What oil was for OPEC states in the 1970s, rare earths are for China today: not just a source of income, but also a political weapon. Oil was used as a weapon in 1973 during the Yom Kippur War to cut off Western support for Israel. Similarly, the Chinese leadership in Beijing now uses rare earths to support its foreign, trade, and economic policies.
Rare earths are not as rare as their name suggests. However, their extraction and especially their refining are a dirty and environmentally damaging business. The West was therefore relieved in the 1990s that China took on this thankless task for the world. At the time, hardly anyone – except the Chinese – considered the consequences of this development.
Today, however, these consequences are painfully evident, as more than 90 percent of processed rare earths originate from China. To speak of a monopoly is almost an understatement. China is acutely aware of its market position and the political power derived from it, and unlike in previous decades, it no longer hesitates to leverage this power to its advantage.
Despite Agreement with Beijing, No Tangible Improvement
The Chinese government had actually agreed with the European Union on a mechanism intended to ensure the supply of rare earths to European companies. However, the implementation of this agreement is progressing extremely slowly. As reported by the European Chamber of Commerce in China, 121 out of 141 applications for export licenses are still on hold. The Chamber therefore warns of further production disruptions for its member companies.
As early as September, the sluggish processing of export licenses could lead to a production halt for 46 companies. However, this is only the beginning, as more could follow by December. The Chamber of Commerce attributes this predicament to the Chinese Ministry of Commerce, which has so far approved only 19 out of 141 export applications. Decisions are still pending for 121 applications, many of which are classified as urgent.
One application was also rejected due to a data error. The European Chamber of Commerce collected information on these applications from its member companies in August and published it as of September 9. However, it was not disclosed which companies from which EU states were affected.
Developing Domestic Rare Earth Solutions Becomes Increasingly Important
Chamber President Jens Eskelund therefore emphasized that the most urgent problem for many companies currently is obtaining new licenses. Only a few companies are already benefiting from the mechanism agreed upon between China and the EU to alleviate the situation.
Rare earths are needed for the production of high-quality electromagnets, and sensors and electric motors also cannot be manufactured without these components. In July, EU Commission President Ursula von der Leyen announced a new mediation mechanism. It was actually intended to accelerate the lengthy and complicated application process. However, the latest surveys from August show that this is not happening.
This once again highlights how dependent and vulnerable Europe’s economy remains regarding rare earths. Without a secure domestic supply of these and other indispensable raw materials, the EU will therefore be unable to break free from strategic dependence on other countries.
An Opportunity in the Crisis for Ucore Rare Metals
For far-sighted investors, however, this also presents an opportunity, as rare earths are currently just one bottleneck among many. For other elements classified as critical, such as magnesium, antimony, and silver, it is also crucial to break China’s dominance in the extraction, refining, and processing of these metals.
A company that decided years ago to participate in building a Western supply chain for rare earths is the Canadian Ucore Rare Metals (WKN A2QJQ4/ TSXV UCU). This technology and raw materials company has developed its own technology for processing rare earth feedstocks, called RapidSX, which is not only faster but also has a less negative environmental impact than the solvent extraction (SX) commonly used in China.
Ucore plans to commission its first production line as early as the second half of 2026. In the facility in the US state of Louisiana, which is already receiving over $22 million in funding from the US Department of Defense, additional production lines are then to be gradually brought online. Just recently, Ucore announced a cooperation with an Australian technology company, which aims to enable the use of material from sources such as electronic waste.
An update last Friday, reporting on the progress of the facility’s construction in Alexandria, Louisiana, recently pushed Ucore shares above the CAD 4.00 mark. Overall, the stock has already performed well, but this was likely just the beginning, should potential rare earth production actually commence as planned in 2026. We’ll keep you updated!
