Navigating Risks in Rare Earth Element (REE) Supply Chains
How companies can identify REE related risk exposures along their n-tier supply chain and initiate feasible mitigating measures
Rare earth elements are critical enablers of today’s advanced technologies, directly or indirectly affecting products of most companies. High market concentration for refining and processing of these materials in China, implemented export controls and rising geopolitical tensions are increasing supply chain vulnerabilities. This Point of View outlines our proven approach how organisations can uncover their REE exposure within their product portfolio, assess their supplier’s resilience on REE related supply chain disruptions, and implement targeted mitigation measures to safeguard their operations. It provides a practical framework to strengthen transparency across your companies’ supplier base, delivers approaches to reduce vulnerabilities in the short- and mid-term and shows strategies to build long‑term resilience.
Key Takeaways:
- REE supply chains face hidden vulnerabilities due to geopolitical concentration and indirect dependencies.
- Transparency and structured supplier resilience assessments are essential to manage REE risks.
- Mitigation requires coordinated short‑, mid‑ and long‑term actions to build lasting supply chain resilience.
Re‑thinking supply chain resilience for rare earth elements
Rare earth elements are fundamental to the technologies that define our era: electric mobility, renewable energy, automation systems, advanced semiconductors, and digital devices. As the world accelerates its transition toward low‑carbon energy systems and highly advanced electronics shaping our daily life, REEs have emerged as a strategic resource with deep implications for global value chains. Yet their supply increases to be fragile, shaped by concentrated processing in China, high technological barriers and rising geopolitical complexity.
This article is designed for leaders in procurement, supply chain management, operations, and risk management. It provides an insight‑driven perspective on how organisations can strengthen resilience by looking beyond transactional procurement and adopting a collaborative, end‑to‑end approach to managing and mitigating REE exposure.
A geopolitically sensitive value chain
Although rare earth elements occur naturally across the globe, economically feasible extraction and – even more critically – refining and processing capacity is concentrated in only a few countries, dominated by China. This concentration spans multiple steps of the value chain, including refinement, processing, metal and alloy production, as well as permanent magnet manufacturing. As a result, companies operating in sectors such as automotive, electronics, aerospace, defense, energy technology or industrial manufacturing face growing exposure to price volatility, supply shortages, and disruptions.
Furthermore, REEs rarely appear as direct procurement items. Instead, they are embedded in a wide range of upstream components such as sensors, high‑performance alloys, displays, electric motors or semiconductor modules. Because of this indirect exposure, many companies are unaware of their actual dependency until disruptions occur – at which point mitigation becomes costly and time‑critical.
Fig. 1 – REE value chain steps and global market concentrations 2025
Hidden dependencies, visible impact
Even though companies may not procure rare earth elements directly, they experience the consequences of disruptions along the supply chain immediately. The impacts include:
- Longer lead times for pre‑components
- Higher material costs resulting from price increases
- Uncertainty in delivery reliability due to upstream bottlenecks
- Regulatory complications for products that contain export‑controlled materials
- Operational risks affecting both manufacturing and aftermarket services
As these vulnerabilities multiply, traditional supplier management approaches become insufficient. Organisations need a more holistic perspective that integrates product knowledge, supply chain intelligence and strategic foresight – also involving your direct and indirect supplier base.
Three imperatives for creating REE resilience
To respond effectively on the current supply situation, companies must move from fragmented, reactive supplier steering to a structured, cross‑functional approach. Based on Deloitte’s experience across industries, three imperatives guide successful actions. We have developed a proven framework to help our clients identify relevant exposures, engage suppliers and initiate effective mitigation actions.
1. Establishing transparency across the product portfolio
Visibility into where rare earth elements are used within your portfolio and where they enter your value chain is the foundation for any strategic response. Achieving this requires alignment across engineering, procurement, supply chain and quality functions.
Leading organisations leverage:
- Engineering data and specifications to identify REE‑containing components
- Sampling documents or part analyses to detect hidden material usage
- Industry benchmarks and HS code analysis of components to uncover indirect exposure
- Bill‑of‑material analysis tools to quantify business impact
Once transparency is achieved, companies can prioritize components and their suppliers based on criticality, risk probability and their contribution to revenue or operational continuity.
2. Evaluating supplier resilience through structured engagement
Since the most significant REE dependencies reside upstream, supplier collaboration becomes a central success factor. A structured supplier assessment developed by Deloitte combining quantitative and qualitative insights – reveals not only operational capabilities but also strategic readiness.
Key dimensions include:
- Inventory management and stock reach
- Sourcing strategy and tier‑n transparency
- Governance and accountability processes for REEs
- Risk management maturity
- Business continuity planning
By validating data through interviews and on‑site visits, Deloitte helps organisations gain a realistic picture of supplier resilience and benchmark maturity levels across their supplier base.
"Given that over 90% of rare earth processing is concentrated in China, access to rare earths is business‑critical for many of our clients. Companies that proactively understand their risk exposure and assess the upstream resilience of key suppliers can turn this dependency into a clear competitive advantage."
Clemens Ulrich, Director Supply Chain & Network Operations at Deloitte
3. Implementing mitigation measures across multiple time horizons
A resilient REE strategy aligns short‑term stabilization with long‑term transformation. Measures may include:
Short-term actions
- Building safety stocks for high‑criticality components
- Increasing transparency with tier‑1 and tier‑n suppliers
- Implementing contingency allocation and escalation processes
Medium-term actions
- Redesigning components to reduce REE intensity
- Establishing reuse or recycling loops
- Securing offtake agreements
Long-term actions
- Diversifying supply footprints or production sources
- Co‑investing in processing capabilities
- Exploring vertical integration opportunities
- Facilitating cross-industry ecosystem partnerships
These measures can help organisations reduce dependencies, enhance flexibility, and build alignment between procurement, engineering and strategic functions.
A forward-looking agenda for resilient growth
As rare earth elements continue to shape the technologies of tomorrow, organisations must rethink how they approach supply chain strategy for these critical components. The shift from linear, cost‑driven sourcing to resilient, multi‑layered ecosystems reflects a broader shift in how industries prepare for uncertainty.
Companies that succeed adopt a mindset centered on:
- End‑to‑end transparency
- Cross‑functional collaboration
- Supplier engagement as a strategic lever
- Investment in long‑term structural resilience
In doing so, they not only protect their operations from disruption – they can also unlock new opportunities for innovation, sustainability and competitive differentiation.
The importance of REEs will continue to grow, but so will the possibilities for companies able to navigate this complexity with confidence. By taking a holistic, forward‑looking approach, organisations can build supply chains that are more secure, more connected and more future‑ready.
