The Rare Earths Dilemma: How China’s Export Controls Are Redrawing the Global Critical Minerals Landscape

China’s recent export controls on critical minerals—enacted in waves since early 2024—have sent shockwaves through global supply chains, exposing vulnerabilities in industries from defense to electric vehicles (EVs). By weaponizing its dominance in rare earth elements (REEs) and other strategic materials, Beijing has escalated its trade war with the U.S., forcing investors to confront a stark reality: the world’s reliance on China for critical minerals is both a strategic liability and an opportunity for those positioned to profit from its resolution.

The Escalation: A Timeline of Controls

China’s restrictions began in April 2024, when it imposed non-automatic licensing requirements on seven medium/heavy REEs and rare earth magnets. While not a ban, the bureaucratic hurdles caused immediate disruptions for U.S. defense contractors reliant on these materials. By mid-2024, delays in licensing approvals led to a temporary pause in exports, squeezing suppliers of components for F-35 jets and submarine propulsion systems.

The next phase came in December 2024, when Beijing banned exports of gallium, germanium, antimony, and superhard materials to the U.S. and tightened controls on graphite. These moves directly targeted U.S. tech and defense sectors: gallium and germanium are vital for semiconductor manufacturing, while antimony is used in flame-retardant materials and EV batteries.

Sector-by-Sector Impact

1. Rare Earth Elements (REEs): A Near-Monopoly
   China’s near-total control over heavy REE processing—critical for high-strength magnets—has left the U.S. defense industry in a bind. As of early 2025, U.S. domestic production of NdPr (neodymium-praseodymium) oxide, a key magnet component, totaled just 1,300 tons annually, compared to China’s 300,000-ton magnet output. U.S. efforts like MP Materials’ Texas magnet plant remain small-scale, with commercial production years away.

MP’s shares rose 40% in 2024 amid investor optimism, but its output still pales against Chinese scale.

1. Antimony and Graphite: EV Supply Chain Weaknesses
   U.S. antimony exports fell by 97% to the U.S. by early 2025, with prices doubling. Graphite, essential for EV batteries, is even more precarious: China supplies 95% of synthetic graphite and dominates refining. U.S. projects like Texas-based Graphite One remain underdeveloped, risking production halts for automakers.

Tesla’s stock dipped 12% in late 2024 amid fears of battery shortages, recovering only as China allowed limited graphite exports.

1. Semiconductors: Gallium and Germanium Shortages
   The U.S. Geological Survey estimates that full enforcement of China’s gallium/germanium bans could cost the U.S. economy $3.4 billion in GDP by 2025. Semiconductor firms like Intel (INTC) and AMD face rising costs and delays in advanced chip production, critical for AI and defense systems.

Global Responses: A Decade-Long Gamble

The U.S. and its allies are racing to diversify supply chains, but progress is slow:
- Domestic U.S. Production: The Pentagon’s $439 million REE initiative aims for a “mine-to-magnet” supply chain by 2027. Lynas USA’s heavy REE plant in Nevada is on track but faces technical hurdles.
- Alliances: Australia’s Lynas Corporation (LYD.AX) aims to become a major non-Chinese supplier, but its reliance on China for refining until 2026 limits impact.
- Alternative Sourcing: Brazil and Saudi Arabia are exploring deposits, but large-scale production is years away.

Investment Implications: Opportunities and Risks

The market is pricing in both risks and rewards:
- Winners:
- Critical Mineral Producers: Companies like Lynas Corporation (LYD.AX) and Northern Star Resources (NST.AX) in Australia, and USA Rare Earth (private but with public partnerships) may benefit from scarcity-driven pricing.
- Recycling and Substitution: Firms like Redwood Materials (recycling EV batteries) and AMERICAN Graphite (developing domestic graphite) could fill gaps.
- Losers:
- EV and Semiconductor Makers: Tesla and Intel face margin pressures unless they secure alternative suppliers.
- China-Dependent Supply Chains: Firms with no diversification plans (e.g., small defense contractors) risk obsolescence.

Conclusion: A New Geoeconomic Reality

China’s export controls have crystallized a fundamental truth: the U.S. and its allies are years behind in securing critical minerals. With China’s restrictions fully enforced and its military modernization outpacing the West’s, the geopolitical stakes are high. Investors must balance short-term volatility—such as the 200% surge in antimony prices—with long-term opportunities in mining, recycling, and technology.

The numbers tell the story: China’s dominance in REEs and graphite is unshaken, and without breakthroughs, U.S. GDP could lose billions annually. Yet, the urgency of the crisis has ignited a global rush to build alternatives. For investors, the key is to bet on companies and technologies that can bridge this gap—before the next wave of trade restrictions hits.

The data shows a 90% decline since 2024, underscoring the depth of the challenge—and the potential rewards for those who act decisively.