Rare earths are minerals or metals. Sixteen elements on the periodic table are classified as rare earths. These are divided into light, medium and heavy rare earths.

Contrary to what the name suggests, rare earths are by no means rare. It is estimated that global reserves amount to around 100 million tonnes. Individual elements such as cerium are even more prevalent in the Earth’s crust than copper.

The largest share of global rare earth consumption is attributable to magnet production (44.3%). The rare earth elements (REEs) neodymium, praseodymium, samarium, lanthanum, terbium and dysprosium are required for this purpose. These magnets are used in the construction of motors and generators for wind turbines and electric and hybrid vehicles, as well as in hard drives, loudspeakers and for magnetic resonance imaging (MRI) scanners. In this respect, REEs are particularly relevant to the renewable energy and e-mobility sectors. They also play an important role in modern military technology.

Rare earths are relevant to numerous future technologies that support the 3D transformation (digitalisation, decarbonisation and demographic change). Rare earths are also significant for modern military technology.

Today, 70% of the world’s mined output – 270,000 tonnes of rare earth oxides (REOs) – is produced in China, which is home to 15 of the world’s approximately 40 active mining sites. The USA (45,000 tonnes REO), Myanmar (31,000 tonnes REO ), Australia, Nigeria and Thailand (13,000 tonnes REO each) follow far behind. Small quantities are also mined in India (2,900 tonnesREO ), Russia (2,500 tonnes REO), Madagascar (2,000 tonnes REO), Vietnam (300 tonnes REO), Malaysia (130 tonnes REO) and Brazil (20 tonnes REO).

Only 19 mining projects outside China are classified as at an advanced stage. The time span from exploration to production at a mine typically spans decades.

China’s dominance in the refining and further processing of rare earths is far greater than its dominance in mining. 90% of global value added in this sector takes place in China.

Through targeted industrial policy measures to integrate recovery technologies into existing production processes, China has now also become an international leader in recycling.

In 2010, China demonstrated its market power to Western industrialised nations for the first time by imposing export restrictions on rare earths. In 2023, it banned the export of technologies for the extraction and separation of rare earths, thereby attempting to cement its dominance. In response to US export restrictions on semiconductors and the punitive tariffs imposed by the US, China introduced further export restrictions in April 2025 and October 2025, which also cover rare earths, magnets made from them, and recycling technologies. At the end of October 2025, China announced that it would suspend export controls for one year.

Against the backdrop of the current tense geopolitical situation, the importance of political measures to achieve raw material sovereigntyis growing.

The EU is seeking to achieve this through Regulation (EU) 2024/1252^[1] (the Critical Raw Materials Act – CRMA). The targets to be achieved by 2030 are: 10% of annual EU consumption should come from domestic mining and 25% from recycling.Additionally, 40% of consumption, in terms of intermediate processing steps, should come from domestic refining/processing. Nor more than 65% of the annual consumption of a given raw material should still come from a single third country. These targets are to be achieved through strategic projects along the value chain, national exploration programmes, supply chain monitoring and stress tests, the obligation of large companies to prevent risks, the strengthening of the circular economy, as well as trade agreements and strategic partnerships.

Various approaches to market design are conceivable, which could enable primary and secondary raw materials to be produced competitively outside China and which could be used to respond to price volatility. Examples inlude the establishment of a guaranteed reference price with profit skimming or a state raw materials reserve.

Substitution, in terms of materials, technology and functionality, can also contribute to raw materials sovereignty. To reduce the demand for heavy rare earth elements (REEs) in permanent magnets, research is being conducted into nanotechnological options for better distribution of dysprosium and terbium in neodymium-iron-boron magnets, as well as magnet materials that do not rely on REEs. In practice, the most relevant so far have been those aimed at reducing the quantity of REEs and substituting technologies.

^[1] _{Regulation (EU) 2024/1252 of 11 April 2024 establishing a framework to ensure a secure and sustainable supply of critical raw materials and amending Regulations (EU) No 168/2013, (EU) 2018/858, (EU) 2018/1724 and (EU) 2019/1020}

The recovery of REEs is achieved through reuse or recycling. The latter is divided into material-based and resource-based processes. Whilst reuse requires large, easily accessible magnets, recycling processes are often energy- and resource-intensive. Material recycling can also alter the properties of the magnets. Currently, recycling is only economically viable for permanent magnets andnot for other components containing rare earth elements.

Recycling companies face the challenge of competing on price with primary raw materials. Currently, recycled materials are usually more expensive. Furthermore, the small quantities of end-of-life magnets and the heterogeneity of material streams complicate the recovery process. Many products containing rare earth elements, such as wind turbines or electric car motors, have not yet reached the end of their service life. Additionally, the EU lacks a comprehensive recycling system. Without local processing facilities, recycled rare earth elements, oxides, alloys and components must be re-exported to China.

China is already a pioneer in integrating recovery technologies into existing production processes. In Europe, targeted industrial policy measures and the expected increase in end-of-life materials could also drive recycling forward. According to forecasts, up to a third of the demand for rare earth elements could be met through recycling in around 10 years’ time, provided that the economic and regulatory framework develops accordingly.

Developments in the areas of mining, processing/refining, recycling/the circular economy, substitution, trade and customs policy, demand and market design will significantly influence supply and value chains – and thus the degree of raw material sovereignty. These factors are key variables in the supply of rare earths: they are key factors. Different development possibilities (projections) are plausible for each of them, and these have been developed on the basis of the sub-chapters. Within the framework of a key factor-based scenario approach, these projections can be grouped into three consistent scenarios.

'Blocked Sovereignty Shift' Scenario: By 2035, the global order has split into two blocs: China and Russia on one side and the US and the EU on the other. The US and China are acting partly as independent superpowers. Security takes precedence over sustainability. Consequently, demand for rare earths shifts from green technologies towards the military sector, rising only modestly. African and Asian countries would rather enter into raw material partnerships with the US and China than with the EU. Investment in raw material extraction stagnates due to weak demand, geopolitical uncertainties, and Chinese counterstrategies designed to undermine the EU’s sovereignty aspirations. China's established position in mining and refining enables it to maintain its dominance in the long term. Recycling and substitution remain marginal issues with no significant impact on the supply situation. China’s market power and Europe’s hesitancy prevent meaningful independence in terms of raw materials.

'Fragmented Sovereignty Shift' Scenario: The EU is confronted with a multipolar world order, where countries prioritise climate and environmental issues differently. Demand for REEs therefore rises only moderately. The EU competes with many countries for raw material partnerships, some of which it manages to secure.

China continues its export controls: through support programmes and the introduction of a reference price model, an investment climate is created that enables mining projects outside China.

The EU benefits from this both directly and indirectly. Processing capacities in Europe are being expanded. Targeted policy measures are leading to the development of a European infrastructure for recycling and intermediate products. However, material flows often still end up outside Europe. Some progress is being made in substitution research. By developing new sources of supply and processing stages, the EU can increase its scope for action to a limited extent.

'Proactive Sovereignty Shift' Scenario: Trade and customs conflicts subside. The return of climate and environmental issues to the political agenda leads to a considerable increase in demand for REEs. The EU enters into raw materials partnerships and invests in promising mining projects through public–private partnerships. This will help secure its supply in the 2040s and 2050s. By 2035, there has been little progress in mining outside China, but this causes hardly any problems. This is because the EU had adjusted its sovereignty strategy in good time by the mid-2020s, focusing consistently on recycling and substitution research. The EU’s rare earth elements reserve served as a bridging instrument to mitigate the price volatility generated by China at that time. The EU is now well equipped to deal with supply chain disruptions and interruptions: A considerable proportion of the rare earths it requires are located within its territory in the form of reserves and recyclable products.

In the medium term, the EU’s strategic sovereignty regarding rare earths can be enhanced through recycling, circular economy strategies, substitution and the establishment of a rare earths reserve. The advantage of these measures is that they focus on rare earth elements already present in the EU, or aim to reduce demand through substitution.

In the long term, financial support for mining projects outside China could contribute to diversifying supply sources, provided opportunities are also created within the EU for the further processing of primary raw materials.