At the end of the eighteenth century, the discovery of a strange black rock in a Swedish quarry marked the beginning of a story that today, centuries later, is at the center of a real geopolitical storm.
What for the Finnish chemist Johan Gadolin was an unknown “new earth” turned out to be the first rare earth compound, from which yttrium would also be extracted.
Today this silvery metal has become essential for the production of chips that power AI, but above all it represents one of the most vulnerable elements in the global battle for control of critical raw materials.
A new report from the Financial Times analyzes how Western dependence on China for these strategic minerals, combined with export restrictions imposed by Beijing as part of the trade war with the United States, is generating widespread panic in the West in key sectors such as semiconductors, defense, and automotive.
While Western countries rush to rebuild autonomous supply chains, concrete risks emerge: market distortions, a new resource nationalism, and a progressive division of the world into opposing blocs.
Chinese dominance over supply chains
Today the vast majority of yttrium, along with many other critical minerals such as gallium and germanium, is produced in China.
Thanks to thirty years of state investments, subsidies, and a farsighted industrial vision, Beijing today controls not only extraction but especially the refining and processing stages.
Chinese authorities understood early on that the country’s development would require enormous quantities of these materials, thus allowing the Dragon to position itself as the world’s leading producer and consumer.
Meanwhile, the West has offshored these processes considered too polluting, effectively relinquishing control of entire strategic supply chains. As a professor from the Camborne School of Mines observes, “thirty years ago we wanted China to take care of it.”
Chinese restrictions and uncertainty in Western industries
With the escalation of the trade war between the United States and China, the latter has progressively limited access to these materials.
Along with gallium and germanium, yttrium is considered the “killer bottleneck” by those operating in the semiconductor sector.
Western companies now face an existential risk: there is not yet a critical minerals supply chain completely shielded from disruptions.
The panic of recent months is palpable. CEOs of American startups report continuous calls from giants in defense, automotive, and chip industries, some of whom fear having to halt production.
Meanwhile, prices are rising, stocks are accumulating, and some processors are asking customers to source the raw material themselves. The situation is particularly serious for defense, a sector in which the United States has no active tungsten mines.
The licensing system
Restrictions have not completely blocked flows but have made them unpredictable through a complicated licensing system.
Beijing can thus monitor who uses the minerals and for what purposes, distinguishing between civilian and military uses.
Western companies live in a sort of limbo, receiving the bare minimum to prevent supply chains from collapsing. This results in a climate of “hysteria”: everything possible is hoarded, prices go crazy, and the entire West seems engaged in a daily battle for resources.
The Western response
Faced with this dependence, the United States and Europe have launched a counteroffensive.
Washington has allocated about 40 billion dollars since 2022, while Brussels has selected dozens of strategic projects and committed about 6 billion euros. Sovereignty and national security reasons are openly discussed.
At the same time, national-level stockpiling initiatives are emerging and competition for mines in Africa and elsewhere is intensifying.
However, this new resource nationalism carries risks, such as possible overproduction and market distortions.
Long-term challenges
Opening new mines and refining plants requires decades and substantial capital, exactly what allowed China to establish itself.
Western publicly traded companies struggle to think on such long horizons. Without continuous state support that includes competitively priced energy, coherent industrial policies, and multi-year purchase contracts, many projects risk remaining on paper.
There is also the fear that if Beijing decided to fully reopen the taps, prices would collapse, making new Western producers uncompetitive.
Towards a new global balance
The Financial Times concludes that the solution cannot be a total and autarkic decoupling.
Competing with a country like China, which produces more than all other countries combined, requires resilient, diversified, and hard-to-disrupt supply chains.
Therefore, greater multilateral coordination among consumer countries is needed, similar to what worked for oil stocks in the 1970s.
Politics has forcefully returned to the mining industry, and the real challenge will be to maintain advanced manufacturing capacity in the West without falling into new forms of resource imperialism or unnecessary duplication of efforts.
