U.S. is accelerating efforts to reduce dependence --- it’s catching China off guard but it still has advantages it could draw on

Even as Chinese rare earth players cement their footholds in international markets, other countries are slowly making progress in rebuilding their rare earth supply chains. They have a singular purpose: to loosen China’s grip on these precious metals.

In striking a multitude of recent deals, Western nations and their allies trying to rely less on China for purified rare earths, which go into everything from iPhones to EVs to semiconductors. This marks a huge realignment in trade—one that goes by names like “friendshoring” and “nearshoring.”

These shifts have occurred so rapidly that they’ve wrongfooted Beijing. “China has not adapted to the current new global rare earth competition pattern,” Dai Tao, a professor at the Chinese Academy of Geological Sciences, wrote in a recent paper.

The US and Europe are striking rare earth deals without China

One example of this realignment is a two-year-old collaboration between US and European rare earth firms. The project involves processing monazite sands in Utah to produce rare earth carbonates, then shipping them to Estonia for processing. In another transatlantic project, rare earth ores mined in Canada will undergo preliminary processing there, then travel to Norway for further refining.

Meanwhile, Japan increased its investment in the Australian rare earths giant Lynas to secure supplies of heavy rare earths, further expanding the Japan-Australia rare earth supply chain.

Japan’s strategic and longstanding relationship with Lynas, which it rescued from collapse in 2016, has paid off in spades: Its rare earth dependence on China has fallen from over 90% of imports to 58% within a decade, according to UN Comtrade data.

China is defending its rare earths dominance with sheer scale

Still, China continues to enjoy significant advantages given the breadth of its industry. Apart from mining its own raw materials, China dominates every other step in the long industrial chain of producing high-purity rare earths. The economies of scale are vast, particularly in a country where labor is cheap. “It’s going to be very difficult to compete with the Chinese cost structure,” said John Ormerod, the principal and founder of JOC, a consultancy that specializes in the rare earth magnet industry.