Why are rare earth metals suddenly popular?

Why is the demand for rare metals rising?

The growing interest in rare earth metals is primarily linked to ongoing discussions about a yet-to-be-signed $500 billion agreement between the United States and Ukraine. Initially, the deal was expected to focus solely on the development of rare earth metals in Ukraine. However, infrastructure projects were later included, though the agreement remains strongly associated with rare earth elements. Additionally, Russian President Vladimir Putin has also expressed readiness to strike a deal with the U.S. on these metals.

In general, the topic of rare earth metals has gained immense popularity. However, it was U.S. President Donald Trump’s particular interest in these metals that thrust this strategically significant but previously overlooked sector of global metallurgy and economics into the limelight.

Rare earth metals are critical to modern industries—ranging from mobile communications and military electronics to metallurgy and green energy. For example, the touchpad technology in mobile phone screens depends on small amounts of indium. Cerium is used to polish glass. Tantalum controls power in phones, while lithium is essential for battery production. Other key elements include dysprosium and neodymium (used in phones and gadgets), yttrium (used in military radars), and germanium and gallium (used in semiconductor production).

The demand for these materials includes lithium, tungsten, and many others. Additionally, there is a specific category of “rare earth metals” which consists of 17 elements such as scandium, dysprosium, indium, and gallium. This distinction often leads to confusion about what exactly is meant when people refer to rare or rare earth metals. For example, of the 17 rare earth metals, only scandium could theoretically be mined in Ukraine, but its production is not economically viable. However, Ukraine does have deposits of graphite, lithium, and other rare metals.

The technological and environmental challenges of extraction

While the entire world needs rare earth metals, their production differs significantly from traditional metal markets like steel or copper. Mining is often concentrated in just a few locations globally, and the market is highly specialized and limited. Some rare metals are extracted in tiny quantities—only a few tons per year—while others are toxic or involve radioactive byproducts, making production challenging and expensive.

Rare earth metals are often byproducts of major metal extraction. For example, cobalt can be obtained during copper mining, and gallium and indium are byproducts of aluminum and zinc processing. Extracting these rare elements from bulk ores is costly and sometimes economically unfeasible. As a result, many mining companies prefer not to deal with them.

Processing rare earth-containing ores into usable materials requires multiple washing and refining processes, often involving acids and other chemicals. This makes rare earth metal extraction an environmentally hazardous industry. As a result, countries with strict environmental regulations often avoid mining them due to high costs. Moreover, it can take decades from the time of investment to the start of actual production, making profitability uncertain. Market prices for rare earth metals are highly volatile—sometimes reaching high levels but also occasionally plummeting below profitability thresholds. Because rare earth metal production is concentrated in only a few locations, there are often no alternative suppliers when prices fluctuate.

China’s dominance in the rare earth market

In such an unpredictable market, traditional investments are hard to plan. Any competitor offering lower prices can make production unprofitable. This is precisely what happened with rare earth materials when China lowered its prices by 30-40%, leading to the closure of many operations worldwide. Today, China produces 98% of the world’s gallium and 67% of its germanium., 60% of the global antimony supply is concentrated in Hunan province’s Lengshuijiang region alone.

In theory, rare earth metals can be produced in various parts of the world. However, this requires significant long-term investment, advanced technologies, and, most importantly, lenient environmental laws. Since rare earth metal extraction is a “dirty” process—requiring the separation of tiny material fractions from large amounts of ore—few countries are willing to develop this industry.

China became the leader in the rare earth metals market due to direct state involvement. Following major economic reforms in the 1980s, China significantly increased its imports of raw materials and energy. To offset rising costs, the government promoted rare earth metal exports, making many foreign operations unprofitable. The U.S., once the leading producer of rare earth metals, was particularly affected by this strategy.

As a result, by the early 2000s, China controlled 93% of the global rare earth market, primarily due to its lower prices—about 50% cheaper than competitors. While the total market is valued at approximately $12 billion annually, China benefits not only from export revenue but also from leveraging its low-cost rare earths to attract foreign tech manufacturers. This is one reason why companies like Apple produce most of their smartphones in China. Foreign firms operating in China can access guaranteed supplies of rare earth metals at below-market prices.

In 2010, tensions between China and Japan escalated when Japan detained several Chinese fishermen near disputed islands in the South China Sea. Coincidentally, in the second half of that year, China cut rare earth export quotas by 40%. Although Beijing denied any connection between the two events, citing environmental concerns and rising domestic demand, Japan—one of the largest consumers of rare earth metals—suffered significant economic consequences. Ultimately, China lifted the restrictions following intervention from the World Trade Organization (WTO).

Over the past 15 years, global demand for rare earth metals has only increased due to the rise of high-tech industries and green energy investments. However, despite efforts to expand production outside China, the situation has not changed significantly. While China’s market share has decreased from 93% to about 70% in recent years, the country continues to dominate in the production of the most valuable rare earth elements, particularly those used in military and high-tech applications.

Trump’s interest in rare earth metals

Given these factors, it’s no surprise that former U.S. President Donald Trump sought access to rare earth and other critical metal deposits, especially considering his dissatisfaction with globalization’s effects on the U.S. economy. Dependency on China for such strategic resources is a major concern for Washington. In early March, Trump increased tariffs on Chinese imports to 20%. Beijing retaliated with tariffs on U.S. agricultural products. Trade wars are likely to escalate, and rare earth metals may eventually become part of this conflict.

However, even if the U.S. decides to invest heavily in domestic rare earth production while loosening environmental restrictions, it could take decades before any significant output materializes. The same applies to mining efforts in Ukraine, Russia, or other countries. While rare earth metals exist in many parts of the world, their low concentrations make large-scale production economically questionable.

Right now, the battle over rare earth metals is more about strategic positioning than actual mining. The global rare earth market is relatively small—worth just $12 billion—but it is crucial to industries that generate trillions of dollars in revenue. This explains the widespread interest in rare earth elements, particularly at a time when globalization and organizations like the WTO are losing favor, at least in the U.S.

Earlier, it was reported that the Kazakh Ministry of Industry and Construction disclosed the rare earth metal development projects currently underway in Kazakhstan.