G7 mulls rare earth price floors, other measures to counter China

The Group of Seven (G7) nations and the European Union are said to be discussing the idea of imposing price floors on rare earths to counter China’s dominance in the supply chain, Reuters reported on Wednesday.

A price floor, if imposed, would provide greater incentives for producers of rare earths and related products in those regions, which for decades have relied on Chinese supply. Rare earths, which are difficult to extract and expensive to process, are key to many high-tech products, including cell phones, EVs and defense applications.

China currently dominates the global mine supply of rare earths and controls over 90% of their total processing capacity. This forces the G7 nations, with the exception of Japan, to their supply rare earths and related products such as permanent magnets, which are used in wind turbines and electric vehicles, exclusively from China.

According to Reuters, G7 leaders recently met in Chicago to address their over-reliance on Chinese supply. “The heart of the conversation was whether to raise the bar on regulation of foreign investment in critical materials in order to avoid companies going to China,” said one of its sources.

Another option would be to introduce geographical restrictions that limit sourcing from select countries like China, though not all G7 leaders were convinced, the source added.

During these talks, the idea of a price floor backed by government subsidies, which the US introduced in late July, was brought up. One of its sources said Canada responded “positively” to this approach. Australia, too, is separately considering setting a price floor.

Sources said the group also discussed a type of carbon tax or tariff on Chinese exports of rare earths based on the percentage of non-renewable energy used in their production.

The discussion comes months after China leveraged its near-monopoly status at the height of the global trade war by imposing export controls on rare earths and related magnets. While exports have since surged as trade tensions subsided, Western nations remain concerned over the security of supply, and many end-users in the EU have been choked off and face the risk of shutdown.