The geopolitics of rare earth elements

The place to start is that this is not really a minerals story, it is a magnets story. Rare earth elements are a modest market on their own, which Ghahreman sizes loosely at somewhere between a few billion and $25 billion, but the magnets made from them unlock multi-trillion dollar markets downstream, because the strongest magnets available make the most efficient electric motors. Ghahreman’s account is that China worked this out 25 to 30 years ago and built the chain deliberately from mining through separation, metallization and magnet manufacture. The resulting position is different in kind from China’s position in lithium or copper, a distinction Kann draws explicitly: in those markets the mining happens elsewhere and China dominates refining, so the material has to come to China and then leave again. In rare earths China also holds the majority of the mining, and then vacuums in everyone else’s concentrates on top of that.

Within that, one number does most of the work. Roughly 63 percent of mining, 90 percent of processing and 93 percent of magnet manufacturing sit in China, but 99 percent of heavy rare earths, chiefly dysprosium and terbium, are produced and consumed inside China. That last figure is a geological fact rather than an industrial-policy one: heavy rare earths happen to be concentrated in Chinese deposits, and MP Materials in the United States has essentially none of them despite having plenty of the light neodymium and praseodymium. Heavy rare earths are what let a magnet tolerate heat, which is exactly what an electric vehicle motor does when the car is driven at 70 or 80 miles an hour. So the chokepoint is not rare earths in general, it is the specific elements that make high-performance motors work, and it is the part of the chain least amenable to simply opening a Western mine. Ghahreman is careful about why. Resources carrying heavy rare earths do exist outside China, in Brazil and elsewhere, but those projects have not been advanced and none of the deposits are being mined today, partly because Chinese-set prices have made such projects unattractive from time to time.

The leverage has been applied in steps rather than all at once, and Ghahreman’s reading is that each step built the capability for the next. December 2023 banned the export of the equipment and technology for processing and magnet manufacturing, not the materials, which he says did not get enough attention and which has since stranded Western projects that had planned to buy Chinese equipment. Summer 2024 consolidated and nationalized the domestic industry, giving the government control from pricing through end product. Then, three weeks before recording, export controls landed on the materials themselves: oxides, metals, heavy rare earth alloys and finished magnets. His argument for why this matters is procedural. Building a licensing process, where every batch needs paperwork identifying the destination country and end buyer, is something a government does only when it intends to use it. On that reasoning he expects the tool to be used more, and his stated strong belief is that China is not a reliable source of rare earth magnets going forward, because it will use supply to change behavior abroad.

Which is what makes recycling structural rather than incidental. Twenty years of imported products containing magnets have accumulated in the United States and Europe as what he calls the largest overground deposit of rare earths, and it has two properties virgin mining does not. The separation of the useful elements out of the basket of seventeen already happened once, when the original magnet was made, so the feedstock arrives pre-sorted. And older products are richer in heavy rare earths, because manufacturers were more generous with them ten or fifteen years ago before cost and availability pressure pushed engineering teams to design them down. So the waste stream is disproportionately rich in precisely the elements the West does not currently mine. That is the closest thing the episode offers to an answer on heavy rare earths, and it is a partial one: it recovers what was already imported, and does nothing about future demand growth.