Rare earths and the new power play: How supply chains reshaped global geopolitics in 2025

If there was one defining lesson global markets absorbed in 2025, it was this: control over supply chains is power. Few developments illustrated this more starkly than the upheaval triggered by rare earth minerals—an obscure group of elements that emerged as central players in geopolitics, manufacturing, and energy security over the year.

The inflection point came in April, when China tightened export licensing norms for rare earth elements. By October, the controls widened further to include rare earth magnets and even processing technologies. The consequences were immediate. Exports slowed, supply chains were disrupted, and industries ranging from electric vehicles and renewable energy to defence manufacturing found themselves exposed.

This was not a crisis of scarcity but one of access. Global rare earth production in 2025 stood at roughly 196,000 tonnes, valued at about $12-15 billion. Yet these elements underpin industries worth an estimated $7 trillion worldwide. Their importance lies in their irreplaceability at scale. Without rare earths, electric motors do not function efficiently, wind turbines stall, and advanced military systems lose critical capabilities.

The numbers underline the dependency. An electric vehicle requires one to two kilograms of rare earth magnets. Offshore wind turbines can consume between 600 and 2,000 kilograms each. A single fighter jet uses more than 400 kilograms across its systems and sensors. Alternatives remain limited, expensive, or technologically immature.

China’s dominance across the rare earth value chain made its move particularly disruptive. The country mines about 70% of global rare earth output, controls 85-90% of refining and processing, and produces over 90% of the world’s permanent magnets. Even when rare earths are mined elsewhere, they often need to be processed in China to be usable, rendering global supply chains fragile and highly susceptible to geopolitical leverage.

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The fallout was swift. Factory floors across the world faced uncertainty, and global EV production came under pressure due to magnet shortages and rising costs. In India, Maruti Suzuki slashed its electric vehicle production target to around 8,000 units from an earlier plan of 26,000 units. Defence manufacturing was also affected, prompting NATO countries to formally classify rare earths as strategic minerals and begin expanding stockpiles.

Price volatility added to the turmoil. Several rare earth elements saw sharp spikes, with yttrium prices surging more than 4,000% during periods of peak supply stress, reflecting both scarcity fears and speculative pressure.

What followed was a global scramble. The US and its allies committed billions of dollars to develop non-China refining capacity. The European Union, under its Critical Raw Materials Act, set a target to process 40% of its rare earth needs domestically. Japan moved to secure long-term supply contracts and accelerate recycling initiatives. Globally, more than 300 million tonnes of rare earth resources have now been identified outside China, with at least 146 extraction and processing projects currently under development.

However, building viable alternatives is a long game. Developing mines, refining capacity, and downstream ecosystems can take a decade or more, underscoring the structural challenge of reducing dependence on China in the near term.

India found itself particularly exposed. Despite holding about 6% of global rare earth reserves, the country imports nearly 100% of its rare earth magnets. This posed a direct risk to India’s manufacturing ambitions, a key pillar of the government’s vision for Viksit Bharat.

In response, New Delhi approved a ₹7,280 crore incentive scheme to build domestic magnet manufacturing capacity of around 6,000 tonnes per year. The objective is twofold: reduce strategic vulnerability and position India, over time, as an alternative supplier in global markets.

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As 2026 begins, the race for rare earths is set to intensify further. Global demand is projected to rise by nearly 700% by 2040, driven by the energy transition, semiconductor manufacturing, and growing defence and space requirements. With stakes this high, rare earth minerals are no longer mere commodities. They have become strategic assets—tools of leverage in an evolving global order where those who dominate supply chains increasingly dictate terms.