Canada leads effort to loosen China’s grip on rare earths

The economic importance of China’s near monopoly of some key raw materials for the batteries, data centres, drones, missiles and mobile phones of the Fourth Industrial Revolution is recognised all over the world, and seen as a significant business and geopolitical risk.

Serious efforts are now under way to weaken China’s position by developing alternative sources of supply.

On Friday, Canada announced 26 investments in rare earths and other critical minerals, worth about £4bn, helped by the government using special powers under its Defence Production Act. This announcement follows similar decisions to boost supply by Australia, Japan and the US.

Yet little of this new supply will come on stream quickly. At best, opening new mines will take three to five years – and, more importantly, it takes five to 10 years to activate new refining capacity.

China controls about 90% of the global capacity for refining rare earths, a sophisticated task that requires expertise, and involves complex chemical processes and significant environmental risks.

These will not easily win planning approval in advanced western democracies. At the same time, company supply chains will also need to be reconfigured to integrate the new sources of supply.

In a rose-tinted scenario, China will still control about two-thirds of the global supply within 10 years – and Beijing will retain plenty of options if it needs to play economic hardball again with a hostile foreign power.

Photograph by CFOTO/Future Publishing via Getty Images