New projects, partnerships and policies are needed to address supply chain risks for rare earth elements

New IEA report highlights growing mismatch between accelerating use of rare earths across a wide range of technologies and slow pace of supply diversification globally

Rare earth elements are moving rapidly to the forefront of global policy making for energy, transport, advanced manufacturing and digital technologies as demand continues to expand while supply chains remain highly concentrated, according to a new IEA report developed to inform G7 discussions this year.

The importance of the 17 rare earth elements that underpin a wide range of technologies - from electric vehicles and AI data centres to robotics and defence systems - has grown sharply in recent years, driven largely by growing use of high-performance permanent magnets. Demand for magnet rare earths - notably neodymium, praseodymium, dysprosium and terbium - has doubled since 2015 and is projected to increase by more than 30% by 2030, according to the new report, Rare Earth Elements: pathways to secure and diversified supply chains, which aims to provide analytical support for discussions under France's 2026 G7 Presidency. As automation and digitalisation accelerate, the report shows that demand for magnet rare earths will grow further beyond the end of this decade, based on today's policy settings.

"Rare earth elements are indispensable to many of the technologies shaping the Age of Electricity and our increasingly digitalised economies, yet their supply chains remain among the most concentrated of all critical minerals," said IEA Executive Director Fatih Birol. "Recent disruptions have underlined how quickly these vulnerabilities can translate into real economic risks. Addressing them will require sustained investment, stronger resilience measures and deeper international cooperation."

Among all the critical minerals analysed by the IEA, rare earths are among the most concentrated geographically across each stage of the value chain. Today, China accounts for around 60% of global mined production of magnet rare earths, while its share of refining is above 90%. Its dominance is even starker in downstream segments, with almost 95% of permanent magnet production. Two decades ago, China represented only around half of global permanent magnet output.

Recent developments have brought these vulnerabilities into sharper focus. Export controls introduced by China in 2025 led to significant short-term disruptions, with some manufacturers outside China facing difficulties in securing key inputs and, in certain cases, having to reduce production. While flows later recovered, the episode highlighted the potential exposure of downstream industries. The report finds that, if such controls were fully implemented, up to $6.5 trillion of economic activity outside China could be at risk each year, with automotive, electronics and other transport sectors heavily impacted.

Despite growing awareness of these risks, progress towards more diversified supply has been limited. Current and planned projects outside the dominant supplier fall well short of what is needed to meet projected demand, according to the report. By 2035, existing and announced capacities are expected to cover only around half of mining requirements, a quarter of refining needs, and less than a fifth of magnet demand outside China. This points to a widening gap unless investment in diversification accelerates. The report highlights a notable imbalance in current supply chain development efforts, with the pipeline of magnet production projects substantially smaller than that of upstream projects. Existing and planned magnet projects outside China account for only around a third of mining capacity.

Closing this gap would require a substantial growth across the entire value chain, particularly in refining and magnet manufacturing, which remain key bottlenecks. The report estimates that around $60 billion of investment will be needed over the next decade to develop diversified supply chains. While significant, this investment is modest compared with the scale of potential economic losses associated with supply disruptions.

Recycling and innovation offer important complementary pathways, with recycling alone having the potential to reduce the need for primary supply by up to 35% by 2050, while advances in innovative production and substitution technologies could ease pressure on the most constrained elements.

The report notes that diversification is not simply a question of planning new projects. There is a broader ecosystem challenge encompassing bottlenecks in technology, equipment, machinery and skills that must be addressed for projects to become competitive.

Achieving secure and resilient rare earth supply chains will require a comprehensive and coordinated approach, according to the report. Given the geographic distribution of resources, capabilities and industrial demand, no single country can build fully integrated value chains in isolation. Strengthened international cooperation will be essential to align investment and support project development, based on more diversified and sustainable supply networks.

The report outlines eight practical actions to support diversification, including strengthening emergency preparedness, scaling up investment across key stages of the value chain, accelerating both supply side and demand-side innovation and improving price transparency.