The new minerals diplomacy

Beijing’s export controls on rare earths and other niche metals are prompting countries and companies to spend heavily in order to become self-sufficient, with destabilising consequences for markets.

Financial Times Europe15 Jul 2026By Cam illa Hodg son

In the late 18th cen tury, a Finnish chem ist named Johan Gad olin was sent anunusual black rock dis covered in a quarry in Ytterby, near Stock holm.

The find was thought to con tain tung sten, but Gad olin announced it in fact con -tained a “new earth”, a pre vi ously unknown min eral sub stance. “Gad olin’s yttria”would become known as the first dis cov ery of a rare earth com pound, and amongthe ele ments it yiel ded was the sil very metal now known as “yttrium”.

Today, yttrium has huge stra tegic value in the pro duc tion of the com puter chipsthat are the back bone of AI. It is also one of the niche metals at the centre of araging geo pol it ical storm.

The vast major ity of yttrium, along with many other min er als used in global man u -fac tur ing pro cesses, is pro duced in China. But as its tit-for-tat trade war with the USescal ates, Beijing has increas ingly restric ted access to its sup plies of crit ical metals.

These include gal lium, used in radar sys tems, and ger manium, used in thermal ima -ging. Yttrium, however, is “the killer choke point”, says one sup plier to the semi con -ductor industry. are facing an exist en tial risk . . . As of yet, there is no date wherewe will have any fully de-risked sup ply chain.”

The lim ited sup ply has caused “panic” in the past few months, says Nick Myers,chief exec ut ive of US rare earths start-up Phoenix Tail ings. Defence, auto mot ive andsemi con ductor com pan ies are call ing “all the time”, with some warn ing that theymay be forced to halt pro duc tion by Christ mas if they do not source the metal, hesays.

Even before Beijing’s intro duc tion of export con trols, experts were warn ing thatage ing mines and soar ing demand for the metals key to elec tri fic a tion and AI mightmean short ages. Now, west ern coun tries are feel ing the effects of los ing a metalspro cessing industry they were happy to let move to China, a shock that has pro -voked mar ket panic and a new resource nation al ism.

In response, nations, led by the US, are racing to develop self-suffi  cient sup plychains by lock ing in access to metals and build ing up domestic min er als indus tries,fram ing the issue as one of “sov er eignty” and national secur ity. But that comes withits own risks if not done care fully, from fur ther dis tor tions in the small mar kets forniche metals to a min er als dip lomacy that bisects the world into com pet ing Amer -ican and Chinese spheres.

For poli cy makers, doing noth ing is no longer an option. Sup ply chains have“become politi cised: they’re about secur ity, they’re about resi li ence and they’reabout diver si fic a tion”, says Daniel Yer gin, an energy his tor ian and vice chair of S&PGlobal.

Par al lel efforts to build out new pro duc tion will mean “mar kets will not be as effi -cient as they were before”, which is likely to lead to higher prices, he says. But “theconcept of effi ciency is itself being refined”, since pri or it ising the low est cost is use -less if mater i als do not flow. “We’re in the middle of a sea change in terms of howthe global eco nomy works.”

China’s con trol of metals sup ply chains is the res ult of three dec ades of invest mentand sub sidies. It has backed the pro duc tion of everything from cop per, used incables and wir ing, to the bat tery metal lith ium, and a long tail of other metalsinclud ing rare earths and tung sten, used in muni tions.

Chinese author it ies recog nised that the coun try would need large quant it ies ofmetals for its bur geon ing indus tries, and the coun try is today not only the lead ingpro du cer but also con sumer of many of them.

But Beijing also took advant age of dein dus tri al isa tion in many west ern coun tries,with man u fac tur ing mov ing off shore in the pur suit of cheap labour and cleaner airat home.

“Thirty years ago, [the west] wanted China to do all the pro cessing of these min er -als. We didn’t want it because it was too pol lut ing. The west handed over the oppor -tun ity,” says Tim Biggs, a pro fessor at the Cam borne School of Mines.

Now, cheaply pro duced Chinese metals are embed ded in the just-in-time sup plychains that global indus tries rely on, but which buckle dra mat ic ally when inter rup -ted — as the Covid-19 pan demic, Rus sia’s full-scale inva sion of Ukraine and the clos -ure of the Strait of Hor muz trade water way have shown.

That has given China lever age, which it has increas ingly been will ing to use: since2023, it has imposed a series of export restric tions on a wide range of niche metals.Worst hit include the US, Korea and Japan, major buy ers whose imports from Chinahave plummeted since 2022.“China could shut down the entire semi con ductor industry if they wanted to turnoff the valve,” says Lita Shon-Roy, a sec tor expert at ana lysis group Tech In sights.

Des pite the export con trols, metals flows have not ground to a halt. Instead, Chinahas cre ated a licens ing scheme under which it decides who gets which min er als.The lengthy applic a tion pro cess gives author it ies detailed inform a tion about whichmetals over seas com pan ies and their con tract ors are using, and why. Applic antsmust show that the mater ial is going into civil ian, rather than mil it ary, sup plychains. Com pan ies, traders and ana lysts say

erial has been flow ing but at unpre dict able paces, with licence approval often slow.“The export con trol sys tem has evolved from a crisis into a man aged sys tem”,though buy ers still face “com pli ance and com mer cial” chal lenges, says Kyle Sul li -van, vice-pres id ent of busi ness advis ory ser vices at the US-China Busi ness Coun cil.

This embeds new uncer tainty into cor por ate sup ply chains and risks cus tom ersswitch ing to Chinese com pon ent sup pli ers whose metals pur chases are not beingmon itored and squeezed.

One exec ut ive at a large Japan ese user of rare earths says China wants to keep com -pan ies in a “neither alive nor dead” state, by sup ply ing them with the min imumneeded to avoid a sup ply chain col lapse — which would hit Chinese com pan ies thatstill rely on mater i als and com pon ents from Japan.

This uncer tainty has cre ated what one vet eran tung sten sup ply chain expertdescribes as “hys teria”. Com pan ies are look ing to stock pile “everything they [can]get their hands on”, with prices spiralling and some pro cessors of mined tung stenask ing cus tom ers to source feed stock them selves, they say. “It’s just mad ness . . . Thewhole west is in a battle.”

For the semi con ductor industry, con straints on avail ab il ity are a big ger chal lengethan higher costs, says Bern stein semi con ductor ana lyst Stacy Rasgon.

Two semi con ductor industry sup pli ers say they are draw ing on their metals stock -piles. Reserve stocks of gal lium are “much lower than they have been his tor ic ally”,says one. Cus tom ers will “pay what it costs, but we have to have something to sellthem”, says the other.

The risks caused by over de pend ence on a single sup plier have triggered a wave ofinvest ment in sup port of new s ources of metals, and the emer gence of resourcenation al ism.“There has been a dra matic increase in the fund ing that is being devoted to thisissue,” says Gra ham Lederer, a geo lo gist who spent a dec ade at the US Geo lo gicalSur vey.

Wash ing ton has announced about $40bn in min er als fund ing since 2022, thoughmuch of it is con di tional, and taken equity stakes in a range of domestic miners. Inthe past 18 months, Brus sels has chosen dozens of stra tegic projects to bene fit fromfaster per mit ting rules and the EU and mem ber states have com mit ted about €6bnto min er als projects in recent months.

Nations from the US to Aus tralia also want to stock pile metals domest ic ally for theircom pan ies to use in times of crisis, set ting up a new com pet i tion for resources.

Whether stock pil ing is effect ive or pits nations against each other “depends on howcoun tries work together”, says former Rio Tinto boss Jakob Stausholm, point ing tothe co-ordin ated devel op ment of oil stock piles fol low ing the 1970s crisis as anexample.

Mean while, some resource-rich coun tries includ ing Guinea and the Demo craticRepub lic of Congo are push ing to cap ture more of the value of their nat ural wealthby requir ing the energy in tens ive pro cessing of mined mater i als to be done domest -ic ally. In Africa, the US has lob bied hard for Amer ican com pan ies to be the buy ersof mines that are up for sale, to secure the mater i als for US sup ply chains.

This reorder ing of the industry through nation al istic or unco ordin ated policiescould fur ther dis tort mar kets, and even res ult in the world pro du cing too much ofcer tain niche metals.

Six non-Chinese com pan ies, includ ing US-based Alcoa and Greece’s Metlen Energy& Metals, have each out lined pro duc tion plans that could col lect ively bring onlinemore than 300 tonnes of gal lium per year, a little under half of annual globaldemand.

“If every body starts pro du cing it, the price will col lapse because the mar ket will gointo over sup ply,” says Guido Janssen, chief exec ut ive of min ing and smelt ing groupNyrstar, part of com mod ity trader Trafigura.

Experts point out that without gov ern ment sup port, announce ments are unlikely totrans late into new gal lium pro duc tion.

Even if sup plies do come online, China could eas ily recom mence unres trainedexports, flood ing mar kets and crash ing prices. That, miners argue, is why they needsus tained gov ern ment sup port and guar an tees from buy ers.“Every body is wait ing for pub lic money to secure and sup port these invest ments,”says one indus trial gal lium buyer, adding that project developers wanted cus tom ersto com mit to pay ing a min imum price over many years. Without gov ern ment back -ing, “none of these projects will suc ceed”, they say.

Alcoa chief exec ut ive Wil liam Oplinger says the com pany is pur su ing an “aggress -ive sched ule” of first gal lium pro duc tion this year and wants to be “first to mar ket”.The metal could go to the US, Japan and Aus tralia, whose gov ern ments are sup port -ing the project.

“We saw dur ing Covid how fra gile sup ply chains are,” adds Oplinger. “I thinkpeople will under stand the import ance of hav ing mul tiple sup pli ers” of nichemetals.

A drop in prices thanks to over sup plied mar kets may not be exist en tial for new pro -du cers of niche metals, which are often made along side other things — gal liumfrom zinc smelt ers, for example — and may be back stopped by gov ern ments onnational secur ity grounds.

Like with the 1970s oil shock, the min er als crisis should be addressed “on a mul ti -lat eral basis”, says Yer gin. “There is obvi ous need for co-ordin a tion among con sum -ing coun tries not only to avoid duplic a tion but in terms of mar shalling resources,cre at ing diver si fied sup ply chains, and get ting projects actu ally across the fin ishline.”

Devel op ing new sup ply chains is not only about back ing the right projects, but alsoabout long-term sup port, such as afford able energy and coher ent indus trialpolicies, experts say.

New mines can take dec ades to develop, and part of China’s suc cess has been itscom mit ment to long-term, patient fund ing — a model that is markedly dif fer entfrom the way lis ted west ern com pan ies invest and the time hori zons over whichthey meas ure suc cess.

“China has done what we should have done” in secur ing its metals sup ply chains,says Stausholm, the former Rio Tinto boss. “A lot of the crit ical min er als are going toChina in any case, because that’s where the pro duc tion is. And that means the keyques tion is: will there be more at-scale man u fac tur ing in the west?”

For that to hap pen, “com pan ies need to have con fid ence that US sup port for the sec -tor isn’t a two- to three-year thing that will end with the Trump admin is tra tion”,says the US-China Busi ness Coun cil’s pres id ent, Sean Stein.Beijing, mean while, is seek ing to extend its own reach. Chinese com pan ies are look -ing to buy or fin ance over seas mines, includ ing rare earth projects in Africa andSouth Amer ica, for cing com pan ies to take sides.

“We did get a firm all-cash bid from one of the biggest Chinese rare earths com pan -ies” for a project in Bur undi, says George Ben nett, chief exec ut ive of US gov ern -ment-backed Rain bow Rare Earths. However, “because of our com mit ment to build -ing out a west ern sup ply chain for rare earths . . . we obvi ously turned them down”.

Global trade has long been at the mercy of clashes between super powers. Aroundthe time Gad olin dis covered yttria, Bri tain and France were locked in a war thatspilled into seaborne com merce, with knock-on effects on Atlantic trade centres.

Break ing that pat tern may require a dif fer ent frame work. David Abra ham, an affil i -ate pro fessor at Boise State Uni versity, says responses to the min er als ques tion areoverly focused on the idea that each coun try needs to be self-suffi  cient anddecoupled from China.

“That’s not help ful when you’re try ing to com pete against one coun try that pro -duces more than all the other coun tries com bined. It’s not a sport, you don’t have to