Global rare earths industry in 2025: Supply chain power, strategic projects, and investment outlook

What Are Rare Earth Elements?

Rare earth elements (REEs) refer to a group of 17 metallic elements that include the 15 lanthanides, along with scandium and yttrium. These elements, although not especially rare in occurrence, are seldom found in economically viable concentrations. REEs are essential in a broad array of high-performance technologies that power the global economy, from smartphones and satellites to renewable energy infrastructure and electric mobility systems.

Critical elements such as neodymium, praseodymium, dysprosium, and terbium are used to produce high-strength permanent magnets, a core component in electric vehicle (EV) motors and wind turbines. Yttrium and gadolinium serve key functions in medical imaging, while cerium and lanthanum support automotive catalysts and specialty glass production. In 2025, rare earths are considered indispensable to the transition toward clean energy and next-generation defence technology.

Who Are the Top Rare Earths Producers in 2025?

The global rare earths production landscape remains dominated by China, which accounted for an estimated 63% of global REE mine output and nearly 90% of global processing capacity as of Q1 2025. China’s Bayan Obo mine in Inner Mongolia remains the world’s largest deposit, with integrated refining capacity that underpins its long-standing dominance in the market.

The United States, through MP Materials’ Mountain Pass mine in California, continues to be the largest producer outside China. However, refining is still partly dependent on Chinese processors. Australia’s contribution is growing significantly, led by Lynas Rare Earths’ Mt Weld mine and Kalgoorlie processing plant, followed by new entrants like Arafura Rare Earths. Myanmar also continues to supply heavy REEs, although its political instability and artisanal mining practices raise sustainability concerns.

In total, global rare earth oxide (REO) equivalent production surpassed 330,000 metric tonnes in 2025, reflecting increased supply but also growing demand from EVs, wind energy, and advanced electronics.

What Are Rare Earth Elements Used For?

Rare earths play a foundational role in multiple sectors. In 2025, the rare earths in EVs and defence tech remain the strongest demand drivers. Neodymium-praseodymium (NdPr) magnets are used in EV drivetrains, while dysprosium and terbium enhance magnet stability at high temperatures—ideal for wind turbines and missile guidance systems.

Renewable energy adoption is accelerating rare earth usage in offshore wind turbines, especially in Europe, the U.S., and China. In electronics, REEs are embedded in display screens, sensors, and semiconductor polishing processes. The healthcare sector relies on gadolinium in MRI contrast agents, and yttrium in cancer treatment radiopharmaceuticals.

The global pivot toward electrification and energy security continues to elevate rare earths from niche inputs to strategic enablers of industrial transformation. As a result, the rare earth elements supply chain in 2025 is considered as critical as oil and gas once were in the 20th century.

How Does China Dominate the Rare Earth Supply Chain?

China’s rare earth sector has matured over four decades into a vertically integrated juggernaut, controlling every link from mining to high-purity oxide refining and magnet manufacturing. In 2025, China still holds more than 85% of global REE processing capacity and dominates global magnet production.

The Chinese government, through state-backed entities like China Northern Rare Earth Group and China Rare Earth Group, enforces production quotas, maintains strategic stockpiles, and leverages export permits as instruments of trade diplomacy. Beijing’s decision in late 2023 to restrict exports of certain REE refining technologies further entrenched this dominance.

China’s ability to weaponize rare earths—as seen during the 2010 Japan dispute and recent export permit suspensions—continues to trigger Western efforts to reduce supply chain dependence, particularly in defence and EV segments.

Which Rare Earth Projects Are Emerging Outside China?

To diversify global rare earths supply, a wave of non-Chinese projects has accelerated into development. In Australia, Lynas Rare Earths Ltd (ASX: LYC) remains the only company with both mining and refining capacity outside China. Its Mt Weld mine feeds a 100%-owned cracking and leaching facility in Kalgoorlie, supported by long-term contracts with the U.S. Department of Defense.

Arafura Rare Earths Ltd (ASX: ARU) is targeting first production from its Nolans project by Q4 2025, backed by AU$850 million in financing and signed offtake agreements with Siemens Gamesa and Hyundai. The project focuses on NdPr oxide, with plans for an integrated processing route.

In North America, MP Materials Corp (NYSE: MP) has secured over $300 million in U.S. government funding to build refining and magnet production capabilities alongside its Mountain Pass mine. Canada‘s Vital Metals Ltd is developing the Nechalacho project, although delays in downstream processing have led to project reassessments.

Africa is gaining prominence as a future supplier. Rainbow Rare Earths is progressing its Phalaborwa project in South Africa with a capex of ~$200 million and expected pilot production by late 2026. These projects are strategically backed by export finance institutions such as the U.S. DFC, Australia’s EFA, and the European Raw Materials Alliance (ERMA).

What Trade Policies and Global Alliances Are Impacting Rare Earth Supply?

Trade and industrial policy in 2025 are central to the global rare earths narrative. The U.S. Inflation Reduction Act (IRA) has imposed domestic content rules on EV tax credits, driving demand for REEs sourced from non-Chinese suppliers. The Defense Production Act and CHIPS Act also earmark rare earths as critical to national security.

The EU’s Critical Raw Materials Act mandates diversified sourcing, strategic reserves, and permits fast-tracking for critical minerals projects. Multilateral platforms like the Minerals Security Partnership (MSP), involving the U.S., Japan, Australia, Canada, South Korea, and India, coordinate funding and supply chain co-development.

Disputes at the World Trade Organization have also reignited debates on fair access, export restrictions, and environmental standards. Tariffs on Chinese magnets, enacted under DSHMRA provisions, are reshaping trade routes, with Southeast Asia and Africa emerging as alternative sourcing hubs.

What Is the Investment Outlook for Rare Earth Stocks?

Investor interest in rare earths has surged in 2025, supported by government incentives, supply chain realignment, and the long-term electrification thesis. Key listed companies include:

Lynas Rare Earths Ltd (ASX: LYC) – Market cap up ~20% YTD on capacity expansion.

MP Materials Corp (NYSE: MP) – Trading above $30 per share after DoD contract renewals.

Arafura Rare Earths Ltd (ASX: ARU) – Gaining momentum as Nolans nears commissioning.

Vital Metals Ltd (ASX: VML) – Under pressure due to downstream delays and management turnover.

ETFs such as VanEck Rare Earth/Strategic Metals ETF (REMX) and Global X Lithium & Battery Tech ETF (LIT) provide diversified rare earth exposure. However, analysts warn of volatility risks tied to price cycles, geopolitical shocks, and project execution failures.

Institutional investors including BlackRock, State Street, and Vanguard have gradually increased positions in rare earths-focused funds, seeing them as strategic plays amid broader ESG and clean energy mandates.

What Are the Environmental and ESG Concerns in Rare Earth Mining?

While rare earths support green technologies, their extraction often generates significant environmental liabilities. Acid leaching, tailings ponds, and radioactive thorium byproducts pose major risks. Communities near rare earth mines—particularly in China and Myanmar—have long protested contamination, poor air quality, and water degradation.

In response, next-generation mining projects are incorporating ESG principles such as closed-loop water systems, dry stacking of tailings, and life cycle carbon audits. Australia and Canada have introduced stricter permitting frameworks, requiring Indigenous consent and biodiversity protections.

Investors are increasingly applying ESG filters to mining projects, and financial institutions often demand International Finance Corporation (IFC)-aligned environmental compliance before releasing capital. The future of rare earth mining will hinge not only on resource access but also on social license and environmental stewardship.

What Is the Future Outlook for Rare Earths from 2025 to 2030?

The rare earths sector is entering a phase of strategic recalibration. From 2025 to 2030, demand is forecast to grow at a compound annual growth rate (CAGR) of 8–12%, driven by EVs, offshore wind, robotics, and aerospace. However, the supply pipeline is constrained by long permitting cycles, limited refining capacity, and high capital intensity.

Breakthroughs in magnet recycling, urban mining, and substitution materials like iron-nitride alloys could offer partial demand offsets, but no known alternatives currently match the performance of NdFeB magnets at scale.

Governments are expected to further expand strategic stockpiles, offer processing subsidies, and tighten export controls. National security policies in the U.S., Japan, and the EU will continue to position rare earths as strategic assets—not just industrial commodities.

For investors, manufacturers, and policymakers, the rare earth elements supply chain in 2025 represents both a critical vulnerability and a generational opportunity to reshape the future of clean tech and defence autonomy.