G7 allies step up rare earth diversification efforts

The world’s leading industrial economies have begun coordinated talks to curb reliance on China for rare earth elements, marking a significant turn in how governments and businesses view supply chain security.

Finance ministers from the Group of Seven — joined by Australia, India, South Korea and Mexico — convened in Washington this week to discuss policy tools to strengthen critical mineral supply chains. The meeting, chaired by U.S. Treasury Secretary Scott Bessent, placed rare earth diversification alongside energy and semiconductor policy as a top-tier economic priority.

The U.S. delegation urged partners to expand refining capacity and align export standards, while exploring price floor mechanisms to prevent market distortions that discourage private investment. Germany’s finance minister confirmed that the group discussed “the feasibility of stabilising prices for strategic minerals,” signalling willingness to intervene directly in commodity markets if required.

Rare earth elements are vital for manufacturing electric vehicles, wind turbines, semiconductors, and defence systems — but more than 80% of global refining is controlled by China. That concentration leaves Western industries exposed to political and logistical risk, as seen when Beijing tightened export restrictions on certain rare earths last year.

For businesses, the shift has two immediate implications. First, supply chains once optimised purely for cost are now being revalued for resilience. The potential establishment of a price floor or strategic reserve could introduce more predictable pricing, but also higher structural costs across industries reliant on these materials. Second, investment flows are expected to pivot sharply toward upstream and midstream capacity in allied markets.

Australia, which has already earmarked A$1.2 billion for a national critical minerals reserve, has positioned itself as a natural partner. “Australia is the world’s most reliable critical minerals supplier,” Treasurer Jim Chalmers told G7 delegates, emphasising long-term stability and environmental compliance.

Europe, meanwhile, faces pressure to accelerate its response. Despite the EU’s Critical Raw Materials Act, the bloc remains heavily dependent on Chinese refining, and analysts warn that industrial competitiveness could erode if supply diversification lags behind U.S. and Indo-Pacific efforts. For European manufacturers in the automotive and electronics sectors, rising costs and extended project timelines are becoming central risk factors.

For corporate leaders, the message from Washington is clear: supply chain diversification is now an element of national strategy, not a voluntary initiative. Businesses in technology, manufacturing, and energy must plan for multi-year lead times to secure alternative sourcing — and to engage with public-private funding programmes designed to build new capacity.

In the near term, boardrooms are expected to re-evaluate exposure to politically sensitive suppliers, model price volatility, and integrate rare earth access into sustainability and ESG reporting frameworks. Governments appear ready to shoulder some of the cost of transition, but execution will depend on coordination between policymakers and private capital.

As one senior official put it after the meeting, “Rare earths have become the new oil — indispensable, strategic, and increasingly political.”