China Controls 90% of Rare Earth Processing: How ASX Miners Are Responding

What happens when one country controls 90% of a material the world can't live without? In 2025, we found out.

China's dual-wave export controls on minerals, equipment, and processing technology sent shockwaves through global supply chains. European prices surged sixfold. Manufacturers scrambled. And suddenly, the few companies building processing capacity outside China became strategically vital.

Australian rare earth stocks are now at the centre of this shift.

According to the International Energy Agency's Global Critical Minerals Outlook 2025, China refines 19 of 20 strategic minerals, holding an average market share of around 70%. For rare earths, the materials inside every electric vehicle, wind turbine, and smartphone, their dominance reaches approximately 90% of global processing.

This isn't a future risk. It's happening now. And for ASX investors paying attention, it's creating real opportunities.

The Real Bottleneck: Processing, Not Mining

Here's what most investors miss: the value isn't in digging up rare earths. It's in processing them.

Mining rare earth ore is relatively straightforward. The hard part is separation, turning raw rock into the specific oxides that manufacturers actually use. This step requires specialised chemistry, expensive facilities, and decades of know-how.

China built this capability while other countries ignored the sector. Today, even ore mined in Australia or the US typically ships to China for refining.

The result? China now controls 94% of permanent magnet manufacturing, up from 50% just twenty years ago. These magnets power EV motors, wind turbines, and defence systems.

For investors, the takeaway is simple: companies that can both mine and process rare earths hold a strategic advantage that pure miners cannot match.

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How Australian Producers Are Responding

Australia is moving fast to fill the gap.

Lynas Rare Earths (ASX: LYC) is the clear leader. It operates Australia's first rare earths processing facility in Kalgoorlie, and the largest outside China. The company mines ore at Mt Weld, processes it in Kalgoorlie, and then completes separation at its Malaysian plant.

Lynas achieved a major milestone in 2025: first production of separated dysprosium and terbium at its Malaysian plant, becoming the only producer of both light and heavy rare earth oxides outside China. The market noticed. Lynas joined the S&P/ASX 50 in December 2025.

That said, building processing capacity isn't easy. Recent power disruptions at Kalgoorlie caused production shortfalls, reminding investors that operational risks remain real.

Arafura Rare Earths (ASX: ARU) represents the next wave. Its Nolans Project in the Northern Territory has secured over A$1.35 billion in government-backed funding, including strategic equity from the Australian Government and debt from US EXIM.

Unlike most projects, Nolans is designed as a fully integrated operation. Arafura plans to process its own ore domestically, avoiding reliance on Chinese facilities entirely. Binding offtake agreements with Hyundai, Kia, and Siemens Gamesa already cover 66% of planned output.

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The Risks You Need to Know

This sector isn't for the faint-hearted.

Rare earth prices swing wildly. The IEA notes that 75% of strategic minerals show more volatility than oil. A single policy shift from Beijing can move markets overnight.

Execution risk is also high. Processing facilities are complex, expensive, and slow to build. Even Lynas, the most established player, faces ongoing operational challenges.

And while Western governments are pouring money into supply chain diversification today, political priorities can change. Investors should size positions accordingly.

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What This Means for Investors

The rare earth sector has fundamentally changed. What was theoretical risk is now real disruption, and governments are responding with serious capital.

Three points to remember:

• Processing beats mining. Companies that can refine rare earths outside China command strategic premiums.
• Government backing matters. Allied funding is de-risking Australian projects, but it doesn't eliminate execution challenges.
• Volatility is permanent. This sector will stay sensitive to geopolitics. Don't overconcentrate.

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For a deeper look at critical minerals opportunities, download ASR's free Top-3 Stocks & Market Outlook Report, including current research on resource stocks positioned for the energy transition.

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