China export curbs put $6.5 trillion global supply chains at risk: IEA

China’s tightening control over critical minerals and export restrictions on rare earth elements could put around $6.5 trillion a year of downstream production outside China at risk, as industries from automobiles and defence to clean energy and high-tech manufacturing remain exposed to concentrated supply chains, the International Energy Agency (IEA) said.

The warning comes as global efforts to reduce dependence on China for critical minerals face hurdles, with trade restrictions, price volatility and limited diversification of refining capacity creating new economic security challenges, according to the IEA’s Global Critical Minerals Outlook 2026 report.

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In April 2025, Beijing introduced export controls on seven heavy rare earth elements, triggering disruptions across downstream industries. The restrictions affected companies dependent on rare earth magnets, with some automakers forced to reduce utilisation rates or temporarily halt operations, the report said.

China later expanded the measures in October 2025 to cover internationally manufactured products containing rare earths sourced from China or produced using Chinese technologies. While the expanded restrictions were suspended for one year until November 2026, the IEA said the underlying vulnerabilities remain.

“Full implementation could put an estimated USD 6.5 trillion per year of downstream production outside China at risk across the automotive, high-tech, defence and energy sectors,” the agency said.

China’s rare earth dominance exposes global vulnerabilities

The export curbs highlighted the world’s dependence on China’s processing capabilities for critical minerals. While many countries have mineral reserves, China remains the dominant player in refining and processing several key materials required for electric vehicles, renewable energy equipment, semiconductors and defence applications.

The disruption from China’s rare earth restrictions pushed governments and companies globally to accelerate efforts to diversify supply chains, build alternative processing capacity and secure long-term mineral supplies.

The IEA said the challenge is not limited to rare earths. Critical mineral markets across battery materials, base metals and strategic minerals have also experienced sharp price movements amid rising demand and supply constraints.

Mineral prices rebound amid supply pressures

Critical mineral prices recovered sharply in 2025 and early 2026 after a period of declines.

Prices of base metals, including copper, aluminium and tin, rose by around one-third between January 2025 and April 2026, driven by tighter market conditions.

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Battery materials also saw a strong recovery, with lithium prices more than doubling as demand from energy storage applications increased. Strategic minor mineral prices surged as well, led by tungsten, where prices rose sixfold due to growing demand from high-tech and defence sectors.

The IEA said these price movements underline the growing competition for minerals needed for energy transition technologies and strategic industries.

Refining remains concentrated

Despite efforts to diversify supplies, global refining capacity remains heavily concentrated.

The top refining nations accounted for more than 75% of total growth in refined mineral supply over the past two years, with China leading in several key energy minerals and Indonesia emerging as the dominant player in nickel processing.

Excluding rare earths, the average market share of the largest refining country stood at 72% in 2025, highlighting the continued dependence on a small number of suppliers.

The IEA warned that mining expansion alone will not be enough unless countries also develop refining and downstream processing capabilities.

“Project pipelines reveal significant imbalances, as refining and downstream capacity continue to lag behind mining developments outside dominant supplier regions,” the report said.

Investment slowdown raises concerns

The push to diversify supply chains is also facing investment challenges.

Global critical mineral investment declined 9% in 2025, while capital spending in battery metals fell more than 20%, raising concerns about future supply availability as demand continues to rise.

The IEA said diversification would involve additional costs, but the impact on consumers could remain limited because critical minerals generally account for only a small share of the final cost of products.

However, some intermediate industries could face higher costs and may require targeted support during the transition.

Stockpiles offer short-term buffer

To reduce exposure to supply disruptions, the IEA said strategic stockpiles could provide an important short-term safeguard.

For 11 high-risk materials assessed by the agency, the net annual cost of maintaining stockpiles for countries outside dominant supplier regions was estimated at less than $900 million, offering a relatively low-cost buffer against potential disruptions.

The agency said long-term resilience would require a combination of supply diversification, recycling, investment in new projects and greater transparency across critical mineral markets.

(With inputs from ANI)