Western capitals repeat the same mantra: diversify supplies, reduce risks, reinforce strategic autonomy. By the end of 2025, European Commission President Ursula von der Leyen was optimistically citing projects like a magnet plant in Estonia as proof that the continent is reacting. But in the industry the tone is much less enthusiastic: without competitive processing and without sustained financial muscle, dependence on Beijing will remain intact.
Disengaging from China in rare earths is not a political decision that is signed in Brussels and executed the next day. It’s an industrial puzzle with at least three critical pieces:
- Obtain raw materials outside of China. The EU seeks agreements with Canada or Australia to ensure mining supplies
- Also process them outside of China. Extracting is not enough: we must separate and refine
- Make the business viable. Western plants must compete on costs… or survive with permanent state support
That’s where the biggest obstacle appears. Matthias Rüth, director of the marketing company Tradium, warns of a recurring scenario: if a serious competitor emerges, Beijing can temporarily relax restrictions or lower prices to suffocate it. He already did it in the past. And you can do it again.
In a market where China dominates volumes and processing capacity, competing without sustained public support borders on chimera. Europe not only needs investments; needs to resist a possible price war.
What exactly are rare earths?
Despite their name, they are not that rare. It is a group of 17 metallic elements present in the Earth’s crust, but dispersed in low concentrations. The problem is not its existence, but its profitable extraction and, above all, its chemical separation, a complex and expensive process.
Its relevance is enormous, since it is essential for electric car motors, wind turbines, smartphones and computers, semiconductors and defense systems.
In Japan they called them “industrial vitamins” years ago. Without small amounts of these elements, much of the energy and digital transition would simply stop.
Chinese market power
China’s dominance is not coincidental. Beijing bet on this sector four decades ago. According to data from the International Energy Agency, the country concentrates around 60% of global rare earth mining production and around 91% of processing. In the case of magnets—key for electric motors—the dependency is especially pronounced.
In an ideal global market, such specialization would not be problematic: China produces cheap, the West buys, and everyone wins. But trade in critical raw materials is governed not just by economic efficiency, but by geopolitics.
Already in the 2010s, China suspended exports to Japan after a diplomatic conflict. More recently, it has imposed restrictions on mining and processing technologies (2023) and export bans on several critical raw materials (2025). The message is clear: whoever controls the supply controls the negotiation.
Dependency without substitutes
Europe imports approximately 95% of the rare earths it needs. Replacing them is not easy. In some cases there are alternatives, but they usually involve lower performance or higher costs.
The radical alternative—stop buying—is unrealistic: it would mean paralyzing entire industries. The green transition, digitalization and part of the defense sector would be compromised.
The problem, furthermore, is not just Chinese. It is structural. For years, Europe bought cheap and let its own mines and plants close. Now it is trying to rebuild a practically non-existent value chain.
A late turn, but necessary
The community response came late. The European Critical Raw Materials Act sets production, processing and recycling targets within the continent. The list includes not only rare earths, but also copper, nickel, helium or phosphates.
There are promising initiatives:
- Refineries in Estonia and France
- Lithium discoveries in Germany
- Mining projects like those of Norge Mining in Norway
But the gap between the political announcement and industrial profitability is enormous. The recycling and national production quotas are ambitious, although difficult to execute in a complex regulatory environment with high energy costs.
The underlying question is not whether Europe can extract and process rare earths. Can. The question is whether it is willing to pay the price: subsidies, administrative simplification, massive investments and, probably, years of losses before reaching scale.
Decoupling from China is not impossible. But it won’t be cheap, quick or painless. And meanwhile, every European electric car, every turbine and every chip reminds us of an uncomfortable reality: strategic autonomy begins underground… and today that land is, to a large extent, under Chinese control.
