The Chinese government’s discretion over the export and refining of rare earths destined for foreign markets will have many potential losers globally, with few winners—especially non-Chinese miners—whose opportunities will depend on the degree of closure imposed by Beijing. This is according to an in-depth analysis by Goldman Sachs analysts, who find that the most critical and restricted metals are gallium, followed by lutetium, terbium, samarium, and graphite.
In particular, gallium is crucial for the production of semiconductors, while the other metals on the list, thanks to their exceptional resistance and thermal stability, are essential for aerospace and defense.
Defense and semiconductors will therefore be the sectors most likely to be affected by China’s crackdown on licenses, which, Beijing announced in its official statement on October 9, will be denied for “products that are or could be used,” among other things, “for military use or to enhance military potential.”
While defense and advanced semiconductors are the first line of impact, the next sector to be hit is electric automotive. The reason is simple: battery-powered car engines rely on neodymium permanent magnets, a technology in which China controls “92% of the refining and 98% of global production,” Goldman recalls. Although Beijing now declares it intends to limit licensing to military (or terrorist) uses only, the heavy rare earths needed to improve efficiency and thermal resistance—such as terbium and dysprosium—are dual-use materials and therefore easily subject to selective bottlenecks. Already in May 2025, “the mere threat of restrictions caused a brief interruption to Ford production.” Beijing’s decision-making power over licensing, therefore, could jeopardize the entire assembly lines of giants like Volkswagen, Stellantis, or Tesla.
Rare earths aren’t that rare, but producing them “domestically” takes years.
It’s not the availability of rare earths in the Earth’s crust that represents the main obstacle, but rather the refining and development time of dedicated mines and plants. The Trump administration made self-sufficiency in the supply of critical materials a strategic priority last March, and in the following months, various US departments acquired significant stakes in North American rare earth mining companies (including Trilogy Metals and MP Materials). More recently, on October 20, Australian Prime Minister Anthony Albanese and President Trump signed an agreement that will support $8.5 billion in new mining and refining projects in Australia. The agreement stipulates that the two governments will invest an additional $1 billion in projects in the United States and Australia over the next six months.
However, the road to true self-sufficiency still appears to be a long one. “Mining production of rare earths outside China remains limited, with modest shares in the United States (12%) and Myanmar (8%),” the report notes. “Although extraction is much less complex than refining, increasing it will not quickly eliminate dependence on Chinese imports,” since heavy rare earth elements—those recently restricted—are geologically much scarcer than light rare earth elements, and “outside China and Myanmar, known deposits are mostly small, lower-grade, or more radioactive.” And, in any case, it takes at least eight years for a new discovery to become a fully operational mine.
Then there’s refining: a process in which China holds much of the expertise and which isn’t much quicker—about three years to build a plant and another two to reach full production.
Commodities as a Geopolitical Lever: A New Reality
For Goldman, the geopolitics of commodities is already transforming the traditional role of these resources within investment portfolios. While we assume the global availability of oil and natural gas will be ample in the coming years, we reiterate that the increasing geographic and political concentration of supply amplifies the benefits of commodity diversification in portfolios. With a large portion of supply located in regions with high geopolitical or trade dispute risk—and with commodities increasingly used as leverage—the risk of disruption grows.
In the case of rare earths, purchasing them directly on markets (typically listed in China) is in most cases futile: restrictions do not increase the domestic price. The effective way to hedge against disruption risk is therefore equity exposure to non-Chinese mining and refining companies.
This risk of supply shocks could be repeated elsewhere: more and more countries that had previously dominated the extraction or refining of critical materials due to efficiency could seek to exploit their position of strength. This is the case with the Democratic Republic of Congo, which since February of this year has imposed an export ban on cobalt—of which it holds approximately 70% of global production—pending the introduction of a quota system that, according to Goldman Sachs, “will push the cobalt market into deficit by 2026.”
