Explainer | Five Eyes, One Trading Partner: The Critical Minerals Dilemma New Zealand Is Not Talking About

Written by Asil Kutty

The Invisible Weapon

In an ever-changing world with growing demands for technology and processing, resources and ownership have expanded from being solely economic issues to now being a security issue. New Zealand, being part of the Five Eyes alliance, is supposed to guard and protect it from national security threats, but what if a potential threat is your biggest trade partner? What can a country do to guarantee itself the resources necessary for innovation and growth while also trying to maintain peace and balance its complex relationships? How can NZ ensure it will not be vulnerable in the future?

More Than Just Mining

Minerals have consistent internal structures as opposed to rocks, so they are more valuable. Because they are found in the earth, minerals are usually mixed with other rocks. Processing and refining are done to the mixture in order to isolate the desired minerals (National Geographic, 2023). Like dirty water, we cannot really do much with it, so we purify it to get clean, usable water.

The industries and technologies that depend on critical minerals are:

• Wind and Solar Power

• Electric Vehicles and Battery Storage

• Devices and Computing (AFSIC - Investing in Africa, n.d.)

Everyday applications of critical minerals:

• Batteries (cobalt, lithium, manganese)

• Transportation (aluminium, nickel, cobalt)

• Energy (aluminium, manganese, lithium) (Bureau of Ocean Energy Management, n.d.)

Defence applications of critical minerals:

• Multi-purpose integrated chemical agent alarms, sonar transducers, radar systems and enhanced gamma-ray radiation detection devices (Beryllium, Titanium, Cobalt)

• Lasers, monitors, avionics (Gallium, Germanium, Yttrium)

• Precision-guided missile systems, high-performance magnets, sensors, and guidance technologies (Beryllium, Tungsten, Cobalt) (SFA (Oxford), 2026)

China processes and refines 98.7% of gallium, 73.9% of germanium, 95.2% of graphite, 95% of manganese, and 92.1% of rare earths (International Energy Agency, 2025). China leads in germanium production and makes up 99% of worldwide low-purity gallium production. The remaining producers besides China are Japan and Russia. Germany, Hungary and Kazakhstan all stopped producing by 2016. 

Some organisations treat rare-earth elements with so much importance that they are locked behind vaults and accompanied by armed security. China almost has a monopoly in refining rare-earth elements because the nation recognised their value from as early as the 1960s (Feng, 2025). From the 1980s, China identified which minerals matter for the future economy (electric vehicles, microchips, green energy, weapons systems) well before competitors did. It also acquired control of mines, processing, and refining infrastructure. China engaged with African countries, offering investment, jobs, and tax revenue in exchange for mine access in countries like Congo, Zimbabwe, Zambia and Mali. China now controls about 85-98% of the industry associated with rare-earth elements, including mines and refineries (Kalisky, 2024). 

From 1990 onwards, the Chinese government designated rare-earths as a strategic protected mineral. The Magnequench acquisition is an example of a strategic move, where two Chinese companies bought a US-based industry leader in rare-earth magnets. They proceeded to keep the company in the US long enough to satisfy the government’s conditions, then relocated the entire operation and its technology to China (Lau, 2022). For many Western countries, it was cheaper to import refined rare-earth elements from China than to develop the necessary infrastructure. The United States’ sole large rare-earth mine, Mountain Pass in California, shut down because it was unable to compete with China’s low costs. Matching China’s strength would require strategic partnerships, generous subsidies, and technological innovation (Daniel, 2025), meaning that it will most likely take decades for Western countries to adequately catch up. 

When Supply Becomes Strategy

Export controls are regulations on what can leave a country’s borders. Sanctions are broader restrictions on trade or financial transactions with specific countries or entities. Traditionally, such actions have been taken against adversarial countries, but the distinction in this case is that China’s mineral restrictions are a situation where a developing country is taking advantage of its resource position against developed countries. Historically, export controls were commonly used to limit weapons proliferation. Arguably, the focus has shifted towards technology. The US restricts chip exports to China, and China restricts mineral exports to the US and its allies. However, overusing these tools can also create harm on the side using them. When the US revoked the licenses of technological companies Intel and Qualcomm to sell chips to China, American companies were hurt in the process (Wang et al., 2025). Actions like export controls can be appealing to countries that have an aversion to military confrontation or to countries for which military confrontation is genuinely unfeasible or unrealistic. China’s export restrictions are actions of deliberate economic statecraft instead of just simple trade policy; they are using economic tools to influence the behaviour of other nations. 

China introduced strict rare-earth export controls in April 2025. Instead of applying per shipment, Chinese producers with approval can ship using year-long permits to specific customers. This basically means that China is deciding who gets supplied and who does not. The controls include raw materials, components, equipment, and technologies used in processing rare earths and making magnets, effectively making it harder to construct alternative supply chains outside of China (Astute Group, 2026). The license system means that approved and established customers get a more stable supply, while those who are not approved are at the mercy of applications, which can be delayed or denied. China is rewarding those who are dependent on it and trying to cut diversification attempts, creating an incentive to stay inside the Chinese supply chain. 

The first instance of China weaponising rare earth elements was in 2010, during a disagreement regarding a fishing trawler, leading to a ban on rare earth elements. In April 2025, China imposed export restrictions on seven rare earth elements. There were also restrictions on germanium and gallium in 2023, as well as a ban on rare earth element extraction and separation technologies. It is argued that the US could have seen the relatively recent export restrictions coming based on China’s past actions involving rare earth elements (Baskaran & Schwartz, 2025). 

After China introduced export controls on rare earth elements and any related compounds, automobile manufacturers in the US, Europe, and other countries struggled to acquire magnets, with a few shutting down factories entirely. The prices of rare earths in Europe were almost six times higher than those in China. The export controls also make it harder for other countries to diversify the supply chain for rare earths (Kim et al., 2025). The robotics industry has also taken a hit due to the export controls, but there is a major risk for defence companies. Jets and submarines require a significant amount of rare earths (Meredith, 2025). This is a risk, especially if one country’s weapons systems are built on supply chains at the mercy of another. 

The October 2025 package of export controls is both comprehensive and extreme. Based on Announcement 62, a Chinese engineer cannot legally teach rare-earth separation techniques to a foreign company without a government licence. So they are not just restricting the product but also the expertise. The Foreign Direct Product Rule from Announcement 61 states that any product made anywhere in the world that contains 0.1% or more of a Chinese-origin rare earth by value would now require the Chinese government’s approval to be exported to a third country. There is also a list of entities placed on China’s Unreliable Entity List, including BAE Systems, AeroVironment, Teledyne, FLIR, and TechInsights. Western defence and intelligence companies have been placed on this list, and this means that they are now prohibited from importing or exporting with China, and Chinese individuals and organisations are prohibited from trading with them. The US, in response to these additional restrictions, imposed an additional 100% tariff on all Chinese goods, bringing the tariff to about 130% (Underwood, 2025). It would be safe to say that most countries are now looking at domestic production and investment, if not at least diversification, in regards to the rare earths supply chain. 

The Balancing Act for New Zealand 

The Five Eyes originated from the UK and the US sharing intelligence to combat the Axis powers (Germany, Italy, and Japan). The alliance was created with the UKUSA agreement in 1946, and then Canada, Australia, and New Zealand joined later on. The alliance allows these countries to share information on terrorism, threats, and espionage (Richardson, 2025). NZ has had to juggle between this alliance and China. It was the first to sign a free trade agreement with China and has repeatedly stopped just short of full alignment with its Five Eyes partners on China-related political statements. For instance, it dropped “genocide” from the Uyghur motion, sat out the Hong Kong security law declaration, and expressed discomfort about Five Eyes “going beyond intelligence sharing” (Schleich, 2021, p.1). NZ’s Five Eyes responsibilities also involve surveillance of Pacific Island nations, and many of those nations have deep ties with China (Schleich, 2021). 

At 11.1 billion USD in exports, China was NZ’s biggest trading partner in 2024. In the same year, NZ exported about 45 billion USD in total, meaning China received about 25% of all our exports. The main exports were dairy and animal products, foodstuffs, fruits, and wood products (Observatory of Economic Complexity, n.d.). It makes sense that NZ would want to be cautious, considering that China is its biggest trading partner. 

New Zealand’s official Government Minerals Strategy was published in January 2025 by MBIE. The document is structured around three outcomes (Productive, Valued, and Resilient). NZ has potential deposits of rare earth elements on the West Coast, Marlborough, and on the Chatham Rise. It also has potential antimony, vanadium, titanium, lithium, and heavy mineral sands. The main gap is that almost none of the resources are being developed at a scale that matters, and the ability for processing and refining is basically nonexistent (Ministry of Business, Innovation and Employment [MBIE], 2025). Interestingly, there is no mention of China at all in the document. Most importantly, NZ has an official minerals strategy that is aware of global supply chain concentration risks. 

According to the Ministry of Foreign Affairs and Trade, NZ and China established formal diplomacy in December 1972. China is also a significant partner economically, as it has been NZ’s biggest trading partner since 2017. NZ also had duty-free access to more than 97% of China’s tariff lines by 2016 (Ministry of Foreign Affairs and Trade, n.d.). 

As of recently, NZ joined the IMSP (International Minerals Security Partnership) (New Zealand Government, 2025). This means that NZ is trying to diversify its supply chains for minerals away from China. If China and NZ enter a dispute and the latter is cut off from mineral resources, this would cause supply disruptions and the challenge of finding alternative suppliers and buyers. Even if NZ did find buyers, they would most likely be more expensive and less efficient than China. 

Summary

China’s dominance in the industry was not accidental but actually formed by decades of deliberate strategy. The monopoly that China has on processing allows it to put other countries in a chokehold through export restrictions, making NZ’s position unstable. New Zealand is part of the Five Eyes alliance, but they economically depend on China. The nation being silent on specific issues may not be a sign of incompetence or weakness, but actually a strategy. If NZ criticises China, they risk facing economic retaliation from its biggest trading partner. If NZ is not hard enough on China (like the US may expect it to be), then allies in the Five Eyes might question its reliability. The main challenge is maintaining both relationships without letting either one undermine the other. From a minerals perspective, the tension is specifically about supply chains and security. China dominates mineral processing, but countries in the Five Eyes want supply chains that are not heavily based in China. They want diversity so that they are not dependent on a single supplier. This could restrict access during political or security tensions, potentially damaging or wreaking havoc on the country’s economy. As a result, New Zealand must carefully balance its economic reliance on China with its strategic commitments to the Five Eyes, navigating an increasingly difficult path that protects both its security interests and economic stability.

References

AFSIC - Investing in Africa. (n.d.). Applications of Critical Minerals in Industry. https://www.afsic.net/applications-of-critical-minerals-in-industry/

Astute Group. (2026, March 11). China streamlines rare-earth export licensing as governments race to secure critical minerals supply. https://www.astutegroup.com/news/general/china-streamlines-rare-earth-export-licensing-as-governments-race-to-secure-critical-minerals-supply/

Baskaran, G., & Schwartz, M. (2025, April 14). The Consequences of China’s New Rare Earths Export Restrictions.  Center for Strategic and International Studies. https://www.csis.org/analysis/consequences-chinas-new-rare-earths-export-restrictions

Bureau of Ocean Energy Management. (n.d.). Uses of Critical Minerals. https://www.boem.gov/marine-minerals/critical-minerals/uses-critical-minerals

Daniel. (2025, January 24). Breaking Down China’s Rare Earth Monopoly: Why Western Companies Struggle and What Can Be Done? Rare Earth Exchanges. https://rareearthexchanges.com/news/rare-earth-supply-chain-10/

Feng, E. (2025, July 23). How China came to rule the world of rare earth elements. NPR. https://www.npr.org/2025/07/23/nx-s1-5475137/china-rare-earth-elements

International Energy Agency. (2025). Executive Summary - Global Critical Minerals Outlook 2025. https://www.iea.org/reports/global-critical-minerals-outlook-2025/executive-summary

Kalisky, Y. (2024, December). How China is acquiring control of global metal & mineral markets. Institute for National Security Studies. https://www.inss.org.il/strategic_assessment/metal/

Kim T.-Y., Dhir, S., Dasgupta, A., & Scanziani, A. (2025, October 23). With new export controls on critical minerals, supply concentration risks become reality. IEA. https://www.iea.org/commentaries/with-new-export-controls-on-critical-minerals-supply-concentration-risks-become-reality

Lau, C. (2022, April 1). How China came to dominate the supply chain of rare earths and critical minerals. The Graduate Press - La Gazette de la Paix. https://thegraduatepress.org/2022/04/01/how-china-came-to-dominate-the-supply-chain-of-rare-earths-and-critical-minerals/

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