In early 2025, China launched a sweeping crackdown on foreign companies it accused of stockpiling rare earths, sending shockwaves through global supply chains. The move reflects Beijing’s broader strategy to tighten control over its rare earth sector—critical to high-tech industries from defense systems to electric vehicles.
In April 2025, Beijing implemented a new system of export control by introducing new permitting requirements for seven rare earth elements and refined products, including dysprosium, terbium, and neodymium alloys. This new approval process can extend up to 45 days, which not only delays shipments but also introduces uncertainty into the market.
Additionally, the Ministry of State Security (MSS) has initiated a campaign focused on curbing smuggling and illicit exports, alleging that there is collusion between foreign intelligence agencies and Chinese criminal organizations.
For the first time, China has also withheld its 2025 mining and smelting quotas, resulting in a lack of transparency that fuels market speculation. Furthermore, Beijing has directly warned foreign buyers against stockpiling rare earths and magnet products, indicating that such practices could lead to stricter restrictions. As a result, export volumes are being deliberately rationed to prevent hoarding, and larger or atypical orders are now subjected to greater scrutiny.
Beijing has taken measures to prevent companies from accumulating large inventories of medium and heavy rare earths, aiming to maintain control over the supply chain and leverage within the sector. In April, China placed seven categories of rare earths on an export control list in response to tariffs imposed by former U.S. President Donald Trump, which also included permanent magnets and other finished products. This decision has led to shortages in various industries, particularly in the automotive sector.
Despite a recent agreement between Washington and Beijing for a 90-day extension of their tariff truce, China's controls on rare earth exports remain a crucial issue within ongoing negotiations. Beijing exercises control over rare earth production through established mining and processing quotas. Last year, only two state-owned companies were granted these quotas.
While there has been a partial resumption of rare earth exports after complaints from U.S. and European officials regarding shortages, data and surveys indicate that Beijing continues to manage exports tightly. A recent survey by the U.S.-China Business Council revealed that 50% of companies reported pending or rejected applications for rare earths. In June, China exported 3,188 tonnes of rare earth permanent magnets, more than double the amount exported in May but down 38% compared to the previous year. Over the three months leading up to June, following the implementation of trade restrictions, magnet exports were about half of what they were in the same period the previous year.
The USCBC report highlighted that larger orders, particularly those exceeding applicants' historical averages, faced increased scrutiny to avoid stockpiling. The application review process is thorough, with any discrepancies potentially leading to delays or rejections. As a result, industry associations and business lobbies have been actively appealing to China's commerce ministry to expedite reviews for urgent cases.
The issue has prompted some Western companies to relocate production of finished products to China, aligning with Beijing's goal of tightening control over the supply chain. Louis Pinkham, CEO of U.S.-based motor manufacturer Regal Rexnord Corp, noted that the company has shifted some production to China to facilitate the assembly of rare earth magnets and their subsequent export. He emphasized the challenges posed by the current situation, stating, “For the last four months, I have been on one or two calls every week, working with our teams to manage this situation. There is no question that this is not a great use of time.”
Surveys reveal that nearly half of the member firms of the U.S.-China Business Council have experienced delays, with some having their applications for rare earths pending or flat-out rejected. Industry insiders suggest that this system of control is not merely about managing supply; it also serves to maximize leverage in trade negotiations. Every application is reviewed meticulously, and even minor discrepancies can lead to rejections. Companies facing urgent needs have resorted to turning to industry associations for assistance in lobbying Beijing for faster approval processes.
China has framed its recent crackdown on foreign firms hoarding large inventories as a necessary national security measure. Officials have expressed concerns that such hoarding undermines supply stability, a sentiment reminiscent of Beijing’s earlier restrictions on the exports of gallium and germanium in 2023. At the same time, these new restrictions seem to arise amid escalating U.S.–China trade tensions, suggesting that rare earth materials have become a significant bargaining chip in this ongoing conflict. With China processing approximately 90% of the world's rare earths and producing 94% of permanent magnets, the country wields substantial leverage over industries reliant on these critical inputs.
The effects of the recent disruptions have been both immediate and severe. For instance, there have been significant price spikes in rare earth materials, with neodymium surging over 16% and both dysprosium and terbium experiencing more than tripling in price within just a few months. Alongside these price increases, supply chain disruptions have also wreaked havoc on industries. Automakers and electronics firms across the U.S., Europe, and Japan faced production halts; in fact, by May 2025, shipments bound for the U.S. had plummeted by over 90% before seeing a partial recovery.
In response to these challenges, a notable shift in production has occurred, with some Western manufacturers relocating their final assembly operations to China, where magnet components are more readily available. This move effectively increases Beijing's control over the supply chain, raising concerns among global stakeholders.
Recognizing the urgency of the situation, foreign governments and companies have begun to take decisive steps to diversify their supply chains. The EU Parliament has condemned Beijing’s restrictions, while the U.S. government has thrown its support behind domestic rare earth projects. Notably, the U.S. Department of Defense provided a $150 million loan to MP Materials to assist in heavy rare earth separation, and the Department of Energy committed nearly $1 billion toward critical mineral initiatives.
Additionally, alternative supply chains are beginning to take shape, with producers like Australia’s Lynas Rare Earths expanding their operations. However, analysts caution that unless there is a significant scale-up in production capacity, the world could face a troubling 30% shortfall in rare earth supplies by 2035.
As governments and industries scramble to secure stable and diversified rare earth supplies, Quest Metals stands at the forefront of this global shift. With a firm commitment to ethical sourcing, advanced processing capabilities, and partnerships across North America and Australia, Quest is rapidly emerging as a reliable alternative to China’s rare earth dominance. In a world where geopolitical risk is now directly tied to material access, Quest Metals offers a resilient, transparent, and strategically aligned supply solution for the future of clean energy, defense, and high-tech innovation.