Washington Backs Madagascar Rare Earths as Beijing Holds Export Controls
U.S. state-backed investment in Madagascar rare earths challenges China's grip on minerals critical to energy-transition hardware, with Brent holding above $91 on Hormuz risk.
Washington endorsed a rare earths mining project in Madagascar, oilprice.com reported Wednesday (2026-07-29). Beijing has held in place export licensing requirements on seven heavy rare earths it imposed last year in retaliation for U.S. tariffs.8
The licensed minerals, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium, are indispensable to the high-performance permanent magnets used in electric vehicles and advanced industrial equipment. China digs up roughly 70% of global rare earth ore, refines more than 90% of processed material, and produces nine-tenths of finished magnets, the Economist reported in May 2026. Beijing's licensing regime has imposed a live constraint on Western manufacturers already seeking alternative sources.8,2
The Madagascar move fits the pattern of state-directed resource investment the Trump administration has been deploying across multiple jurisdictions. In February, Orion CMC, a consortium including the U.S. government, agreed to buy a 40% stake in the only Western-controlled copper and cobalt mines in the Democratic Republic of Congo. Chinese entities hold stakes in an estimated 90% of all Congolese mining projects, according to the former chair of Gécamines, Congo's main state-owned miner.1
But China's leverage has survived recent diplomatic engagement. Trump traveled to Beijing in May 2026 for a high-level summit with President Xi Jinping, with stated goals that included stabilizing bilateral trade and enlisting China's diplomatic assistance in managing tensions with Iran. Beijing kept its heavy rare earth export controls in place after that summit. No reported concession on minerals licensing emerged.4
The Iran dimension connects to oil market pricing. Iran's sea mine capabilities, examined by Foreign Policy on July 8 (2026-07-08), pose a documented threat to traffic through the Strait of Hormuz. ICE Brent crude front-month was at $91.04 per barrel at Saturday's close (2026-08-01). ETO Markets' chief investment officer Jonathan Barratt said on July 12 (2026-07-12) that sustained Hormuz uncertainty could push Brent to $85-$87 per barrel. Brent has since settled well above that ceiling, suggesting the market had priced in more disruption than Barratt's mid-July assessment envisioned, or that additional bullish factors were pushing crude higher.7,6
Still, G7 leaders meeting in France on Wednesday (2026-06-17) agreed to coordinate rare earth stockpiling and launch a new platform through the International Energy Agency, E&E News reported. The joint statement stopped short of specifying volumes or timelines. Washington's Madagascar bilateral commitment predates any supply guarantee the G7 platform might eventually produce.5
Japan's retreat from Madagascar's mining sector illustrates the operational risks that state-backed capital may be better positioned to absorb than commercial investors. Sumitomo agreed to divest its 54.17% stake in the Ambatovy mineral project on the island to Ambatovy Mineral Resources Investment, a Jersey-based consortium, for $418 million, Japan NRG Weekly reported on May 25 (2026-05-25). Sumitomo had invested $3 billion in total and accumulated more than ¥400 billion in losses through persistent technical problems.3
Europe is exposed to the same Chinese export controls but has fewer instruments to respond. The Economist noted in May 2026 that the continent's dependence on Chinese rare earth processing mirrors the structure of its former reliance on Russian gas: built gradually, now hard to reverse. Brussels lacks the bilateral investment model Washington is deploying in Madagascar and Congo.2
The next signal is whether Beijing moves beyond export licensing to restrict access to rare earth processing technology, a step oilprice.com's Wednesday (2026-07-29) reporting flagged as part of Beijing's available toolkit. If it does, ore mined in Madagascar or anywhere else outside Chinese territory would still face a processing gap that Western nations have not closed at commercial scale.8