A new report from the International Energy Agency highlights a growing mismatch between the rapid increase in demand for rare earth elements and the slow pace of global supply diversification. The findings, developed to inform discussions under G7 engagement this year, emphasize the need for new projects, partnerships, and policy measures to strengthen supply chain resilience.
Rare earth elements—17 materials used across advanced technologies—are becoming increasingly important for sectors including electric vehicles, artificial intelligence data centers, robotics, advanced manufacturing, and digital infrastructure. Demand for magnet rare earths such as neodymium, praseodymium, dysprosium, and terbium has doubled since 2015 and is projected to rise by more than 30% by 2030, according to the report. Continued growth in automation and digitalization is expected to further increase demand beyond the end of the decade.
Fatih Birol said rare earth elements are essential to technologies supporting electrification and digital economies, but supply chains remain highly concentrated. He noted that recent disruptions have demonstrated how quickly supply constraints can translate into broader economic risks, underscoring the need for sustained investment, resilience measures, and international cooperation.
The report found that rare earth supply chains are among the most geographically concentrated across mining, refining, and manufacturing. China currently accounts for roughly 60% of global mined production of magnet rare earths and more than 90% of refining capacity. In downstream segments, including permanent magnet production, the share is close to 95%. Two decades ago, China represented about half of global permanent magnet output, highlighting a significant increase in concentration over time.
Recent export controls introduced in 2025 contributed to short-term supply disruptions, with some manufacturers outside China reporting difficulties securing key inputs and, in certain cases, reducing production. Although supply flows later stabilized, the report states that the episode highlighted exposure across downstream industries. The analysis suggests that, if such controls were fully implemented, up to $6.5 trillion in economic activity outside China could face potential risk annually, particularly in automotive, electronics, and transport sectors.
Despite growing awareness of these vulnerabilities, progress toward supply diversification has been limited. The report indicates that current and planned projects outside the dominant supplier are insufficient to meet projected demand. By 2035, existing and announced capacities are expected to cover only about half of mining requirements, roughly a quarter of refining needs, and less than one-fifth of magnet demand outside China. This gap is expected to widen without accelerated investment.
The IEA also identified imbalances across the supply chain, noting that the pipeline of magnet production projects remains significantly smaller than upstream mining developments. Existing and planned magnet projects outside China account for only around one-third of mining capacity, pointing to downstream bottlenecks in manufacturing and processing.
To address these challenges, the report estimates that approximately $60 billion in investment will be required over the next decade to build more diversified supply chains. While significant, the agency noted that the investment is modest compared with potential economic losses associated with supply disruptions.
Recycling and innovation were identified as complementary solutions. Recycling alone could reduce the need for primary supply by up to 35% by 2050, while advances in production technologies and material substitution could ease pressure on constrained elements. However, the report emphasized that diversification involves more than launching new projects, citing broader challenges including technology access, equipment availability, skilled labor, and financing.
The agency concluded that strengthening rare earth supply chains will require coordinated international efforts. Given the geographic distribution of resources and industrial demand, no single country can develop fully integrated value chains independently. The report outlines several actions to support diversification, including improving emergency preparedness, scaling investment across the value chain, accelerating innovation, and enhancing price transparency.
#SupplyChainNews #CriticalMinerals #EnergyTransition #GlobalSupplyChains #ManufacturingRisk
