China controls rare earth minerals through a deliberate, multi-decade strategy that focused on dominating not just mining, but the far more lucrative and environmentally costly processing and refining of these elements.

While other countries have rare earth deposits, they largely lack the infrastructure, technology, and political will to process them, making them dependent on China to complete the supply chain.

The Strategic Shift from Mining to Processing 

While some might assume China's dominance is solely due to abundant reserves, the truth is more complex. The United States, Australia, and other nations also have significant rare earth deposits. However, China's strategy was to corner the market on the next crucial step in the value chain.

• Environmental and Economic Barriers: The extraction and processing of rare earth elements (REEs) are incredibly difficult, costly, and environmentally hazardous. The process requires highly technical expertise and involves the use of toxic chemicals and the production of radioactive waste. In the past, the U.S. and other developed countries had rare earth processing facilities, but they closed them down due to mounting environmental regulations and costs.

• A Deliberate Investment: While the West was stepping back, China made a deliberate, state-backed decision to invest heavily in the technology and infrastructure for rare earth processing. The country provided generous subsidies and had less stringent environmental regulations, which allowed it to offer rare earths at a price point that was impossible for other nations to match. This effectively drove competitors out of the market and gave China a near-monopoly on the entire supply chain. Today, China processes over 85% of the world's rare earths.

The Weaponization of the Supply Chain 

China's dominance isn't just an economic advantage; it's a powerful geopolitical tool. The country has demonstrated its willingness to use its rare earth leverage to achieve strategic objectives.

• The 2010 Japan Incident: In 2010, after a territorial dispute with Japan, China briefly restricted rare earth exports to the country. While the embargo was short-lived, it caused panic in the global market and served as a stark wake-up call to nations that were overly reliant on China for these critical materials.

• Using Rare Earths as Retaliation: In more recent trade disputes, China has imposed export restrictions on certain rare earth elements and magnets, which are essential for everything from electric vehicles and wind turbines to military defense systems. This is a clear demonstration of how it can use its control over the supply chain to punish rivals and advance its own interests.

A Global Dependence with No Easy Way Out 

The world's dependence on China for rare earths is deeply entrenched, and it will be difficult for other countries to catch up.

• The Monopoly on Expertise: China has not only built the infrastructure but has also cultivated the necessary technological expertise and intellectual property. The country has been granted a massive number of rare earth-related patents, making it difficult for other nations to build their own processing facilities without years of research and development.

• The Cost of Entry: Developing a rare earth supply chain from scratch is a massive and expensive undertaking. It requires a huge initial investment, a long lead time, and the political will to deal with the inevitable environmental and social costs. This makes it very difficult for private companies to compete with China's state-backed industrial policy.

• The Final Product Trap: China now hardly ever sells raw rare earths. Instead, it uses them to produce high-value products like permanent magnets, which are critical components for electric vehicle motors, drones, and wind turbines. This allows China to capture a much larger share of the profit, while other nations remain dependent on it for both the raw materials and the finished goods.

By Jo Ikeji-Uju

https://ubuntusafa.com

https://ubuntusafa.com/Ikeji