This report explores the critical role of rare earth elements (REEs) in strategic applications, ranging from energy technologies and advanced electronics to aerospace and defence systems. It emphasises that highly concentrated supply chains have elevated these elements to the forefront of global energy and economic security agendas. Permanent magnets, particularly neodymium-iron-boron (NdFeB) magnets, account for approximately 95% of total rare earth consumption by value and underpin critical technologies like electric vehicles (EVs), wind turbines, and artificial intelligence data centres.

Executive summary

The supply of magnet rare earths is among the most geographically concentrated of all strategic minerals. In 2024, China accounted for 60% of global mined production of magnet rare earths, 91% of refining output, and 94% of sintered permanent magnet production. Export controls introduced by China in 2025 brought the risks of this concentration into sharp reality, with export volumes falling sharply and forcing some automakers in the United States and Europe to cut production. If implemented in full, these controls could put USD 6.5 trillion of downstream production at risk annually for countries outside China, with the United States and Europe facing potential direct economic losses of over USD 1.5 trillion each.

Introduction

Rare earth elements are a set of 17 metallic elements, including the lanthanide series, scandium, and yttrium. While relatively plentiful in the Earth’s crust, they are rarely found in economically viable concentrations and are difficult to separate due to their chemical similarities. Based on atomic weight, they are classified into light rare earths (LREEs), such as neodymium and praseodymium, and heavy rare earths (HREEs), such as dysprosium and terbium. These elements are essential for high-performance magnets that enable energy efficiency improvements of 20-40% in motors compared to ordinary devices.

Chapter 1. Market overview

Global reserves of REEs exceed 90 million tonnes of rare earth oxide equivalent, with China holding roughly 48.9% and Brazil 23.3%. The total market value of these elements is estimated at USD 6.4 billion today. Magnet rare earths represent about 50% of the market by volume but 96% by value. This creates a “basket problem” where high-value magnet elements must be co-produced with abundant, lower-value elements like cerium and lanthanum, often undermining production economics. Demand for magnet rare earths is projected to expand by a third by 2030 and double by 2050 under today’s policy settings, driven primarily by EV deployment and wind power.

Chapter 2. The strategic importance of rare earths for economic security

The strategic importance of rare earths is difficult to overstate, as they underpin sectors including semiconductors, robotics, and defence. Supply disruptions carry massive economic multipliers; the automotive sector faces the single greatest impact, with over USD 3 trillion in potential direct losses outside China. If October 2025 export controls were fully enacted, China’s magnet exports would be enough to impact the production of 61 million conventional cars, 44,000 military jets, or 6,700 AI data centres. A significant premium exists for magnets produced outside China, reflecting the increasing weight of security considerations in sourcing decisions.

Chapter 3. Opportunities and challenges for diversification

Achieving diversified supplies requires significant capacity expansion across the entire value chain. By 2035, demand for magnet rare earths outside China is projected to rise by 50%. Meeting this demand necessitates increasing mining, refining, and magnet production capacities by factors of two, four, and six, respectively. An estimated USD 60 billion in investment is required over the next decade, with refining and magnet manufacturing accounting for most of the need. Key challenges include structural cost disadvantages outside China, complex permitting processes, and the “metallisation” bottleneck, where refined oxides are converted into metallic alloys.

Chapter 4. Pathways to secure and diversified rare earth supply chains

The IEA outlines eight strategic policy recommendations to build resilient supply chains. Governments must first understand national demand and risk exposure through enhanced data collection and industry engagement. They should increase preparedness for disruptions by establishing strategic stockpiles; the operating cost for a one-year stockpile of magnet materials is estimated at a modest USD 200 million. A whole-ecosystem approach is required to address bottlenecks in specialised equipment and skills. Financial support through public equity, grants, or price-based mechanisms like contracts for difference can reduce investment risk.

Promoting both supply-side and demand-side innovation is vital to reduce dependency. For instance, Japan successfully reduced its rare earth demand by 30% after 2010 through coordinated redesign programmes. Finally, recycling could meet up to 35% of primary supply requirements by 2050, provided that collection and sorting are improved through targeted policies and infrastructure investment. International coordination remains essential, as no single country can efficiently develop a complete end-to-end value chain in isolation.