Ukrainian rare earths: A new variable in geopolitical games, can it shake China's dominance within ten years?

The current status of Ukraine’s rare earth resources: potential and limitations coexist

1. Reserve distribution and types

Ukraine's rare earth resources are mainly distributed in the following areas:

- Donbas region: rich in apatite deposits of rare earth elements, but a high-risk area due to the Russian-Ukrainian conflict.

- Kryvyi Rih Basin: rare earth deposits associated with iron ore, mainly light rare earths (such as lanthanum and cerium).

- Dnipropetrovsk Oblast: There are rare earth resources associated with uranium, but the development level is low.

According to data from the Ukrainian Geological Department, its total rare earth oxide (REO) reserves are estimated to be between **500,000 and 1 million tons**, accounting for about **1%-2%** of the world's proven reserves, far lower than China (about 37%), Vietnam and Brazil. In terms of types, light rare earths are the main type, while heavy rare earths (such as dysprosium and terbium) are scarce, and the latter are precisely the core materials in the fields of new energy and military industry.

2. Technological shortcomings and geopolitical risks

Despite the existence of resources, Ukraine's rare earth industry faces multiple constraints:

- Outdated mining technology: the extensive mining model inherited from the Soviet era leads to low efficiency and lacks modern purification technology;

- Infrastructure damage: The conflict has paralyzed the transportation and power systems in the mining area, making reconstruction costs high;

- Environmental concerns: Rare earth mining may exacerbate ecological problems in eastern Ukraine and trigger public protests.

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US-Ukraine Minerals Agreement: Opportunities and Challenges

In 2023, the United States and Ukraine signed a Memorandum of Understanding on Cooperation in Critical Minerals, which aims to develop Ukraine's rare earth resources through financial and technical assistance. If the agreement is implemented, it may bring about the following changes:

- Initial establishment of the industrial chain: US companies may help build mining and primary processing facilities, but refining and high-end applications will still need to rely on external parties;

- Geopolitical value: Ukrainian rare earths can serve as a supplement to the "de-China" supply chain in Europe and the United States, especially in the field of light rare earths;

- High dependence on financing: The project needs to continue to attract Western capital, but the risk of war may undermine investor confidence.

Replacing China in Ten Years? The Gap Between Reality and Ideal

Although there is room for imagination in the US-Ukraine cooperation, it is doubtful that Ukraine's rare earth industry will replace China within ten years for the following reasons:

1. Huge disparity in resource endowments

- China's rare earth reserves account for 37% of the world's total, covering all 17 elements, especially the monopoly of heavy rare earths, which is difficult to shake;

- Ukraine has limited light rare earth reserves and the cost of mining is likely higher than that of China (the cost of mining in Baotou, China is the lowest in the world).

2. The maturity gap of the industry chain

- China controls **60%** of the world's rare earth mining and **90%** of its refining capacity, and owns a complete industrial chain from mines to permanent magnets;

- Ukraine needs to build refineries and high-value-added industries from scratch, and ten years is only enough to complete the initial layout.

1.Geopolitical and economic risks

- The prolonged conflict between Russia and Ukraine will make it difficult to guarantee the safety of mining areas, and international capital will take a wait-and-see attitude;

- China may use price regulation and technological barriers to suppress emerging competitors and consolidate its market position.

4. Market demand dynamics

- Global demand for rare earths is expected to grow to 300,000 tons per year by 2030, with the increase mainly coming from electric vehicles and wind power. Even if Ukraine produces at full capacity, it will be difficult to meet the gap.

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Conclusion: Partial replacement rather than comprehensive subversion

In the next decade, Ukraine may become a regional supplement to the light rare earth supply chain in Europe and the United States, but its industrial scale, technological level, and geopolitical environment determine that it is difficult to shake China's global dominance. The real variables are:

- Technological breakthroughs: If Ukraine achieves a leap forward in rare earth recycling or green mining technology, it could improve its competitiveness;

- The game between major powers is escalating: If the United States supports Ukraine at all costs in a "wartime state", it may accelerate the reconstruction of the supply chain.

The lesson from Ukraine's rare earth story is that the competition for resources has shifted from a "reserve race" to a complex game of "technology + geopolitical influence", and China's real challenge may come from the dimensionality reduction attack of disruptive technology rather than the rise of another resource-rich country.

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**Extended thinking**: In the new industrial revolution driven by new energy and AI, whoever controls rare earth refining technology and the research and development of alternative materials will truly dominate the future industrial chain. Ukraine's attempt may just be a footnote to this game.