From State Capital to Strategic Autonomy: Analyzing Government Roles in the Global Rare Earth Game【SMM Analysis】

As a non-renewable strategic resource, rare earth has become a focal point of competition among major powers. With China dominating the rare earth industry chain, particularly in the smelting and separation sector, major economies such as the US, the European Union, and Japan are attempting to reshape the global rare earth supply chain landscape through unprecedented government interventions. From the US Department of Defense directly investing in rare earth enterprises, to the EU setting clear quantitative targets for supply chain autonomy, and resource-rich countries like Brazil and Southeast Asian nations promoting industrial upgrading through export restrictions, an all-around competition centered on rare earth is intensifying.

The Americas: Direct State Capital Intervention and the Rise of Strategic Resource Nationalism

The Americas region is becoming a critical battleground for the diversification of global rare earth supplies, with governments adopting distinct yet targeted intervention strategies. The US is accelerating the reconstruction of its rare earth industry chain through direct state capital involvement.

In July 2025, the US Department of Defense acquired a 15% stake in MP Materials, the largest rare earth producer in the US, for $400 million, making it the largest shareholder. This move goes beyond traditional policy support, reflecting the direct deployment of state capital in critical minerals.

The US government also provided a guaranteed floor price of $110 per pound for neodymium and dysprosium from MP Materials (twice the current price in the Chinese market) and committed to securing customers for all of the company’s rare earth magnet production over the next decade. Apple, in turn, offered a $500 million offtake agreement.

This model of "government-guaranteed prices + long-term offtake agreements" significantly reduces the risks for private capital investing in rare earth projects and serves as a core strategy for the US to rebuild its supply chain.

As the country with the world’s second-largest rare earth reserves, Brazil is actively promoting rare earth development. The Brazilian government has identified 27 rare earth-related projects across seven states and is providing R$5 billion (approximately RMB 6.4 billion) in discounted loans through the National Bank for Economic and Social Development.

In November 2025, the Brazilian government further authorized the use of incentive bonds to finance strategic mineral projects, which is expected to attract R$5.2 billion (approximately $981 million) in annual investments. Silveira, the Minister of Mines and Energy, explicitly stated: "We want Brazil to lead the global energy transition—not merely as a supplier of raw materials, but as a dominant player in the value chain of critical minerals for a sustainable future on Earth."

Brazil is also actively participating in the US-led Minerals Security Partnership (MSP), opening rare earth investments to capital from the US, Japan, Europe, India, and others, while restricting Chinese capital involvement, demonstrating a clear trend toward "decoupling from Chinese investment."The Canadian government also adopted direct intervention measures. In November 2025, the Minister of Natural Resources of Canada stated that the government had begun studying the acquisition of equity in critical mineral production and processing projects, including rare earth processing facilities. This move clearly mirrored the US strategy of investing in MP Materials, reflecting the shared stance of North American countries on the security of the rare earth supply chain.

Asia: Alliance Network Building Coexists with Resource Nationalism

The rare earth competition in Asia exhibits multi-layered characteristics, featuring both US-led alliance network building and nationalist policies in resource-rich countries.

The US is actively building a rare earth supply chain alliance in the Asia-Pacific region. In October 2025, during Trump's visit to Japan, the US and Japan signed a rare earth and critical mineral cooperation framework. The two sides will establish a joint financing mechanism, a reserve system, and a critical mineral supply security rapid response team led by the US Department of Energy (DOE) and Japan's Ministry of Economy, Trade and Industry. As one of the few countries outside China with deep expertise in magnet technology, Japan's companies, such as Shin-Etsu Chemical and Hitachi Metals, possess advanced magnet technologies. Through this framework, Japan's technological expertise will combine with the US's resource base and scaling potential to jointly reshape the regional rare earth supply chain.

In Southeast Asia, although Malaysia signed a critical minerals agreement with the US in October 2025, it maintained its ban on raw ore exports. Malaysia's Minister of Trade, Tengku Zafrul Aziz, emphasized, "We no longer wish to be a country that only digs and exports cheap raw materials as in the past." This policy aims to encourage foreign investment and technology sharing, promote the local processing of rare earth raw ore, and enhance the capacity to capture value from resources.

Vietnam, which holds the world's second-largest rare earth reserves (after China), has also become a key US cooperation partner. In October 2025, the US and Vietnam signed a rare earth cooperation framework, under which the US will support Vietnam in developing its rare earth resources through technology transfer and private investment. However, Vietnam's current production and refining capacity is limited, and large-scale development remains in its early stages.

Europe: The Difficult Transition from Market Dependence to Strategic Autonomy

Europe faces severe challenges in the rare earth supply chain and is attempting to reduce external dependence through legislation, funding, and internal cooperation.

The European Union passed the Critical Raw Materials Act in 2024, setting specific targets for 2030: at least 10% of the EU's rare earth consumption to be mined locally, 40% processed locally, 25% sourced from recycling, and no more than 65% dependence on any single country for any strategic raw material. Currently, Europe requires approximately 18,000 mt of magnets annually, but domestic production is only 1,000 mt, resulting in a significant supply-demand gap.

In October 2025, the European Commission announced the "RESourceEU" plan, aimed at reducing dependence on Chinese critical materials. The plan includes establishing strategic metal reserves, setting up a concentrated procurement platform, and accelerating financial support for local mining and refining projects.

As a core EU member state, France is actively conducting a nationwide "treasure hunt" campaign to systematically explore its rare metal ore deposits. The French Geological and Mining Research Bureau launched a new round of resource surveys in February 2024, expected to be completed by 2029, focusing on key resources such as lithium, tungsten, antimony, and rare earths.

Europe is also actively promoting the development of local rare earth projects. The rare earth refinery located in Lac, France, has received joint support from the French and Japanese governments; it is the only plant outside China capable of processing all 17 rare earth elements. Estonia's largest permanent magnet production plant in Europe commenced operations in September 2025, with an initial annual production of 2,000 mt and a planned eventual capacity of 5,000 mt.

Analysis of Major Models and Tools of Government Intervention
Government intervention models in the rare earth industry across various countries can be summarized into the following types:

Direct Investment and Equity Participation: The US Department of Defense has directly taken equity in MP Materials, while the Canadian government plans to acquire equity in critical mineral projects, reflecting the direct involvement of state capital in the rare earth sector. This model can quickly address the funding shortages faced by private capital but may raise concerns about market distortions.

Price Guarantees and Long-Term Offtake Agreements: The US government provides floor prices for rare earth products and commits to long-term procurement, significantly reducing market risks for enterprises. This "government-guided, market-operated" model has become an important tool for the US and the West in restructuring the rare earth supply chain.

Trade Policies and Export Controls: Malaysia maintains its ban on the export of raw ore, while Brazil restricts the export of unprocessed raw materials, both aiming to promote the development of local processing capabilities. Such resource nationalist policies may impact global supply in the short term but could reshape the global rare earth trade landscape in the long run.

Alliance Building and "Friend-Shoring": The US has established the Mineral Security Partnership (MSP) to create a supply chain alliance excluding China, with member countries including Japan, Australia, Canada, South Korea, India, and some EU nations. This "mini-lateral mechanism" is becoming a key diplomatic tool for the US and the West in restructuring critical mineral supply chains.

Regulatory Simplification and Financial Support: Brazil has established the National Mineral Policy Council (CNPM), composed of 18 ministries, specifically to plan the national mining strategy for 2025–2050. Countries also support rare earth projects through various tools such as tax incentives, discounted loans, and bond financing.

Resource-rich countries like Brazil and Malaysia are promoting local industrialisation through export restrictions, seeking a balance between the US-West and China. In the future, the rare earth supply chain will become more diversified and regionalized, but China’s technological and cost advantages in smelting and separation will be difficult to replace in the short term.

The global rare earth competition is a contest for future industrial dominance, with governments worldwide transitioning from market observers to active players, striving to leverage state power to promote the development of their local rare earth industries.