ASEAN as a collective possesses substantial critical mineral resources, including an estimated 20% of the world's rare earth element reserves, according to 2023 data from the US Geological Survey (USGS). Despite this significant resource base, the region's current contribution to global REE mine production stands at a modest 8%. This disparity underscores a fundamental challenge: while the geological potential is high, the region has yet to fully translate its reserves into significant global output, particularly in the crucial midstream and downstream processing stages.
This situation highlights a notable "resource-rich, processing-poor" phenomenon within ASEAN. The consistent data indicating ASEAN's considerable REE reserves, as reported by various sources, stands in stark contrast to its notably lower production and processing levels when compared to China. This is not merely a quantitative gap but a structural imbalance. While raw material abundance is a prerequisite for a thriving REE industry, the true value and strategic control within the REE supply chain are concentrated in the complex, capital-intensive processing and refining stages. These stages can multiply the value of the raw ore by up to 30 times, transforming it into high-value magnet metals and finished products. By primarily exporting raw or semi-processed ores, ASEAN countries are effectively ceding this immense value-added potential and strategic leverage to external players, predominantly China.. For ASEAN to genuinely disrupt China's monopoly and capture greater economic benefits, it must strategically invest in and attract foreign expertise for midstream and downstream processing, thereby moving beyond being solely a source of raw materials.
Vietnam holds some of the world's largest REE reserves, with estimates varying significantly from 3.5 million tonnes (a USGS downgrade) to as much as 22 million tonnes, potentially ranking second globally after China. Despite this vast potential, its current production is relatively low, around 300-600 tonnes per year. Major deposits like Dong Pao, Vietnam's largest mine with over 5 million tons of oxides, and Nam Xe in the northwest region remain largely untapped. Vietnam's reserves include both light rare earth elements (LREEs) and heavy rare earth elements (HREEs), though the exact proportion of HREEs is not publicly known, which introduces some uncertainty for establishing secure heavy REE supply chains. LREEs such as lanthanum are found in Quang Nam, suitable for catalysts, while HREEs like praseodymium and neodymium are present in Ha Giang, suitable for high-tech industries.
Vietnam's refining and processing technology is currently described as relatively backward, and its production capacity remains limited. However, the government is actively promoting modernization by attracting foreign direct investment (FDI) and strengthening cooperation with international companies. The new 2024 Mineral Geology Law, passed in Q4 2024 and effective July 2025, aims to streamline regulations, centralize management, and promote sustainable extraction, including direct state budget allocation for strategic mineral exploration. Vietnam aims to increase its REE ore output to 2 million tonnes per year and processing to 62,500 tonnes by 2030. The nation has attracted significant international interest, including a large-scale Western-backed REE project, and has cooperation agreements with Japan, South Korea, Australia, Canada, and the US. The auctioning of mining rights for Dong Pao is expected to attract significant foreign interest.
Vietnam's recent policy shifts, particularly the 2024 Mineral Geology Law, coupled with ambitious production and processing targets, clearly demonstrate a strong governmental commitment to developing its REE sector. This creates a favorable investment climate. However, a critical challenge lies in the conflicting estimates of Vietnam's REE reserves, with the USGS downgrading its estimate from 22 million tonnes to 3.5 million tonnes. This significant uncertainty can deter large-scale, long-term investments, as investors require reliable data for feasibility studies. Furthermore, while Vietnam is attracting foreign investment, its current processing technology is explicitly described as "backward". This indicates that the gap is not just in physical capacity but in fundamental technical know-how required for efficient, high-purity, and environmentally sound refining, a gap exacerbated by China's ban on REE technology exports. Vietnam's long-term viability as a major disruptor hinges on resolving the uncertainty surrounding its actual extractable reserves and, more critically, on successfully acquiring or developing advanced, environmentally compliant processing technologies. International partnerships must prioritize genuine technology transfer and comprehensive capacity building, rather than merely focusing on raw material extraction.
Myanmar is a significant global producer of rare earths, ranking third globally in supply (10% in 2023) and fourth largest producer overall (4% in 2022), with mine production of 31,000-38,000 tonnes per year. It is particularly critical as a raw material supplier for heavy rare earths, including dysprosium and terbium, which constitute almost two-thirds of the global market for these specific HREEs. These are mainly sourced from ion adsorption clays, similar to those found in Southern China. Myanmar's REE supply chain is heavily reliant on China; almost all of its REE ores were exported to China in 2022, and a significant portion of China's REE imports (41-71%) come directly from Myanmar.
However, Myanmar's REE industry is fraught with challenges, including political instability due to a military coup since 2021. Reports indicate widespread illegal mining, severe environmental degradation from chemical leaching and toxic wastewater, and a disregard for basic labor standards. The fractured authority and ongoing civil war have led to shifting control of mines, notably by the Kachin Independence Organization/Army (KIO/A). This instability directly impacts supply chain certainty and has led to price volatility, such as the significant rise in terbium prices after the KIO/A takeover.
Myanmar's critical role as a HREE supplier, especially for dysprosium and terbium, makes it an indispensable source for certain supply chains. However, this high resource potential is coupled with a high-risk profile. The severe environmental and social costs incurred due to lax regulation and ongoing conflict are well-documented. The persistent political instability directly impacts the reliability of supply and contributes to price fluctuations. While Myanmar possesses significant heavy rare earth resources, its high-risk profile encompassing geopolitical, ethical, and environmental concerns renders it an unreliable long-term partner for diversification efforts seeking a stable, sustainable supply. Western nations face a dilemma: maintaining dependence on a high-risk source or committing to long-term investment in more stable, alternative supply chains.
China's dominance in the rare earth industry is the culmination of decades of strategic planning, technological investment, and economic maneuvering. The nation developed and refined REE technologies domestically, building upon initial roots in the United States. This foresight led to the vertical integration of its entire supply chain, encompassing everything from mining to the manufacturing of high-value magnets. Furthermore, the Chinese government has actively engaged in the consolidation of its rare earth industry, a move designed to better influence global prices and enhance operational efficiency.
A significant factor in China's ascendancy has been its ability to leverage low labor costs, substantial government subsidies, and less stringent environmental regulations. These conditions have enabled China to produce rare earth metals at a fraction of the cost incurred in other countries. Historically, environmental issues and the associated compliance costs, which led to the closure of rare earth operations in other regions (e.g., Mountain Pass in the US, Asian Rare Earth in Malaysia), allowed the Chinese industry to flourish by avoiding similar expenditures.
China controls an overwhelming 85-99% of global REE processing capacity, and virtually 100% of the world's heavy rare earth (HREE) supply. This control is underpinned by specialized technical expertise, particularly in complex processes like solvent extraction. The nation has accumulated more REE patents than the rest of the world combined, reflecting its deep technological advantage. A critical strategic move was the imposition of a ban on the export of REE extraction and separation technologies in December 2023. This ban significantly impacts the development of REE supply chain capabilities outside of China by restricting access to essential know-how.
China has consistently demonstrated its capacity to weaponize rare earths, as seen with the export ban to Japan in 2010 following a fishing trawler dispute, and more recent restrictions on the US in 2023. This market dominance grants Beijing the ability to dictate prices, allowing it to raise costs for certain customers or undercut rare earth supplies outside its control. Rare earths play a critical role in green energy and technology, as well as in national security through their use in military technologies. China has also strategically outsourced some of its rare earth mining to Myanmar, capitalizing on cheaper labor, while focusing its domestic efforts on the more profitable and technologically demanding refining processes.
China's dominance in the rare earth industry is not an accidental outcome but the direct result of a deliberate, multi-decade national strategy that meticulously integrated economic, technological, and geopolitical objectives. The synergistic effect of its cost advantages, technological superiority, and comprehensive vertical integration has created a self-reinforcing monopoly that is difficult to dismantle. The recent technology ban is a calculated strategic move to maintain this chokehold, making it exceedingly difficult for competitors to catch up and establish independent capabilities. This creates a formidable barrier to entry for new players, requiring not just access to resources but a comprehensive, coordinated, and sustained effort from other nations to build alternative supply chains.
While ASEAN possesses significant rare earth potential, particularly in countries like Vietnam and Malaysia, current limitations in processing capabilities and the fragmented nature of regional efforts present substantial hurdles. Disrupting China's near-monopoly is not about replacing China's volume entirely, but rather about building resilient, diversified supply chains, especially for critical heavy rare earth elements. The region faces a dual challenge: overcoming the technical expertise gaps, which are exacerbated by China's strategic technology export ban, and navigating complex environmental, social, and governance (ESG) issues inherent in rare earth extraction and processing. While some progress has been made, notably with Lynas's advancements in Malaysia and Vietnam's evolving policy framework, a comprehensive, coordinated regional strategy is paramount for ASEAN to emerge as a viable alternative in the global rare earth supply chain.