Why China Dominates Critical Mineral Processing

China dominates critical mineral processing because it built state-supported refining capacity over several decades while Western producers left the middle of the supply chain, starting in the 1990s, over cost and environmental pressure. The result is that China's share of refining and magnet making is far higher than its share of mining. China mined 69% of the world's rare earth oxide in 2025, but an estimated 90% of rare earth processing and magnet fabrication capacity sits inside its borders, according to a 2026 European Parliament study cited by the Bloomsbury Intelligence and Security Institute.

Where does China lead, and at which stage?

China leads at different stages for different minerals. Mining is concentrated in China for rare earths, graphite and tungsten, while for cobalt and nickel the mines sit in the Democratic Republic of the Congo and Indonesia and China's weight comes from refining. The table separates the two stages using the latest US Geological Survey figures.

How did China become the processing hub?

China became the processing hub through decades of state-supported refining investment, which gave it scale and cost advantages that private Western producers could not match. The Bloomsbury Intelligence and Security Institute notes that Western producers began abandoning mid-stream processing in the 1990s because of rising costs and environmental concerns, leaving China as the default place to separate and refine.

Rebuilding the capacity takes time. The US has about 15,000 t of annual rare earth separation capacity against domestic demand of roughly 45,000 t, according to the same European Parliament study. The US Government Accountability Office has estimated that a fully domestic mining-to-magnet supply chain could take up to 15 years to rebuild.

How has China used this position since 2023?

China has turned processing dominance into export licensing in a series of steps since 2023. Each measure targeted a mineral where Chinese processing is hard to replace, and the later ones reached foreign-made products.

The International Energy Agency's 2026 outlook estimates that US$6.5 trillion of annual downstream production outside China could be put at risk if the October 2025 rare earth controls were fully enforced. The same outlook says implementation was delayed by one year.

Who is building alternatives?

Alternative capacity is growing, but from a small base. US production of rare earth compounds and metals reached an estimated 8,900 t in 2025, up from 120 t in 2021, according to the USGS. The IEA expects the top rare earth refiner's share to fall from over 90% in 2023 to 85% in 2025 and to about 70% by 2035, but it also finds that planned refining capacity would reach only about two-thirds of expected mine output in 2035, and planned magnet production about one-third.

• United States. MP Materials signed a deal with the Department of Defense in July 2025 that includes a 10-year price floor of $110 per kilogram for its neodymium-praseodymium products and a commitment to buy the output of a new magnet plant, which is expected to start commissioning in 2028. See offtake agreements.
• Australia and the US. A framework signed on 20 October 2025 backs a US$8.5 billion pipeline of projects, including an Alcoa-Sojitz gallium project in Western Australia that the Minerals Council of Australia says will deliver around 10% of world gallium supply.
• European Union. The Critical Raw Materials Act sets a 2030 benchmark of processing at least 40% of annual consumption of strategic raw materials inside the Union. See the EU act explained.
• G7. Canada reported on 17 June 2026 that the G7 production alliance is catalysing US$19.2 billion in projects across 69 partnerships. This is a government claim and has not been independently audited.

Frequently asked questions

Does China own most of the world's critical mineral mines?

No. China mines most of the world's rare earths, graphite and tungsten, but it mined only 2,000 t of the 310,000 t of cobalt produced in 2025 and about a fifth of the lithium. Its larger advantage is in processing and refining, where it handles material mined in other countries.

Why can other countries not simply build more refineries?

Other countries can build refineries, but it takes years and the economics are hard. Western producers left mid-stream processing in the 1990s because of cost and environmental pressure, and the US Government Accountability Office estimates that rebuilding a full mining-to-magnet chain could take up to 15 years.

Are China's October 2025 rare earth export controls in force?

The October 2025 controls are suspended, not repealed. The suspension runs until 10 November 2026, and China said on 28 September 2026 that its trade arrangements with the US run to 10 January 2027, although that statement did not name rare earths. The April 2025 licensing requirements were never suspended.

Which minerals does China control most tightly at the refining stage?

The USGS reports that China produced 99% of primary low-purity gallium, leads global germanium production, leads refined cobalt production and supplied 55% of US graphite anode material imports in the first eight months of 2025. Heavy rare earths are also concentrated in China, and its licensing covers seven medium and heavy rare earth elements since April 2025.

Sources

Read on October 12, 2026. Figures on this page come from these documents; where a number is an estimate, the source says so.

1. USGS Mineral Commodity Summaries 2026: Rare earths
2. USGS Mineral Commodity Summaries 2026: Graphite, cobalt, gallium, germanium, tungsten, lithium and nickel. Commodity chapters of the same publication
3. IEA: Diversification is the cornerstone of energy security (May 2025)
4. Global Mining Review: report on the IEA Global Critical Minerals Outlook 2026 (17 July 2026). The IEA site blocks automated readers, so the IEA figures come from this report of the release
5. Bloomsbury Intelligence and Security Institute: China's rare earth processing dominance (30 September 2026)
6. MP Materials: Department of Defense partnership (10 July 2025)
7. Minerals Council of Australia: US-Australia framework (October 2025)
8. Prime Minister of Canada: G7 Leaders' Summit backgrounder (17 June 2026)