A Case Study in Scarcity & Conflict

Trade tensions remain elevated between the US and China and Liberation Day added fuel to that fire. China’s response included export controls on heavy rare earth elements (REEs) for all countries, not just the US. Two months later, there are reports of a Chinese-backed militia in Myanmar securing control of heavy REE mines (1). With a near-monopoly on the supply and refinement of REEs, China wields significant power over important global industries.

REEs are increasingly recognized as important inputs for magnets used in various technologies, such as electric motors, wind turbines and data storage systems—among other applications. In other words, they are crucial to the modern economy. But not all REEs are created equal: there are light REEs and heavy REEs. Light REEs are more abundant and widely used. The five largest REE mines (Mountain Pass in the US, one in Australia and three in China) produce 85% of the world’s supply, but they all specialize in light REEs (2).

Heavy REEs aren’t as common and there is currently no mine built at scale producing heavy REEs so their supply is seen as more critical. Automakers, aerospace manufacturers, semiconductor companies and military contractors are a few of the industries feeling the effects of China’s export controls. Some automaker production lines in Europe have shut down and “of the hundred of requests for export licenses made by auto suppliers since early April, only a quarter have been granted so far.” (3)

This is not the first time China imposed REE-related sanctions; they did the same to Japan in 2010 that sent prices for many REEs through the roof. Then in 2019 and 2021, China considered REE export controls attempting to test the impact on military contractors. (see chart below - 4)

China has long understood the fragile nature of the REE supply chain, particularly for heavy REEs, which is why REE export controls was one of the first tactics employed in response to Liberation Day. Using the heavy REEs from Myanmar, China can sustainably supply their domestic industries while simultaneously weakening adversaries.

Chinese dominance in REEs has long been recognized by other nations yet Western powers have been slow to act. Finally, they are beginning to do so: Brazil, the US and EU have established their own initiatives aimed at reducing their need for China to mine and refine REEs, but those initiatives will take time (4). Companies are also researching alternatives to reduce their need for REEs entirely (4).

Of course, anyone who follows the REE market should have seen this coming (even we were aware of the risks related to REEs several years ago). We have written extensively about the global risks of scarcity and conflict, and REEs are but one example where China is at the center of both issues. Let’s hope the US can buy time to bring more REE mining and refining capacity online before China takes more decisive action.

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References

1. https://www.reuters.com/world/china/china-backed-militia-secures-control-new-rare-earth-mines-myanmar-2025-06-12/

2. https://sustainabledude.substack.com/p/why-china-banned-rare-earths-but

3. https://www.reuters.com/business/autos-transportation/some-european-auto-supplier-plants-shut-down-after-chinas-rare-earth-curbs-2025-06-04/

4. Morgan Stanley Research report on MP Materials

Image References

1. https://www.sciencenews.org/article/rare-earth-mining-renewable-energy-future

2. Morgan Stanley Research report on MP Materials

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