Rare earths, real risks: why cheap supply comes at a high price

China’s recent export restrictions on rare-earth minerals have reignited global anxieties about the fragility of supply chains, technological dependence, and geopolitical risk. A Foreign Policy analysis traces the roots of this vulnerability to decades of cost-driven outsourcing: Western countries and Japan offshored rare-earth production to China, drawn by low prices and minimal environmental oversight. While this strategy delivered cheap materials for high-tech and green industries, it created a structural dependency that now poses economic, environmental, and strategic risks.

In response, governments are moving aggressively to diversify supply chains. On October 20, the United States and Australia signed an $8.5 billion deal to secure critical minerals and rare earths, prompting U.S. President Donald Trump to claim that the U.S. would soon have “so much critical mineral and rare earth that you won’t know what to do with them,” with prices falling to $2 per kilogram. As Foreign Policy notes, these claims are wildly optimistic: establishing new mines, refining facilities, and processing plants outside China requires years of development, substantial capital, and compliance with stricter environmental and labor standards, all of which drive up costs rather than reduce them.

Government interventions already illustrate this reality. The U.S. Defense Department, for instance, has committed to a 10-year offtake agreement with MP Materials, guaranteeing $110 per kilogram for neodymium-praseodymium oxide—nearly double the market price at the time. Similarly, Japan’s strategic stake in Australia’s Lynas Rare Earths ensures priority supply but at a premium. These examples underscore the point that secure, responsible, and environmentally compliant rare-earth supply chains inevitably command higher prices, reflecting a “geopolitical premium” that buyers are increasingly willing to pay.

Environmental considerations further complicate the economics. China’s industry has historically externalized significant ecological and health costs, estimated at $5.4 billion in 2015 alone, and recent policies have forced some highly polluting production to countries like Myanmar, raising humanitarian and ecological concerns. Reshoring production to countries like Australia and the U.S. mitigates some of these harms but increases operating costs due to stringent environmental oversight.

The article also highlights the untapped potential of circularity. Secondary sources—coal ash, electronic waste, and magnets—contain millions of tons of rare earths that remain largely unrecovered. Start-ups like France’s Carester aim to combine recycling with domestic refining to secure a fraction of global demand, demonstrating that responsible sourcing can extend beyond primary mining.

Foreign Policy concludes that building resilient, sustainable rare-earth supply chains requires deliberate state intervention, long-term investment, and a willingness from manufacturers and consumers to pay the full environmental and material cost. Rare earths may not be literally rare, but they are precious, finite, and strategic. Paying the real price is essential to secure technological independence, environmental responsibility, and geopolitical resilience.

By Vugar Khalilov