Industries from automobiles and defence to clean energy as well as high-tech manufacturing continue to be exposed to concentrated supply chains, with tightening grip of China on critical minerals and, along with it, export restrictions on rare earth elements threatening roughly $6.5 trillion per year of downstream production outside of China, the International Energy Agency – IEA said.
The warning is issued as global efforts to minimise reliance on China for critical minerals are running into obstacles, with trade restrictions and price volatility as well as limited diversification of the refining capacity leading to new economic security issues, the Global Critical Minerals Outlook 2026 report from the IEA says.
Beijing imposed export controls on seven heavy rare earths in April 2025, causing disruption throughout downstream industries. The report said the limitations hurt companies that rely on rare earth magnets, with some carmakers compelled to lower utilization rates or suspend operations.
China then extended the regulations in October 2025 to cover products made internationally containing rare earths from China or made with Chinese technology. The fundamental vulnerabilities persist, the IEA said, even as the expanded constraints have been put on hold for a year until November 2026.
Full implementation could as well jeopardise downstream production outside China throughout the automotive, energy, high-tech, and defence sectors, anticipated at USD 6.5 trillion per year.
China’s Rare Earth Control Reveals World Vulnerabilities
The tightening grip of China on critical minerals exports underscored the reliance of the entire world on China’s processing capacity when it comes to critical minerals. Despite the presence of mineral reserves across many countries, China is still a major player when it comes to refining and processing many key materials used in semiconductors, defence applications, electric vehicles and renewable energy equipment.
The rare earth restrictions from China sent shockwaves around the world, prompting governments as well as companies to take action to diversify supply chains, develop new processing capacity and guarantee long-term mineral supplies.
According to the IEA, the problem is not just for rare earths. Sharp price swings have also been seen in critical mineral markets for a variety of battery materials, base metals and also strategic minerals due to growing demand and supply limitations.
Mineral prices bounce back on supply pressures
Prices of critical minerals rebounded substantially in 2025 and 2026 – its early half post a period of downtrend.
Market conditions tightened, with base metals prices of copper, aluminium and tin increasing by about a third from January 2025 to April 2026.
Battery materials also enjoyed a healthy rebound, with prices for lithium nearly doubled on the back of increasing demand from energy storage applications. Prices of strategic minor minerals also shot up, dominated by tungsten, which saw a sixfold spike in costs due to rising demand from the high-tech and defence sectors.
The price swings highlight higher competition for minerals used in energy transition technologies as well as strategic industries, the IEA said.
Refining still concentrated
There have been efforts to expand supplies, but global refining capacity continues to be highly concentrated.
Over the last two years, the largest refining countries made up over 75% of the total increase in refined mineral supply, with China leading the way in a number of important energy minerals and Indonesia becoming known as the key player when it comes to nickel processing.
It is well to be noted that the largest refining country, aside from rare earths, had an average market share of 72% in 2025, underscoring continued reliance on a limited number of suppliers.
The IEA said that growth in mining alone would not be sufficient unless countries also expand refining and downstream processing capacities.
The report said that the project pipelines exhibit significant disparities as refinery capacity and downstream capacity continue to fall behind mining developments outside the dominant supplier regions.
Concerns over Investment Slowdown
The effort to diversify supply chains is also running into investment headwinds.
Global investment in critical minerals fell 9% in 2025, with capital expenditure on battery metals falling by over 20%, raising worries over the capacity to meet future demand as consumption keeps increasing.
As per the IEA, the diversification would come at a cost, but the effect on consumers would likely be minimal as critical minerals usually make up only a small fraction of the final cost of products.
However, some intermediate-level industries may face higher expenses and need targeted assistance during the period of transition.
Short-term buffer provided by stockpiles
The IEA added that strategic stockpiles could be a key short-term security measure to minimize exposure to supply disturbances.
The agency calculated that the net yearly expense for the 11 high-risk materials to sustain stockpiles other than dominant supplier zones was less than $900 million, a relatively inexpensive buffer against possible interruptions.
The agency said a mix of recycling, supply diversification, and investment in new projects as well as greater transparency throughout critical mineral markets would all be needed for long-term resilience.