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Rare-Earth Elements (REE) Industry

Two Chinese government agencies on 09 October 2025 announced multiple new rare earth-related export control measures. Export applications destined for overseas military users, as well as to importers and end-users on the control and watch lists, shall not be approved in principle. This included export controls on technologies related to rare earths, requirements for overseas entities to obtain a dual-use items export license, as well as export controls on items related to superhard materials, rare earth equipment and raw materials, five medium and heavy rare earth elements, lithium batteries as well as artificial graphite anode materials.

Rare earth permanent magnets are not only essential components in a range of defense capabilities, including the F-35 Lightning II aircraft, Virginia and Columbia class submarines and unmanned aerial vehicles, but also a critical part of commercial applications in the United States. They are also used to generate electricity for electronic systems in aircraft and focus microwave energy in radar systems.  The F-35, for instance, requires more than 900 pounds of rare earth elements. Each Arleigh Burke DDG-51 destroyer requires 5,200 pounds, and a Virginia class submarine needs 9,200 pounds.

Rare earth elements are also used in other ways that don't involve magnets. Vehicle-mounted laser range finders, such as those found on Abrams M1A1/2 tanks, make use of rare earth elements, as do their portable counterparts and target designators. Also making use of rare earth elements are; fiber optics communication systems; cerium-polished optical lenses; and sonic transducers used in submarine sonar systems. 

"Given the dual-use nature of these items, China implements export controls in line with the law. This is a commonly adopted practice internationally, and will better maintain national security and interests while better carrying out the country's international non-proliferation obligations," a Ministry of Commerce (MOFCOM) spokesperson said.

Products intended for military use are presumed ineligible for licenses, whereas civilian goods are not subject to this restriction. "China's announcement of export control measures on rare earths and related items is a legitimate action by the Chinese government to refine its export control system in accordance with laws and regulations," a spokesperson with MOFCOM said on 12 October 2025. "China's export controls are not export bans. Licenses will be granted for eligible applications. ... China's export controls are not export bans. All applications of compliant export for civil use can get approval, so that relevant businesses have no need to worry."

The incident stemmed from Washington's threat to impose tariffs of 100 percent on China and export control on all critical software, under the pretext of "countering" China's tightening of rare earths export regulations. Since the China-US economic and trade talks in Madrid in September 2025, the US, in just 20 days, introduced a string of new restrictive measures targeting China. The U.S. stock market erased about $2 trillion in value 10 October 2025 after Trump threatened massive tariffs against China.

China repeatedly stated that its export control measures on rare earths and related items is a legitimate action by the Chinese government to refine its export control system in accordance with laws and regulations. These actions wre said to be not only necessary to safeguard national security, but also fully demonstrate China's steadfast commitment - as a responsible major country - to pursuing world peace, reducing the risk of military conflict, and preventing the proliferation of weapons of mass destruction, in accordance with international norms and common practice.

In April 2025, MOFCOM and the General Administration of Customs implemented export control measures on certain items related to seven types of medium and heavy rare earths. Meanwhile, related rare earth technologies were listed on China's Catalogue of Technologies Prohibited and Restricted from Export in 2001, and related exports must comply with legal procedural requirements.

China had introduced multiple policies and measures in aspects including industry entry standards, sector consolidation, and environmental protection, which effectively promoted the sustainable and healthy development of the industry. In October 2024, a set of regulations on rare earth administration in China took effect, aimed at promoting the high-quality development of the rare earth industry while maintaining the safety of national resources and industries.

China's government said 03 July 2023 it will impose export controls on gallium and germanium -- rare metals used in the production of semiconductor materials. Both gallium and germanium are key in the making of semiconductors and other electronics. For example, germanium is used in fiber optics and semiconductors, while gallium is used in making chipsets for electronic devices such as computer motherboards or portable phones.

China is the world's top producer of raw gallium, which is used in making chipsets to generate high frequency raid waves in 5G base stations, accounting for 95 percent of the global output. China is also a major supplier of germanium, which is mainly used in fiber and infrared optics, PET plastics, electronics and solar panels. The EU has listed the metal as a critical raw material, as it imports about 17 percent of its supplies from China.

China's commerce ministry and General Administration of Customs released a statement saying that China would implement export controls on items related to gallium and germanium, "in order to safeguard national security and interests." China accounts for a large share of the global output of the materials. Large amounts of those metals are sent to Japan to satisfy the needs of Japanese companies. Under the controls, exporters will be required to file an application with authorities, specifying who will be the end-users and how the materials will be used. Their application must be vetted and approved before they can ship the products. Violators will face punishment.

The move was evidently in response to the US and its allies ratcheting up pressure on China's high-tech industries. Washington has tightened restrictions on semiconductor exports to China. Japan also said it will implement stricter export controls on chip-making equipment. Dutch chipmaking equipment giant ASML said that due to these export control regulations, ASML will need to apply for export licenses with the Dutch government. China has repeatedly voiced dissatisfaction over the Dutch move and called on the Dutch government to respect market principles and contractual spirits in order to avoid damage to bilateral cooperation

China’s export controls on gallium could hit the US defense industry, as this materia is widely used in advanced radar systems installed on warplanes, warships and ground installations. Gallium arsenide (GaAs) and gallium nitride (GaN) are the most basic materials in the making of the transmit receive modules on active electronic scanning array (AESA) radars, which are widely used on modern warplanes, warships and ground installations. US defense companies Raytheon and Northrop Grumman are reportedly introducing new AESA radar systems based on GaN, which provide superior performance than previously used GaAs. The latest radars for the F/A-18E/F carrier-based fighter jet and the F-35 stealth fighter jet also incorporate GaN.

Almost all gallium used in the United States was imported, most from Western Europe and Canada. But by 2021, China produced over 80% of the world's crude gallium and was the primary source of the gallium imported by the United States. In 2019, gallium metal imports by the US decreased by about 90% from those of 2018, most likely owing to the introduction of higher import tariffs on gallium from China and the 300% increase of gallium imports from China in 2018 before the tariffs were introduced. Gallium stockpiling in 2018 may have been prompted by the discussion of China’s potential tariffs. Low-grade primary gallium producers outside of China most likely restricted output owing to a large surplus of primary gallium. These producers included Japan, the Republic of Korea, Russia, and Ukraine. Germany and Kazakhstan ceased primary production in 2016 and 2013, respectively.

China is rich in rare-earth resources and the country produces different kinds of rare-earth products. Since the 1990s, China had become the leading rare-earth supply country in the world. During the past decade, China's rare-earth production accounted for about 90% of the world total. Rare-earth consumption in China had increased steadily. The country consumed about 73,000 t of rare earths in 2007 and 68,000 t in 2008 compared with 19,300 t in 2000. Rare earths was a strategic commodity in China. Foreign investors were prohibited from mining rare earths and were restricted from participating in rare-earth smelting and separation projects.

Although China's total output capacity was huge, the average capacity for each producer was small. As a result, the profitability was low and the product quality was inconsistent between different shipments. Because of oversupply of rare-earth products in domestic markets, producers exported their products at prices that were less than their production costs, and they depended on the export VAT rebate to make up the difference to become profitable. In 2005, the Government cancelled the export VAT rebate and levied an export tariff of 25% on some rare-earth products.

The dominant position China's rare earths in the world was expected to become more important because of the wide range of cutting-edge environmental technology, such as wind turbines, low-energy light bulbs, and hybrid cars, that depend on rare-earth metals. Owing to an increase in domestic demand, the Government gradually reduced the export quota during the past several years. In 2008, domestic rare-earth producers were allocated a total of 34,156 t (in rare-earth oxide content), of which the first batch was 22,780 t and the second batch was 11,376 t. Sino-foreign joint-venture rare-earth producers were allocated a total of 8,210.5 t in 2008. The Government approved 23 domestic rare-earth producers and traders to have the right to perform rare-earth trading in China. Only 20 domestic rare-earth producers and traders were awarded export rights, and the first batch export quota was reduced to 16,043 t in 2009. Sino-foreign rare-earth producers were allowed to export a total of 6,685.1 t in 2009.

In 2002, the State Council approved the restructuring of the domestic rare-earth sector and the establishment of two regional groups-China Northern Rare Earth Group Co. and China Southern Rare Earth Group Co. Owing to the reluctance of local governments and rare-earth producers, the establishment of the two groups was unsuccessful. During the past several years, the Government continued to urge rare-earth producers to merge into several large groups and to eliminate duplicate projects. Rare-earth producers realized that the bitter competition among each other was causing financial losses and that integrating the rare-earth producers could benefit the rare-earth sector in China.

In 2007, Rare Earth Hi-Tech Co. changed its name to Baotou Rare Earth Co. and started to discuss with other rare-earth producers in the Nei Mongol Autonomous Region the possibility of forming Baotou Rare Earth International Trading Co. and establishing a rare-earth concentrates reserve base in the Region. Mianning County in Sichuan Province was China's second ranked rare-earth producing base. In 2007, the local government shut down mining activities in Mianning County because miners were using obsolete technology to exploit and process rare earths and were causing environmental damage in the county. In 2008, Jiangxi Copper Corp. obtained rare-earth mining rights in Maoniuping, Mianning County, and planned to use advanced mining and processing technology to produce rare earths.

Dingnan Dahua New Materials Co. Ltd., Ganxian Hongjin Rare Earth Co. Ltd., and Minmetals Nonferrous Metals Co. Ltd. formed a joint-venture company, Minmetals Ganzhou Rare Earth Co. Ltd., to process rare-earth resources in Ganzhou, Jiangxi Province, in 2008. Most of China's ion-absorption type of rare earth was located in Ganzhou. There were 88 rare-earth producers in Ganzhou, and 90% of them ceased their operations because of weak prices. Jiangxi Province had an ion-absorption type of rare earths reserve of 2.3 Mt. Minmetals Ganzhou Rare Earth had a rare-earth separation capacity of 8,500 t/yr and planned to expand the separation capacity to 13,500 t/yr within 5 years. The joint venture also planned to develop value-added rare-earth products for the aerospace and electronics sectors.

China Nonferrous Metal Industry's Foreign Engineering and Construction Co. Ltd. (CNMI), Fengyuan Development Co. Ltd., Jiangsu Zhuoqun Nano Rare Earth Co. Ltd., and Shengchang Rare Earth Material Co. Ltd. jointly established a rare-earth company-China Nonferrous South Rare Earth (Xinfeng) Co. Ltd.-to build a 7,000-t/yr rare-earth separation plant in Shaoguan, Guangdong Province. Rare-earth operations at CNMI's Zhujiang Smelter in Guangzhou, Guangdong, Shengchang, and Zhuo Quo would be shut down when the Xinfeng plant started operation. The Government approved the establishment of the new company and the relocation plan of the Zhujiang smelter.

Guangdong Guangsheng Nonferrous Metals (Group) Co. Ltd.'s subsidiary Guangcheng Nonferrous Metals Co. Ltd. was the sole legal rare-earth mining company in Guangdong Province. The Government approved Guangcheng's application to list on the stock exchange and to consolidate eight rare-earth mining, smelting, and processing companies and five tungsten mining companies in Guangdong. Guangcheng had a rare-earth smelting and separation capacity of 8,000 t/yr.

China's companies were looking for rare-earth investments overseas. East China Exploration planned to acquire a 25% interest in Australia's Arafura Resources Ltd., which had the Nolans rare-earths-phosphate-uranium project in Northern Territory, Australia. China Nonferrous Metals Mining (Group) Co. Ltd. agreed to acquire a 51.6% interest at Lynas Corp. Ltd. Lynas's Mount Weld rare-earth mining project was under construction in Western Australia. If the transaction is completed, China would continue to be the globally dominant player in the rare-earth industry in the future.




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