What's Happening?
The G-20 has issued a draft declaration aimed at protecting the global critical-minerals value chain from unilateral trade measures that are inconsistent with World Trade Organization rules. This move
comes in response to China's recent export restrictions on heavy rare earths such as dysprosium and terbium, which have significantly impacted supply chains for industries ranging from missile manufacturing to electric vehicle production. The U.S. and its allies are actively working to establish supply chains independent of Chinese control, with efforts including investments in North American rare-earth firms and the commissioning of heavy-rare-earth separation lines. Despite these efforts, China remains dominant, refining over 90% of global rare earths and producing 94% of permanent magnets essential for various technologies.
Why It's Important?
China's control over the rare earths market poses a strategic challenge for the U.S. and its allies, as these materials are crucial for defense and technology sectors. The G-20's focus on mineral supply chain resilience highlights the geopolitical significance of these resources. The U.S. defense contractors have already reported shortages and price surges, indicating potential vulnerabilities in national security and technological advancement. The G-20's actions reflect a shift in global strategic priorities, placing critical minerals alongside major geopolitical issues such as conflicts in Ukraine and the Middle East.
What's Next?
The G-20's declaration, while non-binding, signals a collective acknowledgment of the need to diversify supply chains away from Chinese dominance. Future steps may include increased investment in alternative sources and technologies to process rare earths outside China. The U.S. and its allies are likely to continue pursuing strategic partnerships and investments to secure these essential materials. The ongoing geopolitical tensions may lead to further diplomatic and economic measures to counterbalance China's influence in the rare earths market.
