The latest wave of export restrictions on critical minerals has jolted supply chains and raised new questions about the impact of “resource nationalism”
In April, China imposed fresh export controls on several rare earth elements - including samarium, gadolinium, terbium and dysprosium - along with related products such as high-performance magnets.
These materials are essential to the manufacturing of electric vehicles, wind turbines, defense systems, and advanced electronics.
Under the new rules, exporters must now apply for licenses from the Chinese Ministry of Commerce, adding potential weeks or months of delay to global supply chains.
Risk managers in industries from automotive to aerospace are facing a familiar but intensified dilemma: a single-country dependency on strategic inputs that can be throttled with little notice.
A reminder of concentration risk
China currently accounts for 69% of global rare earth production.
Its decision to restrict exports - widely viewed as retaliation for recent U.S. tariffs - underscores the fragility of globalised manufacturing models. It also exposes how politically motivated controls can cause ripple effects far beyond the bilateral US-China relationship.
Early fallout has already emerged in sectors reliant on electric propulsion and emissions control systems. According to maritime intelligence firm Riviera Maritime Media, shipbuilders in South Korea and Europe are already experiencing delayed deliveries of specialist equipment due to sourcing issues linked to China’s new controls.
In the auto sector, analysts warn that the availability of rare earths used in EV motors could rapidly constrict if alternate sourcing is not secured.
Some U.S.-based manufacturers have flagged the prospect of reduced production targets for late 2025 unless exemptions or substitutes are found.
Not just an ESG issue — an operational risk
Rare earth supply has often been viewed through an environmental, social and governance (ESG) lens, due to concerns about ethical sourcing and environmental degradation. But this latest development reframes the issue: it’s a core operational risk.
For risk managers, this means revisiting business continuity plans that may not adequately reflect the growing politicisation of resources. The question is no longer just “where do we get it?” but “how fast can access be cut off?”
Strategic responses: what risk managers should do now
- Map exposure at the component level. Many organisations still don’t have full visibility into where and how rare earths are used across their product lines. Mapping this out - ideally with tier 1 and tier 2 supplier cooperation - is essential for quantifying risk.
- Engage with procurement on sourcing alternatives. Viable substitutes for rare earths exist in some cases, but switching often requires redesigning products or requalifying suppliers. Risk managers should be part of these conversations from the outset, not just during disruption.
- Stress-test inventory and lead times. Export license approvals from China are likely to be slow, particularly for firms without strong in-country relationships. Scenario modelling should reflect longer lead times and potential zero-supply cases.
- Monitor trade policy signals. China’s move is widely interpreted as strategic retaliation, but future controls may arise from environmental policy or domestic demand surges. Ongoing geopolitical and regulatory monitoring should be part of any robust enterprise risk management programme.
Bigger picture: the new normal of resource nationalism
This is unlikely to be a one-off event. China’s export controls are part of a growing global trend toward “resource nationalism” — where governments leverage control over key raw materials to achieve broader economic, strategic or political aims.
As the energy transition accelerates and critical minerals become more valuable, countries rich in these resources are reasserting ownership and reshaping trade terms.
We have seen this in Mexico, which nationalised its lithium reserves and handed exclusive mining rights to a state-owned enterprise. In Indonesia, the government has banned exports of unprocessed nickel to spur domestic refining and attract battery manufacturers.
Even in traditionally open markets, calls to tighten foreign access to rare minerals are gaining political traction — including in the US, EU, and Australia.
For multinational firms, this trend has significant implications. Supply chain risk is no longer a matter of logistics and weather events — it’s deeply geopolitical. Access to raw materials is now entangled with national interests, trade disputes, and security policies.
For risk managers, this signals a shift from reactive contingency planning to proactive, geopolitical foresight. It’s no longer sufficient to identify alternative suppliers — firms must also assess the political stability, regulatory trajectory, and strategic intentions of countries where those suppliers operate.
Understanding the shifting landscape of trade, investment restrictions, and resource diplomacy will be central to ensuring long-term resilience.
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