The rare earth elements are a group of 17 metals on the periodic table, and they show up in places you’re probably not thinking about on a daily basis: powering an electric vehicle motor, spinning inside a wind turbine generator, embedded in MRI machines at hospitals, and threaded through fiber optic cables. Rare earth minerals are the ores that contain those metals, and they occur naturally in the Earth’s crust. However, rare earth deposits are typically dispersed in low concentrations, meaning separation and refining set the pace of supply.

The global economy runs on these materials, and right now, most of that supply comes out of one country.

Download the full Mission Critical report (PDF) for a deeper look at critical minerals, rare earth production, global supply dynamics, how China established dominance as the world’s largest producer of rare earth exports, and practical strategies to strengthen resilience in critical raw materials.

Key Numbers

• ~60% — China’s share of global rare earth production (mining)
• Up to 90% — China’s share of REE processing into oxides, metals, and magnets
• $170 million — U.S. rare earth import value in 2024 for compounds and metals
• 46% — Share of rare earth trade affected by export restrictions from 2021 to 2023
• 5.0x — Jobs created (the 5; each rare earth industry job generates five additional jobs elsewhere in the economy
• 618,000 — Downstream workers supported by rare earths products and technologies across the U.S. and Canada

How Rare Earth Minerals Create Economic Value

Economic value builds link by link along a production chain. Mining concentrates raw ore; separation and refinement separate that ore into individual elements; manufacturers turn those inputs into magnets and specialty components; finished goods move into the global economy. Value capture increases significantly after the mine because separation relies on specialized chemistry and precise handling, not just heavy machinery.

Many processing flowsheets rely on acids—commonly hydrochloric acid—followed by solvent extraction to isolate elements with similar properties that resist easy separation. This is slow, intricate work, and the chemical properties of rare earth metals demand tight process controls. Even a small variation can change the performance outcome of the final product.

Which Industries Are Most Exposed?

Certain industries feel the effects of rare earth supply disruptions sooner than others. Electric vehicles, wind turbines, consumer electronics, and defense, just to name a few. Why? Because sector performance is directly tied to magnet-grade inputs, and redesign cycles are slow by design. They can take years, in fact.

Since EV motors and turbine generators depend on permanent magnets, shortages raise prices and create production delays, triggering expensive redesign and requalification cycles. Electronics supply chains are already lean, so even the smallest shift in lead times quickly creates a ripple effect across product lines.

The same dependency shows up in adjacent applications—catalytic converters and oil refining catalysts, fuel cells, and MRI machines. Rare earth metals are only present in small quantities in these products, but their absence has significant consequences; they cannot be easily substituted with other materials.

Three Ways Rare Earth Disruptions Hit the Economy

1. Production delays and redesign costs. When supply tightens, firms must qualify alternative materials or retool processes, which is not a quick process. In the defense and automotive sectors, these qualification cycles can be years-long.
2. Price volatility and inflation pressure. Export restrictions reduce supply and make rare earth exports unpredictable. OECD (Organization for Economic Cooperation) data shows that 46% of rare earth trade was affected by restrictions from 2021 to 2023. That uncertainty shows up in contract pricing, which is eventually passed on to consumers through inflation.
3. Shifts in global competitiveness. Manufacturing goes where supply is reliable. With Chinese companies operating at scale, and the Chinese government maintaining broad policy coordination over the sector, it’s no surprise that investment tends to flow towards hubs with established separation capacity. Over time, that erodes domestic industrial ecosystems.

Why the Rare Earth Elements Supply Chain Is Economically Fragile

The rare earth supply chain is built on concentration and bottlenecks. Mining is distributed unevenly around the world, but refining is even more concentrated. However, processing remains the tightest point because scaling separation requires time, specialized knowledge, and significant capital. So much so that the International Energy Agency (IEA) has repeatedly emphasized China’s dominance in processing, with the numbers to back it up: 90% of global finished rare-earth material production passes through Chinese facilities.

Then there’s the fact that, because most rare earth elements have similar properties at the atomic level, separating them requires multi-stage chemical processing at an industrial scale. Econofact estimates it will take a decade or more to build meaningful domestic processing capacity in the U.S., reflecting real physical and regulatory constraints.

Heavy rare earth elements add another layer of fragility: ion-adsorbing clay minerals in southern China are the world’s largest producers of heavy rare earths such as dysprosium, terbium, and other critical heavy rare earth elements for high-temperature magnet performance. Alternatively, light rare earths come from other deposit types and are somewhat more geographically distributed. Some processing streams also involve radioactive elements as byproducts, which require specialized handling and regulatory pathways that take time and capital investment to establish.

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What Governments and Industry Can Do—and Why It Pays

As an economic strategy with long-term payoffs, risk reduction isn’t just defensive. A more resilient supply chain increases competitiveness and provides a buffer against economic shocks.

Priority actions:

• Diversify sourcing across many countries; building on other countries with known rare earth deposits creates redundancy across the global supply.
• Expand domestic processing and magnet capacity manufacturing to stabilize rare earth production.
• Invest in recycling infrastructure so rare earth products can re-enter the supply chain as feedstock, reducing dependence on primary production.
• Build permitting and workforce programs around realistic timelines for new mines and separation plants.
• Fund geological survey mapping so projects start with better data and reduce development risks.
• Align with international frameworks, like the European Union’s Critical Raw Materials Act, which is already being used to reduce single-supplier dependence by arranging investment and policy around its targets.

Together, these efforts strengthen the availability of critical minerals and help prevent future disruptions.

The Policy Case for Action

Rare earth elements don’t frequently make the headlines, unless there’s a crisis, but the economic exposure is present and compounding. There are several structural conditions that policy needs to address before a disruption requires an expensive response.

Here at CSG South, we work at the intersection of these issues to support state policymakers across the southern U.S. with research, analysis, and peer learning that help governments act on complex, high-stakes topics such as critical minerals supply chains.

Contact us today to learn more about our work on critical minerals and energy policy.

This page is largely adapted from Mission Critical: The Vital Role of Rare Earth Elements to 21st Century Economies, written by Nick Bowman, policy analyst serving as liaison for the Energy and Environment Committee under the leadership of Chair Representative Jim Gooch Jr. of Kentucky. Some quantitative details are pulled from external sources.

Download the full Mission Critical report (PDF)