China's Rare Earth Export Controls and the Geostrategic Risk Your Procurement Team Is Not Pricing

In April 2025, China's Ministry of Commerce introduced mandatory export licensing for seven medium and heavy rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.1 The licensing regime has been in full enforcement since that date. Its downstream effects are now visible in production schedules, procurement budgets, and capital plans across automotive, aerospace, electronics, and defence sectors.

The common mistake is treating this as a compliance problem. It is a structural supply constraint that arrived wearing compliance clothing, and there is a second ratchet coming in November 2026.

How the Geostrategic Architecture of China's Export Controls Is Built

China accounts for approximately 60 percent of global mined rare earth production, more than 90 percent of global refining capacity, and close to 95 percent of permanent magnet production.2 The April 2025 licensing regime is not a standalone measure but the second layer of a control architecture that has been building for several years, with each new instrument extending further than the last.

• Announcement No. 18 (April 2025). Mandatory export licensing for seven designated elements. Processing time runs up to 45 working days under the standard regime. In practice, approvals in the months following the announcement routinely took two to four months. Applications related to defence programs are automatically rejected.3
• MOFCOM Notification No. 61 (October 2025). The second ratchet extended controls extraterritorially for the first time. Non-Chinese manufacturers exporting products containing 0.1 percent or more of Chinese-origin rare earth content from one country to another are brought into the Chinese licensing process.4 This provision was suspended until November 2026 as part of a diplomatic arrangement following the Xi-Trump summit in May 2025. The original April 2025 regime on the core seven elements was never suspended.5
• June 2026 entity list additions. China added MP Materials and USA Rare Earth, along with eight other US entities linked to the US military, to its export control entity list.6 The architecture is not being dismantled. It is being refined.

What the Procurement Math Actually Looks Like Under Partial Enforcement

The licensing queue alone changed the inventory economics for any company previously sourcing terbium or dysprosium on a just-in-time basis. The downstream pricing impact seen to date reflects partial enforcement only; the full enforcement scenario has not yet arrived.

• Inventory carrying cost. A company absorbing a two to four month licensing queue needs to carry four to five months of buffer stock simply to maintain continuity. For most manufacturers, that inventory position is a material budget line that did not exist in 2024 planning cycles.
• Price exposure in Europe. European rare earth prices briefly reached six times Chinese domestic equivalent levels in the months following the April 2025 controls.7 Companies with European manufacturing operations pricing their input costs on pre-2025 assumptions are carrying a model error.
• Scale of full-enforcement exposure. The IEA's April 2026 report estimated that full enforcement of China's controls could put up to $6.5 trillion in annual economic activity outside China at risk, with the automotive sector alone facing over $3 trillion in potential exposure.7 G7 leaders pledged at the June 2026 summit to cap China's dominance at 60 percent by 2030. Current and announced projects outside China are expected to cover only half of mining needs and less than a fifth of magnet manufacturing demand by 2035.2
• Traceability gap. Most procurement functions currently have no chemical composition traceability by country of origin across their bills of materials. Building that capability is a compliance precondition under Notification No. 61 if the November 2026 provisions come into force. Five months is not enough time to build it from scratch.

What Risk Functions Should Be Tracking Before November 2026

If the November 2026 suspension lapses without renewal, a company in Germany or South Korea manufacturing a wind turbine containing Chinese-origin neodymium above the 0.1 percent threshold and selling that turbine to a US buyer would require a Chinese export license for that transaction.4 Several actions cannot wait until after the expiry date.

• MOFCOM licensing approval rate tracking. Monitor approval rate trends for civilian versus dual-use applications between August and October 2026. A narrowing approval rate on civilian applications during that window is a high-confidence signal that the November suspension will lapse without extension.
• Diplomatic calendar monitoring. If October 2026 China-US diplomatic engagement is quiet and no formal extension announcement is made before early November, treat the lapse as a working assumption and confirm that contingency stock and alternative supplier positions are already in place.
• Bill-of-materials traceability audit. Identify which inputs across the full BOM contain Chinese-origin rare earth content above the 0.1 percent threshold. This is the minimum analytical precondition for any compliance analysis under Notification No. 61 and should not wait for the suspension to lapse.
• Alternative supplier pre-qualification. The IEA calculates that $60 billion in investment is needed over the next decade to diversify rare earth supply chains, and that commitment has not been made.2 Pre-qualifying the suppliers that do exist, with full understanding of their lead times and capacity limits, is an action available now. Waiting for the November cliff removes that option.

Meridian Intell note: The companies least disrupted by the April 2025 controls were the ones that had built watch indicator frameworks at least six months before the announcement. That window is considerably shorter for the November 2026 cliff. The observable signals are available now. The decision window is not open indefinitely.

Methodology: Analysis draws on MOFCOM regulatory filings, IEA supply chain data, published legal commentary from Taylor Wessing and White & Case, and publicly reported pricing data. All cited sources are publicly available.

Footnotes

1 Taylor Wessing, Key Changes in China's Export Control Landscape for Rare Earths, April 22, 2026. Available at taylorwessing.com.

2 International Energy Agency, Rare Earth Elements: Pathways to Secure and Diversified Supply Chains, April 2026. Cited in Anadolu Agency, April 8, 2026. Available at iea.org.

3 Rare-Earth-Mining.com, China Rare Earth Export Controls: Essential Buyer Guide, April 7, 2026.

4 White & Case, China Imposes Extraterritorial Jurisdiction and a 50% Rule for Export Controls on Rare Earth Elements, October 12, 2025. Available at whitecase.com.

5 TechTimes, China Rare Earth Export Controls: April Curbs Still Bite After Beijing Summit, May 25, 2026.

6 Reuters, China Targets US Rare Earth and Other Firms with Export Controls, June 22, 2026.

7 International Energy Agency, Rare Earth Elements Report, April 2026. Cited in BusinessGreen and Yahoo Finance, April 7-8, 2026. LinkedIn / Arda Işıldar citing same, April 12, 2026.

About the author

Jay Bimbrah, Co-Founder & COO. A former Scotland Yard counter-terrorism investigator, Jay has advised EMEA tier-1 banks and Lloyd's market firms on distinguishing real exposure from theoretical risk.