With new export controls on critical minerals, supply concentration risks become reality

In today's tense geopolitical environment, critical minerals have risen rapidly up the policy agenda as a cornerstone of energy and economic security. These minerals are not only crucial for energy technologies but also play a vital role in high-tech industries, aerospace, defence and advanced manufacturing, making them central not only to energy security but also to broader economic resilience.

The IEA was the first to highlight the risks of high supply concentration of critical mineral supplies, especially in processing and refining. The Global Critical Minerals Outlook 2025 showed that, for a remarkable 19 out of 20 important strategic minerals, China is the leading refiner, with an average market share of 70%. Moreover, our analysis shows that this concentration has only intensified in recent years. Reliance on a small number of suppliers increases vulnerability to shocks and disruptions, be it from extreme weather, technical failure or trade disruptions.

This is no longer just a theoretical concern. There has been a proliferation of export controls on key materials and technologies in recent years. New restrictions on rare earth elements and lithium-ion battery supply chains underscore once again the vulnerabilities and risks.

The supply of rare earths remains among the least geographically diversified among all critical minerals. For rare earths used in magnets for various industries – notably neodymium, praseodymium, dysprosium and terbium – China accounted for around 60% of global mining output in 2024, followed by Myanmar, Australia and the United States. China’s dominance is even greater in the separation and refining stages, representing about 91% of global production, with Malaysia a distant second.

Moreover, China has significantly strengthened its position in the manufacturing of rare earth-containing permanent magnets – magnets that retain their magnetic properties indefinitely without the need for external power. Two decades ago, China accounted for around 50% of the production of sintered permanent magnets commonly used in cars, wind turbines, industrial motors, data centres and defence systems. This share has risen significantly to 94% today, making China the world’s single largest supplier of the component critical to the manufacturing of the most powerful motors that are used for many cutting-edge applications. Such high market concentration leaves global supply chains in strategic sectors – such as energy, automotive, defence and AI data centres – vulnerable to potential disruptions.

A notable development came on 4 April 2025 when the Chinese government introduced export controls on seven heavy rare earth elements, as well as all related compounds, metals and magnets. As export volumes fell sharply in April and May, many carmakers in the United States, Europe, and elsewhere struggled to obtain permanent magnets, with some forced to cut utilisation rates or even temporarily shut down factories. Even after trade volumes recovered, rare earth prices in importing countries remained elevated – with European prices reaching up to six times those in China – hurting the cost competitiveness of rare earth-based products manufactured outside China.

On 9 October 2025, the Ministry of Commerce of China announced further export controls on rare earth elements and related products, equipment and technologies. The new controls require foreign companies to obtain a license from China to export “parts, components and assemblies” containing Chinese-sourced rare earth materials or produced using Chinese rare earth technologies. The rule was applied with immediate effect to products made in China. However, from 1 December 2025, the controls will be escalated to include "internationally made" products containing Chinese-sourced materials 1 or manufactured using Chinese technologies, even if they are traded domestically.

The inclusion of “parts, components and assemblies”, beyond the previous isolated controls on select rare earth magnets and materials, could have a dramatic impact on global supply chains, as many strategic sectors rely on products and components containing the controlled Chinese rare earth elements. These sectors include energy, automotive, defence, semiconductors, aerospace, industrial motors and AI data centres.

Moreover, the list of rare earth elements subject to controls has been expanded to include five additional elements – holmium, erbium, thulium, europium and ytterbium – on top of the seven elements initially restricted in April, with the new measures taking effect from 8 November. The inclusion of holmium is particularly significant, as many permanent magnet makers have been revising their approach to replace the previously restricted rare earths with holmium since April 2025. New controls were also announced on a wide range of equipment for processing rare earths, including for milling, separation, and refining – also effective from 8 November.

These new export controls are a marked escalation of the restrictions on rare earths. In addition to energy technologies, defence and semiconductor supply chains could be particularly affected if export licences for components containing rare earth elements are delayed or denied.

In 2024, China exported 58 000 tonnes of rare earth magnets – enough to manufacture components to make millions of cars, industrial motors or aircraft – or to build thousands of strategic military systems, data centres or wind turbines. Prolonged delays or denials in licensing could threaten revenues, competitiveness and employment for global industrial value chains.

The export controls could also significantly undermine international efforts to diversify rare earth supply chains and scale up strategic manufacturing. The new restrictions on equipment for processing rare earths risk constraining the ability of emerging projects to refine raw materials and produce permanent magnets. This could introduce major operational hurdles for nascent industrial ecosystems, resulting in slower development and increased vulnerability to supply shocks.

It is not only rare earth elements that are impacted. On 9 October 2025, China also announced major export controls on lithium-ion battery supply chains, effective from 8 November. The new controls expand on previous measures and cover a much broader range of battery materials, technologies and equipment across multiple stages of the supply chain. They now include battery cells and packs for high-performance applications, cathode precursors, an expanded scope of anode materials, a broader coverage of lithium iron phosphate (LFP) cathode materials, and battery and material production equipment and technologies.

China currently dominates the midstream and downstream supply chains for batteries globally, with shares of 80% or more in many key areas. In some segments such as precursor cathode materials and LFP cathode materials, China maintains a near monopoly, with shares of 95% or above. This exceptional concentration creates multiple points of vulnerability across the supply chain.2

In the short term, if export approvals for companies are delayed, the international market may face tight supplies of battery materials. This could lead to increased costs for batteries, with potential knock-on effects on the affordability of EVs and storage. The new restrictions also create risks for strategic sectors which depend on lithium-ion batteries, such as defence, aerospace, AI data centres, and even medical applications.

Looking further ahead, the new controls target some critical chokepoints in global battery supply chains, notably graphite anode material and cathode material precursors for which supply options outside China are extremely limited. If these supplies are disrupted, this could severely restrict the ability of the rest of the world to produce batteries, with potentially significant strategic and economic consequences.

LFP batteries are a case in point, with markets expanding rapidly. They represent half of the global electric car battery market and the majority of the energy storage market. While China currently dominates this segment, efforts are underway to develop LFP battery production outside China. However, new restrictions on LFP cathode materials could impede these initiatives, reinforcing China’s dominance in this technology, with major implications for energy storage deployment.

The simultaneous restrictions on battery equipment and technologies could also lead to even greater market concentration in China, as they could significantly hinder countries’ efforts to develop diversified battery supply chains. If restrictions are sustained, this could lead to major revenue and job losses for producers of battery materials around the world.

There remains some uncertainty over enforcement of the latest export controls. As the geopolitical context continues to evolve, trade negotiations could alter the scope or stringency of the restrictions. Nevertheless, the latest developments underline the crucial importance of advancing diversification to ensure the long-term resilience of global supply chains.

Diversification in the rare earths market has been limited by several factors. In the upstream segment, only a handful of mines outside China and Myanmar are operating at scale, and newly announced projects typically have long lead times, averaging around eight years. Refining development is even more nascent, with only a few industrial-scale facilities operating outside China today – in Malaysia, the United States and Estonia. Furthermore, separation and refining processes are technically complex, and many rare earth ores for magnets contain radioactive elements such as uranium and thorium, with few countries having the infrastructure to manage these by-products safely.

A number of projects are currently under development across various regions. Mining projects are being developed in the United States, Australia, Brazil, Tanzania and India. Several separation and refining plants are also expanding or gearing up for operations, in the United States, Australia and Malaysia.

However, planned capacity for permanent magnet manufacturing outside China is notably lower than for mining and refining, posing a key source of concern. Several new plants began operations in 2025, notably in the United States (MP Materials) and Estonia (Neo Performance Materials), while other projects are accelerating in the United States, Korea, Viet Nam and Germany. Continued efforts through targeted policy support and strategic partnerships will nonetheless be essential to bring more projects online. The cooperation between France and Japan on a project to produce rare earth oxides in Lacq, France, illustrates how cross-country cooperation can link different parts of the supply chain.

As with rare earths, there are growing opportunities for diversification emerging across battery supply chains. However, in contrast to rare earths, while substantial capacity expansions are underway in downstream battery cell production, the pipeline for midstream battery material production – such as precursor cathode materials, anode materials, and cathode materials – is considerably more limited.

Korea is currently the leading source of diversified battery material production outside China – and the project pipeline indicates that it is set to remain the largest midstream diversification hub by 2030. However, the country continues to rely on imports of precursor cathode materials and other upstream inputs from China. Moreover, cathode material production in Korea is predominantly focused on nickel-based material, offering little opportunity of diversifying the LFP supply chain.

The United States and Europe are also set to play growing roles in battery supply chain diversification. Based on the pipeline, they are set to lead the expansion of battery production capacity, each accounting for around 40% of capacity outside China by 2030. The United States has several midstream projects under development, notably in LFP cathode and anode materials, which could help mitigate two of the major vulnerabilities in the supply chain, though these remain insufficient to offset reliance on Chinese supplies.

Despite ongoing efforts in several regions, further action is essential to advance strategic projects targeting the most vulnerable segments in the global battery supply chain, including cathode precursors, anode materials, LFP cathode materials, refined battery metals, and production equipment.

The urgency of today’s challenges around critical mineral supply chains echoes a pivotal moment in the history of international collaboration in the energy field. In the early 1970s, when oil price shocks and fuel shortages strained many energy-importing countries, governments came together to create the IEA, building up emergency stocks to protect them from being held to ransom via oil supplies in the future. This landmark cooperation has helped limit the severe economic impacts of oil supply disruptions for decades.

Now, critical minerals have become key components of strategic industries and economic growth. This is why the IEA has launched the Critical Minerals Security Programme – to help countries strengthen resilience against disruptions and promote supply diversification, just as they united in response to the oil crisis in 1974. The Programme builds on the Agency’s long-standing experience in safeguarding energy security. As the IEA Executive Director mentioned in his recent opinion article, no country can tackle the challenges alone. However, with the collaborative spirit governments showed after the 1973 oil shock, countries can build more secure and resilient supply chains and reduce structural risks.

The IEA’s Eric Buisson and Teo Lombardo contributed to this article.