically viable to mine.
“What’s rare about them is when they occur in high concentrations,” said Sally Gibson, professor of petrology and geochemistry at the University of Cambridge. Deposits tended to be less than a kilometre in diameter, which made them difficult to find, she added.
Rare earths are usually mined as a byproduct of other more well-known and widely used minerals, such as iron and phosphorous, which they are found alongside.
Despite Trump’s interest in rare earths in Ukraine, there are no active mines or deposits under development in the country, according to Benchmark Mineral Intelligence.
Why are they so hard to extract?
The production of rare earths is extremely complicated and expensive.
Extracting them from rocks and clay and refining them into a product that can be used for industrial purposes is a lengthy process because the metals have to be separated and purified individually.
It involves many stages and is difficult because the metals have similar chemical characteristics, which make their separation particularly challenging.
“Refining is really where things become difficult,” said Pierre Josso, deputy director of the UK Critical Minerals Intelligence Centre. “Managing to separate them into individual elements takes a lot of time and energy.”
It can be a dirty process, as some of the ore containing rare earths has radioactive elements, such as thorium. It means processing plants may end up with radioactive waste, which is difficult and expensive to get rid of.
Why China dominates the market
China has been investing in refining and processing of rare earths for 30 years and controls 90 per cent of global processing capacity, according to the International Energy Agency.
“You can mine anywhere in the world, but if you don’t also build the smelting and refining capacity, you’ll send your ore to China to be refined,” Josso said.
The risks for western companies because of China’s dominance of the supply chain is recognised by the industry.
“We’ve known it to be a strategic vulnerability for a long time, but it’s so capital intensive to build the midstream processing [which includes storage and transportation],” said Gracelin Baskaran, a director at the US Center for Strategic and International Studies.
China has also continued to produce rare earths at scale, despite tumbling prices as supply outstrips demand. Growth in Chinese supply has increased faster than demand since 2020. Excess supply is expected to persist until at least 2026 or 2027, according to Benchmark Mineral Intelligence.
Why rare earths matter
Western governments are concerned about China’s dominance of the rare earths market because of their importance in a range of sectors, including those considered crucial for national security, such as defence.
This dependence on China exposes the west to changes in the country’s policies, which could wreak havoc with supply chains and the health of companies reliant on the metals for their products.
Worries about China date back to at least 2010 when the US Magnetic Materials Association warned of an “impending rare earths crisis” that it said posed a threat to the economy and national security of the US.
Despite these fears, the west has failed to respond. For example, the EU still does not produce any mined rare earths elements. It imports 98 per cent of its rare earths magnets from China, according to the European Commission.
China demonstrated how it could exploit its dominance of the market in December 2023 when it banned the export of rare earths processing technology.
“There are some parts of processing [the west] never even learned to do,” said Baskaran. “We’re at this really vulnerable time geopolitically. Our defence industrial base has weakened so much. We lack the capabilities to ramp up production of what we need.”
( by Camilla Hodgson, "Financial Times", March 5, 2025)
