 |
| China refined critical metals |
China’s refined metals restrictions may trigger long-term shifts in Western supply chains
China’s latest expansion of export controls on refined critical metals reinforces its dominance—but only temporarily. On October 2025, Beijing added five new rare earth elements to its restricted list, deepening the West’s dependency on Chinese refining. However, analysts argue that this strategic move can only be effectively used once.
Escalating Export Controls on Refined Critical Metals
China processes nearly 90% of rare earths and a dominant share of graphite, cobalt, lithium, and nickel. These refined metals are essential for electric vehicles, wind turbines, electronics, and defense systems. As a result, Western nations face significant vulnerability whenever China signals new restrictions.
However, each restriction brings diminishing returns. As Western buyers confront growing risk, they respond with infrastructure investment and supply chain diversification. Processing may be China’s advantage today, but that lead narrows with every restriction threat.
Western Nations Accelerate Refining Capacity
If Beijing enforces a full export cutoff, Western supply chains would face severe short-term disruption. But the mining of raw ores is not the bottleneck; refining capacity is. The United States, European Union, and allies have already launched initiatives to fund critical mineral processing.
For example, the Inflation Reduction Act (IRA) in the U.S. allocates billions for battery mineral processing. Similarly, Canada and Australia are investing in refining facilities and offering tax credits and subsidies. The more China signals supply risk, the faster the West builds redundancy.
Long-Term Risks to China’s Metal Dominance
China's overuse of export restrictions may ultimately undermine its own market control. If Western buyers succeed in creating secure and independent refining ecosystems, China could face structural overcapacity and declining demand from key international customers.
In the long term, this could result in a bifurcated global market: one system based on secure but higher-cost Western supply chains, and another dependent on cheaper, politically influenced Chinese exports. China's strategic calculus must weigh short-term geopolitical leverage against the risk of permanent market realignment.
ScrapInsight Commentary
China’s latest refined metal restrictions serve short-term diplomatic aims but may backfire economically. Western nations are accelerating investment in refining, which could erode China’s long-held dominance. If Beijing continues its strategy, the refined metals market may fracture into two distinct global systems—one secure, the other unstable.
