Goldman Sachs Warns of Disruptions in Global Supply of Rare Earths and Critical Minerals

Goldman Sachs has raised concerns about growing risks to the global supply chain of rare earth elements and other critical minerals, highlighting China’s dominance in mining and refining, and outlining the challenges faced by nations attempting to build independent supply networks.

On October 9, China expanded its export restrictions on rare earths, adding five new elements to the list and tightening inspections for semiconductor users ahead of a meeting between leaders Donald Trump and Xi Jinping.

China’s Grip on the Supply Chain

In a note published Monday, Goldman Sachs stated that China currently controls 69% of global rare earth mining, 92% of refining, and 98% of magnet manufacturing.

Rare earth elements (REEs) have become a major geopolitical issue because they are essential to high-tech industries — powering everything from batteries and computer chips to artificial intelligence systems and defense equipment.

While the rare earth market was valued at $6 billion last year, it remains a small fraction of the global copper market, which is 33 times larger. Goldman Sachs warned that even a 10% disruption in industries dependent on REEs could lead to a $150 billion loss in economic output, along with inflationary pressures due to shortages.

Potential Export Restrictions Ahead

Goldman Sachs identified several minerals — including samarium, graphite, lutetium, and terbium — as particularly vulnerable to export restrictions.

Samarium, used in heat-resistant samarium–cobalt magnets, is critical for aerospace and defense applications. Disruptions in the supply of lutetium and terbium, which have broader industrial uses, could also threaten GDP growth.

The bank also noted that lighter rare earths such as cerium and lanthanum could become future targets for export limits, given China’s dominant position in mining and refining these elements.

While Western producers like Lynas Rare Earths (LYC.AX) and Solvay could help ease shortages, Goldman Sachs emphasized that global dependence on China remains substantial.

Challenges in Building Independent Supply Chains

Countries are racing to develop independent REE and magnet supply chains, but Goldman Sachs pointed to major hurdles — ranging from geological scarcity and technological complexity to environmental constraints.

Outside China and Myanmar, heavy rare earth deposits are particularly scarce, and most known reserves are small, low-grade, or radioactive. Developing new mines can take eight to ten years, while establishing refining capabilities typically requires at least five years and advanced technical expertise.

Although magnet production outside China — notably in the U.S., Japan, and Germany — is gradually expanding, it still faces difficulties due to China’s control over key inputs like samarium.

Investment and Commodity Risks

Goldman Sachs advised investors to manage exposure to rare earth supply disruptions through equity investments, naming Iluka Resources (ILU.AX), Lynas Rare Earths (LYC.AX), and MP Materials Corp (MP.N) as key players in the sector.

The bank also projected a tightening supply of neodymium–praseodymium oxide (NdPrO), a critical material for high-performance magnets.

Beyond rare earths, Goldman Sachs warned that cobalt, oil, and natural gas are increasingly vulnerable to supply disruptions driven by geopolitical tensions, underscoring the fragility of global resource networks amid rising strategic rivalries.