Europe’s Rare Earth Strategy: Why China Still Holds the Cards
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▦ OPINION | Arno Saffran, Wed 24 Dec, 2025China’s Dominance Isn’t Accidental — It’s Structural
China remains the largest producer and processor of rare earth elements (REEs), the 17 chemical elements essential for everything from electric vehicles and wind turbines to semiconductors and advanced defense systems. Estimates suggest China accounts for roughly 70 % of global rare earth supply, and around 90 % of processing capacity, meaning it refines both domestic ore and significant shares of Australian and U.S. material. China’s integration of mining, refining and manufacturing gives it leverage that no other jurisdiction currently matches. (European Parliament)
That industrial foundation has been built over decades, supported by coordinated investment and policy frameworks that made Chinese rare earths competitive globally even as technology thresholds rose and demand surged.
EU Moves to RebAlance Supply — But Reality Bites
On December 3, the European Commission unveiled a suite of policies aimed at reducing dependence on Chinese rare earths, including the creation of a new European Centre for Critical Raw Materials to coordinate purchases and bolster stocks. Nearly €3 billion has been earmarked for projects in mining, refining and recycling — part of the broader ReSourceEU strategy to de-risk key supply chains. (European Newsroom)
Brussels also signaled that it may use a range of economic tools — from anti-dumping duties to strategic procurement clauses — to secure supplies and maintain industrial competitiveness. (Evrim Ağacı)
This initiative comes alongside debate in the European Parliament and Commission about how to apply trade and industrial policy tools to China’s dominance of rare-earth imports — currently accounting for more than 60 % of the bloc’s supply for these critical minerals. (European Parliament)
Export Controls Raised Eyebrows — And Then Were Suspended
In October 2025, China introduced expanded export controls on several rare earth elements and associated processing technologies, broadening licensing requirements and triggering concern in global markets. These controls were seen as a regulatory move reflecting Beijing’s intent to manage strategic supply chains more tightly. (China Briefing)
Following discussions between Chinese and U.S. leaders, implementation of the expanded controls was suspended for one year, an outcome that reflects both supply-chain sensitivity and diplomatic negotiation. (China Briefing)
Even so, the episode underscored one hard truth: rare earth supply is structurally concentrated, and short-term shocks reverberate through sectors as diverse as electronics, automotive, and defence — exactly the industries policymakers in Brussels and Berlin are keen to protect. (IEA)
Alternatives and Diversification: A Long Road
Europe’s strategy also envisions boosting domestic capacity and tapping alternative partners. Deposits have been identified in Scandinavia and elsewhere, and member states like Germany are investing directly in raw materials projects. (Evrim Ağacı)
Yet building vertically integrated rare earth supply chains — from extraction to high-value processing and magnet production — requires time, capital, and sustained technological development. There is no near-term pathway that replaces China’s entrenched position overnight. Indeed, even major efforts in the United States to secure rare earth supplies have yet to match China’s scale or integration speed.
The Strategic Reality: Cooperation Amid Competition
European leaders have insisted that diversification will not mean decoupling from China — an acknowledgement that cooperation and competition must coexist. President Ursula von der Leyen has publicly stated that the EU will “use all tools” at its disposal to ensure supply continuity while engaging with trading partners — including China — to find workable solutions. (euronews)
Industry analysts note that policies aimed at supply diversification, stockpiling, and recycling are sensible as long-term resilience measures. But they do not diminish China’s centrality to the rare earth market today. That dominance is rooted not just in production volumes, but in processing, technology depth, and global supply-chain linkages that are hard to replicate quickly. (European Parliament)
Strategy Must Start With Reality
Europe’s rare earth strategy represents a serious and necessary effort to shore up industrial resilience. Its focus on stockpiling, joint purchasing, and industry support signals a maturing approach to economic security in a competitive global environment. (European Newsroom)
But the data makes one thing clear: China’s grip on rare earth supply is not a temporary phenomenon to be legislated away. It is a structural foundation built over decades, and remains indispensable to global industrial ecosystems today. Any realistic supply-chain strategy for Europe — from green technologies to defence systems — must acknowledge that interdependence rather than isolation will shape outcomes for years to come.
References:
China accounted for an estimated 69 % of global rare-earth production in 2024, with refining capacity projected to remain high through 2035. Source: Rare Earth Exchanges
China controls nearly 90 % of global rare-earth processing capacity — the technically demanding middle segment of the value chain. Source: Rare Earth Exchanges
The EU currently relies on China for 100% of rare earths refined for permanent magnets. Source: European Commission
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ABOUT THE AUTHOR(S)
— Arno Saffran
Arno developed his approach through roles in client development (KPMG) and strategic commercial engagement (affiliated with advisories including Hakluyt), focusing on complex industrial and energy sectors.
VSG works across the extractive value chain, positioning people who form the critical bridge to early-stage relationships and commercial access in complex markets.
