The recent tightening of China’s export controls on rare earths has led to a significant price increase for these strategically important raw materials. These measures were introduced in April 2025 and affect seven of the total seventeen rare earth elements, including Samarium, Gadolinium, Terbium, Dysprosium, Lutetium, Scandium, and Yttrium. These metals are crucial for high-tech applications and are used in products such as electric motors, magnets, and various technologies.
Impact on Industry
The export controls have significant impacts on various industries, including:
- Automotive Industry: Car manufacturers are affected, as rare earths are used in electric motors and other components.
- Defense Industry: This sector is also heavily impacted, as rare earths are essential for military technologies.
- Electronics and Medical Technology: Companies in these fields are also affected by the shortages, as rare earths are present in many electronic devices and medical equipment.
- Renewable Energy: Manufacturers of solar and wind power systems are also impacted, as rare earths are used in some components of these systems.
Price Increase and Economic Impacts
The price increase of rare earths has direct effects on the costs of numerous technologies and products that contain these raw materials. Since China controls about 90% of the world’s refining capacity for rare earths, alternatives are often more expensive or of lower quality. This leads to significant operational challenges for affected companies, including disruptions in M&A processes and company valuations.
Reactions and Developments
Recently, China has signaled its intention to expedite the approval process for exporting the affected rare earths to companies in the EU. This could bring some relief to European companies that are heavily dependent on these raw materials. However, the situation remains tense, as the procedures for granting export licenses are opaque and delayed.