Data points to a slow displacement of Chinese rare earth exports around the world since 2020, with growth slowing in recent years. Exports expanded by 7.34 per cent last year over 2022 to 52,306 tonnes, according to research by Dongguan Securities.

In contrast, China had exported 48,900 tons of rare earth products in 2021, up 38 per cent over the previous year per statistics from China Rare Earth Society. Those exports flatlined in 2022.

China’s share of total rare earth exports has dropped from about 90 per cent a decade ago to roughly 70 per cent in 2022, the US Geological Survey said.

Rare earth minerals are heavy metals which appear at the bottom of the periodic table and require intense processing to produce usable material. They are used in computers, the motors of computer drives, new-generation light bulbs and batteries for hybrid and electric cars.

Demand for those goods is widely expected to expand the world market for rare earths through 2030.

“The global diversified supply pattern of rare earths has gradually been established,” said Xiamen Tungsten, another Chinese manufacturer of rare earths, in its annual report on Friday. Western countries, it added, “attach increasing importance to key minerals”.

If the offshore supply grows, Orr said, prices will come down, and “China would need to sell at tighter margins”.

A less dominant role for China means more options for foreign buyers as supply chains shift away from the world’s second-largest economy amid import tariffs and company blacklists – restrictive measures imposed by the US and backed by some Western allies.

“[China] has been successful in flooding markets with cheaper rare earths in the past, making Western mines unprofitable, but with the renewed emphasis on diversifying the supply chain that may be less successful now,” said a Hong Kong-based regulatory lawyer familiar with the minerals trade.

China embargoed rare earth exports to Japan in 2010 over the seizure of a Chinese fishing vessel.

That embargo, which is no longer in effect, prompted Japanese producers to extract the minerals from recycled PCs and phones, recalled Stephen Nagy, a visiting fellow at the Japanese Institute of Foreign Affairs.

North American and Southeast Asian countries have lagged behind China so far because of extraction costs and environmental worries – rare earth extraction can easily poison nearby groundwater. China also has a mature network of companies that refine the minerals.

“The general trend is to avoid Chinese monopolies on anything, but that doesn’t mean 100 per cent decoupling from the Chinese rare earth market,” Nagy said. “China still has the expertise [and] the minerals, and it’s willing to put up with the environmental degradation.”

The United States may be less deterred. The country has restarted some rare earth mining operations so that Washington stays separate from China in case of a “larger dispute”, according to a Harvard International Review study from 2021, though it also said the US has more stringent environmental regulations compared to China.

In Malaysia, the government has indicated it may welcome Chinese technology to extract its rare earth minerals without degrading the environment, said Oh Ei Sun, a senior fellow at the Singapore Institute of International Affairs.

“Let’s say Chinese rare earth plants want to relocate to avoid sanctions,” he said. “We’d like to have them.”

But China is not taking the potential environmental costs lightly, either.

In 2011, Beijing put in place its own environmental and industrial standards that “gained global attention for their perceived restrictiveness” while raising concerns about its “willingness” to sell the minerals internationally, according to a January study published by ScienceDirect.

Environmental rules now take precedence over the industry’s development, said Zhao Xijun, a finance professor at Renmin University in Beijing, though modern technology gives China an ongoing advantage.

“China’s advocacy of environmental protection is important,” Zhao said. “China isn’t going to let the rare earth sector harm the environment.”

Xiamen Tungsten, meanwhile, forecast little change in China’s rare earth sector.

“Overall, in the next few years, driven by growing demand, the global supply of rare earth minerals will continue to grow, but the pattern of the mineral supply dominated by China will not change much,” the company said.