IEA says China’s rare earth restrictions could disrupt trillions of dollars in global industry

The International Energy Agency has cautioned that China’s proposed export controls on rare earth minerals could have far-reaching consequences for global manufacturing, with as much as US$6.5 trillion in production outside China potentially exposed to supply chain disruption.

Although Beijing postponed full implementation of the restrictions by one year, the agency warned that the concentration of critical mineral production continues to present a major strategic risk.

Supply chains remain heavily concentrated

Rare earth elements play a vital role in modern manufacturing despite being used in relatively small quantities. They are essential components in electric vehicles, aerospace equipment, defence systems, electronics and renewable energy technologies.

The IEA’s latest Global Critical Minerals Outlook estimates that a full rollout of China’s export controls could affect around US$6.5 trillion of downstream manufacturing activity, with the United States and Europe facing nearly half of the potential economic impact.

“Our latest analysis shows that vast amounts of economic value depend on relatively small volumes of critical minerals, whose supply chains remain highly concentrated and are therefore vulnerable,” said IEA Executive Director Fatih Birol.

Graphite controls could add to supply pressures

The agency also highlighted proposed Chinese restrictions on graphite exports, another critical material used in electric vehicle batteries.

If implemented, the graphite measures could place an estimated US$300 billion of industrial production outside China at risk. China currently accounts for more than 90% of global processed graphite production.

Investment in alternative sources increases

Western governments have responded by expanding investment in domestic and allied critical mineral supply chains.

According to the IEA, public funding commitments for new mining and refining projects climbed to US$65 billion between 2023 and 2025.

The report also noted that new refining facilities in the United States and Malaysia have already reduced China’s share of global rare earth refining from 90% in 2023 to 85% last year. If planned investments move ahead, that share could decline to around 70% by 2035.