IEA Warning: China's Rare Earth Export Controls Could Disrupt $6.5 Trillion in Global Industries

The International Energy Agency (IEA) issued its 'Global Critical Minerals Outlook' report on Thursday (16th), warning that if China fully implements its rare earth export restrictions, up to $6.5 trillion in downstream production outside China could be at risk.

China, the world's largest producer of rare earths, expanded its export controls last October to include more materials and introduced new licensing requirements. Although it later agreed to delay enforcement by one year, the potential impact has already drawn significant international attention. Rare earths consist of 17 metals that, despite their small usage volumes, are essential raw materials for automobiles, aircraft, electronic devices, and defense weapon systems.

The IEA指出 that if these controls take full effect, the automotive, high-tech, defense, and energy sectors will face severe supply disruptions. The United States and Europe are expected to bear nearly half of the economic impact.

Fatih Birol, Executive Director of the IEA, stated that the analysis reveals how vast economic value depends on extremely small quantities of critical minerals, and that these supply chains are highly concentrated and therefore extremely vulnerable.

In addition to rare earths, the report highlights the risks associated with graphite export controls. China supplies over 90% of the world's processed graphite, a core material for electric vehicle batteries. If graphite supplies are disrupted, approximately $300 billion in downstream production outside China could be affected.

To reduce dependence on a single supply source, Western governments are actively building alternative supply chains. Data shows that public financing commitments for new mining projects between 2023 and 2025 have grown more than fourfold, reaching $65 billion.

Thanks to new rare earth refining projects in the United States and Malaysia, China's share of the global market has declined from 90% in 2023 to 85% last year. If these projects progress smoothly, China's market share is expected to further drop to 70% by 2035.