China Controls 94% of Rare Earth Supply as AI Demand Surges

According to Sprott Asset Management, artificial intelligence, defense, and electrification have emerged as three major structural drivers of rare earth demand, elevating rare earths from a traditional commodity to a strategic resource tied to national security and technological competition. AI data centers are expected to consume approximately 3% of global magnetic rare earth demand by 2030, according to the International Energy Agency, with growth potential accelerating as the sector remains in early expansion phase.

However, supply remains highly concentrated in China, which controls 94% of global permanent magnet production capacity and dominates the full supply chain from mining through processing. The U.S. accounts for only 13% of global rare earth ore production, making it dependent on China for two-thirds of its needs. Establishing new supply chains poses a major challenge; new mining operations require an average of 16 years from discovery to production.