Artificial scarcity of rare earths: Production stops due to China's rare earths?

China currently controls around 87 percent of the global processing and 91 percent of the refining of rare earths. Its influence is even greater in the production of rare earth magnets – so-called permanent magnets – which are used in electric motors, power steering systems, lasers, and even smartphones. Neodymium, terbium, and dysprosium from China are therefore essential for digitalization and the mobility transition.

Probably in response to Trump's exploding tariffs, China significantly tightened its export controls on rare earths in April 2025. A new licensing system temporarily led to a de facto export ban. Some countries have since negotiated exemptions to obtain certain licenses. However, the overall situation remains extremely tense.

Such permits are only valid temporarily and only for specific countries. Furthermore, they are strictly limited in quantity. Added to this is the uncertainty caused by last-minute changes or alleged formal errors – a situation interpreted by industry insiders as a means of political pressure on the part of China.

Concerns about production bottlenecks are growing in the German automotive industry. Stocks of rare earth magnets are limited and will be exhausted within a few weeks. Initial production stoppages are not being ruled out. "The last stocks are likely to be used up in four to six weeks," warns Christian Grimmelt of the management consultancy Berylls/AlixPartners.

Several European manufacturers have long been working on solutions to become less dependent on Chinese supplies. BMW, for example, is relying on electric motors that do not require permanent magnets. Mercedes is reducing the need for other critical materials through new cell chemistries. Nevertheless, a complete elimination of rare earths remains unrealistic for the time being: they remain indispensable in numerous vehicle components and consumer electronics. While companies such as Volkswagen and Mercedes are currently giving the all-clear regarding current shortages, predictability remains limited. The price increase confirms the tense situation: prices for certain rare earths are currently 40 to 50 percent higher than just a few months ago.

Rare earths are a group of 17 chemical elements, including lanthanum, cerium, neodymium, praseodymium, europium, gadolinium, terbium, dysprosium, and yttrium. Despite their name, they are relatively abundant in the Earth's crust, but usually only in low concentrations and rarely in a form worth mining. They belong to the group of metals and are characterized by special magnetic, electrical, and optical properties. These make them indispensable for modern technologies such as electric motors, wind turbines, LED lights, smartphones, and defense electronics.

The extraction and processing of these elements are technically complex and associated with significant environmental impacts. Mining usually takes place in open pit mines, which can release radioactive byproducts such as thorium or uranium. For economic and ecological reasons, mining has been significantly reduced or completely discontinued in many Western countries in recent decades. This has enabled China to establish a near-monopoly in the production and processing of rare earths – with far-reaching dependence on the global industry.