The Group of Seven (G7) leaders agreed on Wednesday (June 17) to enhance coordination in order to reduce reliance on China for critical minerals. The related plans include coordinating strategic reserves and launching a new platform led by the International Energy Agency (IEA) to play a greater role. The G7 also reached a consensus to ensure that by 2030, imports of rare earth metals from a single country do not exceed 60%.
Western countries are competing to diversify their supply of crucial metals essential for defense, technology, and renewable energy, aiming to reduce dependency on China. Last year, China imposed export restrictions on permanent magnets, disrupting related industries and exposing reliance on a single source, leading to global market upheaval.
While not explicitly naming Beijing, G7 leaders stated during the summit in Evian, France, that their goal by 2030 is to reduce dependence on single suppliers of rare earths and permanent magnets outside of G7 and partner countries to below 60%, striving to achieve the final goal of 50% “as soon as possible.”
Regarding other critical minerals, the leaders committed to finalizing specific targets by the end of the year.
The G7 leaders also discussed plans to implement quota systems in certain industrial sectors to address the reduced reliance on Chinese rare earth metals. Additionally, they pledged to establish a platform to coordinate efforts to increase the supply of rare earth metals through recycling and the development of new mining projects.
An unnamed G7 official told Bloomberg that while the summit focused mainly on issues related to the U.S.-Iran peace agreement, the critical minerals plan was also an issue on which the leaders reached full consensus. Another official highlighted the high level of agreement among member countries on the necessity of diversifying critical mineral supplies and reducing the risk of disruptions in rare earth metal supply.
“We agreed to enhance closer cooperation in the field of critical raw materials through various avenues,” said German Chancellor Friedrich Merz to reporters in Evian. “We had very in-depth discussions with invited guests on how to achieve diversification in (rare earth metals) supply.”
Given that many potential developers have delayed rare earth development projects due to funding constraints, regulatory barriers, societal resistance, and technical challenges, setting 2030 as the “deadline” for the goal is an ambitious plan for the G7.
Last year, China implemented extensive export controls on most critical minerals and rare earths, threatening manufacturing production lines globally and alerting officials to Beijing’s leverage with its near-monopoly position in rare earth metal supplies.
This year, following disputes related to the Taiwan issue, China also imposed broad restrictions on Japan, limiting the export of various rare earth products for civilian or military equipment.
For Japan, the need to break away from single reliance on China and achieve supply diversification is not new; back in 2010, Japan faced export bans on critical minerals due to disputes over maritime boundaries.
Although the demand for most critical rare earth products may have a relatively small market size, a single project could significantly increase global supply. However, China holds a dominant position in various critical mineral markets, necessitating substantial investments in funds and high-end technical talent to boost rare earth metal production on this foundation.
Moreover, the extraction and smelting process of rare earths are not only costly and time-consuming but also environmentally destructive, which may require several years to establish alternative supply chains.
A report from the International Energy Agency (IEA) shows that China controls around 70% of the processing market for most critical minerals. For certain specific minerals, China’s dominance is even higher: the report indicates that China produces 85% of processed cobalt products and 99% of native gallium globally.
The leaders stated that G7’s development financial institutions and export credit agencies should cooperate (including with the private sector) to provide support for relevant projects and infrastructure development.
So far, countries have announced 195 projects with a total investment of €64 billion (approximately $74 billion). The statement added that countries will explore “price subsidies, joint procurement tools, quotas, price floors, and other trade-related measures,” including achieving these goals through “multilateral trade agreements.” The United States is expected to propose legally binding agreements to Japan and the European Union later this month.
The United States launched the “Project Vault” earlier this year, a critical mineral reserve project with a scale of up to $12 billion, and in April, it announced that the initial funding was set to be implemented soon.