How China holds ‘strategic control’ over global rare earth mineral trade? LGT Wealth's Chakri Lokapriya explains

Most people never think about rare earth minerals — but they’re in almost everything that defines modern life. Electric vehicles, wind turbines, smartphones, AI servers, even fighter jets. These materials — 15 lanthanides plus scandium and yttrium — are small in quantity but massive in importance. And right now, one country dominates them: China.

How much rare earth mineral does China hold?

China holds around 40% of global reserves and produces nearly 70% of the world’s output — about 270,000 of the 390,000 metric tons mined in 2024, according to the U.S. Geological Survey. Even more important, they control over 90% of global refining capacity and 85–90% of magnet production — the critical components that power EV motors, wind turbines, and defense systems. That’s not just an advantage; that’s strategic control.

In 2025, China took it a step further. They began requiring export licenses for seven rare earth elements — including samarium, gadolinium, and dysprosium — and later expanded the list to five more. Starting November 8, any company using Chinese refining equipment or materials will also need approval to export. Defense-related licenses? Most will be denied. It’s a calculated move — tightening the screws just ahead of the Xi–Trump summit in South Korea.

The impact is real. Global EV and renewable manufacturers are facing 5–10% cost escalations and 1–2-month production delays. In India, where EV penetration is still modest (about 3% of passenger cars and 7% of two-wheelers), companies like Maruti Suzuki have already trimmed targets by 24% for FY26. Wind turbine makers like Suzlon and Inox Wind are bracing for short-term execution delays.

India’s government is responding quickly. Despite holding 8% of global reserves, the country processes less than 1% of them. New policies — including a ₹35–50 billion incentive scheme and a National Critical Mineral Stockpile established in October 2025 — aim to build domestic refining and magnet production capacity. Partnerships with Vietnam and Brazil are also in the works to diversify supply chains.

For investors, the message is clear. There are short-term risks — supply volatility, margin pressure, and policy uncertainty — but also tremendous opportunity. Companies outside China, like Australia’s Lynas Rare Earths and Canada’s Neo Performance Materials, are likely to see surging demand. So will recyclers such as Attero and Umicore, as nations look for sustainable and “urban mining” solutions.

The bigger picture is unmistakable: rare earths have become the new oil of the 21st century — defining energy, technology, and defense competitiveness. The nations that secure their supply chains now will set the pace for the next decade.

It’s about smart leadership, independence, and vision. China moved early. The rest of the world is catching up fast. And those who act decisively today — countries and companies alike — will shape the balance of power tomorrow.

The author, Chakri Lokapriya, is the Chief Investment Officer (CIO), Equities of LGT Wealth India.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.