Qatar National Bank (QNB) has highlighted the growing importance of rare earth elements in shaping the global economy, warning that intensifying competition over these critical minerals is deepening strategic tensions between the United States and China.
In its latest weekly economic commentary, QNB said that rare earths—vital for electronics, semiconductors, defense, and renewable energy—are becoming increasingly central to modern industry. As artificial intelligence (AI), aerospace, and clean energy technologies expand, demand for these materials is expected to surge, amplifying China’s dominance in global supply chains and exposing vulnerabilities for Western economies.
“Disputes over export controls of rare earth-related supply chains have almost led to a major escalation of US-China trade conflicts in recent weeks,” QNB noted, adding that strategic rivalry between the two powers will remain a key driver of the global economy in the coming years.
Rare earth elements comprise 17 minerals such as neodymium, cerium, lanthanum, and yttrium, prized for their magnetic, optical, and catalytic properties. Though not geologically scarce, they are difficult and costly to extract and refine, posing environmental and technical challenges. Related critical minerals—including gallium, germanium, indium, cobalt, and lithium—play similar roles in advanced technologies.
QNB’s analysis underscored the central role these elements play across three fast-growing industries. In semiconductors and AI, rare earths are used to polish silicon wafers, manufacture plasma etching systems, and produce high-efficiency magnets that cool data centers. In defense and aerospace, they are essential for radar systems, jet engines, and precision-guided weapons. Meanwhile, in the energy transition, neodymium and praseodymium are key for electric vehicle motors and wind turbines, while lanthanum and cerium enhance catalytic converters and battery technologies.
“The exponential rise in demand has transformed rare earths and critical minerals from industrial commodities into strategic assets,” QNB said. However, the bank warned that production and processing remain heavily concentrated in a handful of countries—particularly China.
Beijing’s control over the industry dates back to its strategic investments in mining and refining during the late 20th century. By the early 2000s, China had emerged as the world’s dominant supplier, now accounting for roughly 65% of global mining output and more than 85% of refining capacity. It also produces most of the world’s permanent magnets and high-value downstream products derived from rare earths.
In 2021, China consolidated several state-owned firms into the China Rare Earth Group, strengthening its oversight of the sector. More recently, Beijing introduced export controls, citing national security concerns—a move that many analysts view as part of its broader geopolitical strategy.
In response, countries such as the United States are working to diversify supply chains. Washington has classified rare earths as critical to national security and is investing in domestic mining and processing through the Defense Production Act. But, as QNB cautioned, such efforts will take years to meaningfully reduce global dependence on China’s rare earth dominance.
