Why are rare earth elements so important for Europe’s energy transition and security?

Rare earth elements are a group of 17 metals prized for magnetic, luminescent and electrochemical properties that are difficult to replace at scale. They are crucial to permanent magnets used in electric vehicle motors and wind turbine generators, and they also feature in high-efficiency batteries, catalysts and electronic displays. Beyond clean tech, rare earths matter for defence systems and wider industrial electronics, making supply reliability a strategic issue rather than a simple commodity concern. As Europe accelerates decarbonisation, electrification and digitalisation, demand rises across multiple sectors at once, increasing exposure to disruption, price shocks and geopolitical leverage.

How does China dominate the rare earth supply chain from mining to magnets?

China’s strength is not limited to extracting ore; it also dominates processing rare earth ore, turning rock into usable materials and finished components. It is estimated to account for around 70% of global rare earth extraction, about 90% of separation and processing, and roughly 93% of magnet manufacturing. Decades of state-backed investment prioritised downstream refining and magnet production, building technical know-how, scale and integrated industrial clusters that are hard to copy quickly. This end-to-end capability gives China strong pricing power and supply-chain influence, reinforced by quotas, exchanges, consolidation into large state-owned groups and the ability to tighten export controls.

Why is Europe so dependent on China for rare earths, and what risks does this create?

Europe depends on China for about 98% of the rare earths it uses because it lacks competitive domestic mining and, crucially, large-scale separation, refining and magnet-making capacity. Even where European deposits exist, projects face long lead times, complex permitting, environmental scrutiny and community resistance, all of which slow development. The biggest risk is strategic vulnerability: restrictions or licensing requirements can disrupt supply for EVs, wind turbines and defence applications, pushing up costs and delaying manufacturing. Europe’s dependence also concentrates business risk, as companies must plan around geopolitical tensions, export controls and potential bottlenecks in processing and magnet availability.

What is the EU doing to reduce reliance on China for rare earths by 2030 and beyond?

The EU is pursuing a mix of domestic capacity-building and diversification strategies. Policies such as the Raw Materials Initiative laid early groundwork, while the 2024 European Critical Raw Materials Act set targets including more domestic processing and a goal that no more than 65% of annual needs for each strategic raw material should come from a single third country. The European Raw Materials Alliance was created to strengthen rare earth and magnet value chains and identify investment needs. More recently, the RESourceEU Action Plan aims to accelerate strategic projects and reduce dependency across key value chains, including rare earths, with ambitions to cut reliance substantially before 2030.

Can Europe realistically build its own rare earth mining, processing and recycling supply chain?

Europe can improve resilience, but replacing China entirely is unlikely in the near term because processing, separation and magnet manufacturing require specialised expertise, large capital investment and careful handling of health, safety and environmental risks. Upstream, many European projects remain at early exploration or face permitting delays, meaning meaningful new mine supply is years away even in best-case scenarios. Downstream, Europe is expanding capacity through facilities such as La Rochelle in France and new magnet production in Estonia, yet scale remains small compared with China. Recycling can help, but recovery rates are currently very low, limited by end-of-life magnet availability.

Mining

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