Chinese Rare Earth Firms Balk at Western Due Diligence Rules, Fearing Reprisals from Beijing
Chinese rare earth firms are refusing Responsible Minerals Initiative due diligence procedures, fearing Beijing reprisals, undercutting a key assurance tool for Western manufacturers.
Chinese rare earth firms are declining to follow international due diligence procedures set out by the Responsible Minerals Initiative because they fear punishment from Beijing for doing so, a source familiar with the matter told Reuters. Western manufacturers have relied on such frameworks to audit mineral sourcing for motors, turbines and batteries. If Chinese suppliers will not engage, those audits cannot function.3,5
The RMI framework, widely used by Western buyers to establish sourcing accountability, requires upstream producers to participate. Chinese producers who engage with a Western-backed compliance regime face scrutiny from a government that has shown little tolerance for suppliers seen as cooperating with foreign regulatory frameworks. Most buyers with exposure to Chinese rare earth supply are now pricing in that friction without a clear workaround.6,2
China's export controls have disrupted supply since earlier this year. Following the Trump-Xi summit on May 14-15 (2026), which Trump called a "success," no formal agreement emerged on Beijing's rare earth restrictions, and shipments of the heavy minerals that power defence electronics and clean energy equipment remained disrupted, oilprice.com reported on May 26 (2026).3
Beijing escalated further on Monday, June 22 (2026), issuing additional export controls against a raft of U.S. firms, including two prominent rare earth companies, Foreign Policy reported. Bryan Bille, a policy analyst at Benchmark Mineral Intelligence, called it a "warning shot." The controls made clear that Beijing views its rare earth position as durable leverage, not a temporary bargaining chip.5
Japan's experience with supply diversification shows what partial de-risking actually achieves. A Foreign Policy report published on August 24 (2026) found that, even after Tokyo shifted procurement toward countries such as Vietnam, those industries remained deeply intertwined with Chinese supply chains. The verdict was unsparing: "Claims that Japan has successfully de-risked its rare earth supply" did not hold.6
David Merriman of Project Blue has argued the West could "significantly derisk" by cutting its reliance on China to 60-70% of total consumption — still a substantial share, but a more realistic target than full independence. Reaching even that level requires upstream investment and Chinese producers willing to engage with international audit standards. Both conditions are now uncertain.2
The compliance standoff sits alongside a crude market in which China's commodities posture has grown harder to read. U.S. Treasury sanctions imposed in April (2026) against Hengli Petrochemical, a privately-owned Chinese refiner, over alleged Iranian oil purchases pushed the company to seek replacement crude from Middle Eastern and West African producers, Reuters reported on June 11 (2026). Hengli operates 400,000 barrels per day of capacity at its Dalian facility and had reportedly secured at least 2 million barrels of West African crude for late June delivery. ICE Brent crude front-month traded at $95.53 per barrel on September 4 (2026).4
Chinese refinery throughput had already dropped sharply before those complications. The country processed 54.65 million tons of crude in April (2026), 11% below March and 5.8% lower than in April (2025), China's National Bureau of Statistics reported on Monday, May 18 (2026). State-owned refiners cut run rates to below 67% of capacity, a record low in Mysteel Oilchem data going back to 2021, as Strait of Hormuz disruptions cut crude inflows.1
Chinese rare earth producers who engage with RMI procedures risk the punishment Reuters' source described. Those who do not leave Western buyers with supply chains they cannot audit. Beijing has given no indication it will ease that pressure.5,6