A systemic approach to the problems of the rare earth market

China’s dominance of the rare earth market created issues of major concern since 2010: Limited export quotas and consecutive price peaks led to fears concerning supply security. Forward integration is shifting the rare earth-dependent high-technology value chain to China. China’s export embargo to Japan showed the world the strategic relevance of its economic dependence on China’s rare earth products. Despite multiple political and industrial efforts outside China, it was not possible to build up an independent rare earth supply chain. We think that this is prevented by systemic problems of the market. This paper examines these distortions of the rare earth market with a systemic approach. Problems are identified and structured qualitatively in order to expose their economic and political connections. They are (1) competing political-economic models, (2) resource nationalism, (3) market opacity, (4) a lack of trust, (5) weak cooperation and (6) short- versus long-term approaches and profit orientation. These problems are interconnected and create vicious circles. In this context, the paper discusses literature solutions and a new proposal, which provides incentives for a higher diversification of the REE market.