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China’s grip on rare earth elements is slipping. Investors should take note.

Without these critical materials for today’s tech, ‘we’re back to tossing rocks and sharp sticks’ China is the world’s biggest producer and exporter of rare earth elements by a large margin, but it’s grasp on the market is slipping, providing opportunities for investors looking to capitalize on the growth in demand for these “supercritical materials.”

If you’re reading this article on a smartphone, chances are that in your hand you hold a rare earth element know as yttrium, which is used to make the display colors on your screen. A lot of the technology we use today can’t be made without these materials.

And China holds a significant lead in manufacturing and processing capacity, with the U.S. coming in a “distant second,” generating about one-sixth of what China can produce, said Mark Williams, a risk management expert and finance professor at Boston University’s Questrom School of Business.

The U.S. Geological Survey reported that China’s production quota for rare-earth oxide equivalent was estimated at 240,000 metric tons in 2023, while the U.S., the second-largest producer, saw output of just 43,000 metric tons.

However, China’s “monopolistic grip” over rare earths is “starting to weaken as research, mining innovation, and new discoveries have occurred elsewhere,” said Williams. China accounts for around 70% of global rare earths production — down from around 90% a decade ago, he said.

COVID-19 and supply chain disruptions “highlighted the risk of overdependency on China imports,” said Williams. Strategic and geopolitical factors are fueling the “drive of rival countries” along with the quest to find substitutes to countering the damaging environmental impact of mining, and increased importance of recycling, he said.

‘Supercritical materials’ Rare earths, or REEs, refer to a group of 17 different elements, including yttrium, scandium and the lanthanides — 15 chemical elements in the periodic table, according to the U.S. Geological Survey.

Contrary to popular belief, other much talked-about commodities essential to technology, such as cobalt and lithium, are not REEs.

The 17 elements officially considered REEs are used in glass polishing and ceramics, automotive catalytic converters, magnetic applications, lighting, televisions and pharmaceuticals, and you can find them in smartphones, computers, cars, wind turbines, and even missile guidance systems.

Downstream uses for REEs have “proliferated, from millions of EVs to billions of LED lightbulbs,” said Byron King, a geologist who writes about energy and resources for Paradigm Press. He referred to the elements as “supercritical materials.”