China rare earth producers forecast profit recovery despite global diversification push

Workers transport soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China. Reuters-Yonhap

Despite concerted international efforts to diversify rare earth supply chains away from China over the past year, leading Chinese producers are forecasting a significant rebound in profitability for 2025.

China Northern Rare Earth Group, a state-owned domestic rare earth giant, has forecast net profit growth of up to 135 per cent for 2025, reversing a decline in the previous year.

Similarly, state-controlled critical minerals giant China Rare Earth Group projected it would return to profitability in 2025.

In the downstream sector, Beijing Zhong Ke San Huan High-Tech, a leading producer of rare earth permanent magnets — a key rare earth product widely used in electric vehicles and consumer electronics — expects its 2025 net profit to surge by as much as 900 percent, reversing a 96 percent decline in 2024.

The company attributed the major turnaround to advances in technological innovation, an expanded market share over the past year, and improved cost controls, according to its earnings pre-announcement in late January.

Rare earths are essential to a wide range of high-tech products, and their importance has grown as demand rises for advanced applications — such as high-performance semiconductors — amid rapid technological development in recent years.

With rich reserves and production capabilities across the entire rare earth value chain, China accounts for around 70 percent of global rare earth mining output, according to the U.S. Geological Survey (USGS). Beijing leveraged this position during last year’s trade rivalry with the United States, imposing export controls on several critical mineral elements — a move that sent ripple effects through global manufacturing supply chains.

As a result, countries around the world have stepped up efforts to reduce their reliance on China's rare earth supply. From the U.S. and Korea to global south nations like Brazil, governments have initiated a wave of plans ranging from mining investments to diplomatic cooperation aimed at securing alternative sources of the critical minerals.

Korea, which is heavily dependent on China for rare earth imports, has accelerated efforts to diversify supply through overseas partnerships and investments. Rare earth cooperation was discussed during a recent meeting between President Lee Jae Myung and Brazilian President Luiz Inacio Lula da Silva in the last week, as Brazil holds the world’s third-largest rare earth reserves while lacking production capabilities.

What's more, Seoul is now chairing a multinational bloc launched by the U.S. in February that is aimed at reducing dependence on Beijing for critical minerals like rare earth elements.

The Critical Minerals Ministerial meeting is held at the State Department in Washington, Feb. 4. AP-Yonhap

After being at the forefront of China’s rare earth export controls last year, the U.S. has been investing heavily in domestic mining companies in an effort to revive its rare earth industry. The latest is an agreement with critical minerals firm USA Rare Earth, revealed earlier this year, in which Washington will invest $1.6 billion for a stake in the company.

Despite these moves, China’s dominant position across the rare earth value chain — from mining and refining to magnet production and recycling — built on decades of state-led support, appears difficult to displace in the short term, as analysts maintain a positive outlook for the sector.

“The strategic importance of rare earths continues to grow. In 2026, the global supply-demand gap is expected to widen, providing long-term support for rare earth prices and profitability of companies in the industry,” China's Citic Securities said in a January note, citing rising demand from sectors such as humanoid robots and drones.

Meanwhile, as rare earths have again come into focus amid the escalating China-Japan dispute — after China restricted exports of rare earth permanent magnets and other critical materials to 20 Japanese companies — analysts said the move could bolster investor confidence in rare earth stocks.

"The strategic value of rare earth was renewed, and would help lift investor risk appetite toward the sector," according to a note by Xiangcai Securities Sunday.

Alice Li is a reporter with the South China Morning Post. She is currently based in Seoul, writing for both The Korea Times and the South China Morning Post under an exchange program.