Rare earth elements (REEs) are fast emerging as one of the world's most strategic commodities. REEs are a group of 17 chemically similar elements critical to key technologies such as renewables or electric vehicles. They are widely available, but rarely found in concentrated deposits, which makes their extraction and processing costly and technically challenging.

From wind farms and electric vehicles to satellites, the accelerating green energy transition and the rapid growth of digital technologies have driven a sharp surge in demand for these minerals, positioning them as the cornerstone of the new economy.

But behind their important role lies a profound imbalance in the world supply of REEs.

China Dominates REEs World Market

According to Kearney’s Global Business Policy Council, China dominates the global market, holding nearly half of the world’s available reserves (48%) and controlling 70–90% of global production and processing capacity. In contrast, the United States and Australia lag significantly behind.

This concentration led to an undue dependence on a single source, leaving the world economy at risk.

The impact is already evident. As trade war with the United States intensifies, China has tightened export controls on different types of REEs, forcing domestic firms to obtain government approval before shipping them to foreign markets. This move has delivered a severe blow to US industries that depend heavily on imported rare earths.

This situation is far from ideal for global stability, as Kearney’s report warns that a sudden supply disruption could put up to $4 trillion in global revenues and 15 million jobs at risk.

It is no surprise that countries are racing to mitigate this risk by seeking alternative sources of supply. However, beyond that, it is equally important for nations to strengthen trust-building efforts. In a world where reliability, transparency, and sustainability are rapidly becoming the standard, trust stands as the most valuable and most limited commodity of all.

Indonesia and ASEAN at the Crossroads of Opportunity

Currently, there is a global shift in supply chains driven by stricter regulations from China. In this context, the ASEAN region has emerged as a key beneficiary, as companies facing higher export costs from China to the United States are seeking alternative production hubs. Countries like Indonesia offer strategic advantages, from lower costs to strong trade integration and geographic proximity to China.

Moreover, new regional trade frameworks such as the RCEP further reinforce this momentum, while ASEAN’s progress in digitalization and green manufacturing paves the way for industrial upgrading and deeper technological collaboration.

Indonesia, as part of ASEAN, must be prepared to seize this opportunity. Indonesia is already a major player in critical minerals (nickel, tin, bauxite, copper) and building a Rare Earth Element capabilities can enhance its strategic positioning in the global energy transition.

Currently, exploration and development of REEs are underway in the country. Looking at Indonesia’s potential, the National Research and Innovation Agency (BRIN) has identified the Bangka Belitung Islands, part of the Southeast Asian tin belt, as being rich in mineral deposits, including REEs.

From a policy perspective, the government’s commitment to enhancing the added value of the national economy through mineral downstreaming is reflected in the issuance of Law No. 2 of 2025, which amends the previous Mineral and Coal Mining Law.

Furthermore, to accelerate national economic growth in the mineral and coal sector, the downstream industrialization policy focuses on strengthening exploration and research efforts while fostering collaboration among multiple stakeholders, including state-owned enterprises (BUMN), regional-owned enterprises (BUMD), government research institutions, private companies, and universities.

However, beyond harnessing its resource potential, Indonesia must build trust among global investors and partners by ensuring that its supply chains are reliable, transparent, and sustainable.

Building a Resilient Rare Earth Elements (REE) Ecosystem in Indonesia

Building REE supply resilience isn't just about finding new sources, but also about creating an integrated and sustainable ecosystem. To achieve true independence and resilience in REEs, Indonesia must focus on five key success factors.

First, Indonesia needs to develop an end-to-end ecosystem by establishing integrated industrial parks that bring all essential capabilities together. Indonesia needs to first map and quantify the reserves. A successful REE commercialization typically involves more than 15 partnerships spanning technology, processing, and downstream industries. Forming the right collaborations can help close capability gaps. For instance, by working with research institutions to gain access to separation technologies or partnering with universities to utilize licensed chromatographic separation methods for REEs.

Second, the government and industry players must work hand in hand to accelerate policy development, investments, and strategic partnerships aimed at reducing dependence on China’s REE supply chain. Indonesia has already taken initial steps in this direction by supporting PT Timah’s pilot plant revitalization project to process monazite, marking an important milestone toward establishing a domestic REE supply. Indonesia needs to develop a rare earth strategy, along with policy and regulations in different areas such as mining rights, environmental safeguards, and the right incentives for downstream investment.

Third, to ensure both efficiency and sustainability, companies must focus on operational excellence by optimizing eight key value levers: building expert-driven operations, prioritizing research, managing capital expenditures effectively, designing efficient organizations, implementing detailed planning and control, applying end-to-end risk management, enforcing strong environmental safeguards, and developing a smart contracting strategy.

Fourth, it’s crucial to gradually build capabilities and technological expertise, starting from beneficiation and growing through strong, strategic collaborations.

Fifth, take strategic actions to build a competitive advantage by fostering collaboration between public and private stakeholders to drive impactful policy reforms that advance REE self-sufficiency.

Building REE resilience is not a short-term goal. It is a long-term transformation that demands collaboration across borders and sustained investment. Nations that can integrate operational excellence, technological innovation, and multi-stakeholder support will lead the way in establishing a strong and independent REE supply chain.

By taking this path, Indonesia has the opportunity not only to strengthen its role in the global supply network but also to emerge as a trusted and strategic partner in the world’s REE value chain.

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Imanol Arbulu, Partner and Head of Energy Practice Southeast Asia at Kearney

The views expressed in this article are those of the author.