Thailand, a key player in Southeast Asia’s manufacturing and export economy, faces potential risks to its supply chains due to China’s recent restrictions on rare earth element (REE) exports. As a hub for industries like automotive, electronics, and renewable energy, Thailand relies heavily on global supply chains, including critical minerals sourced from China, which dominates 60% of global REE mining and 85% of processing.
China has started permitting certain rare earth shipments under its updated export control regulations, but the sluggish approval process poses risks of disrupting global supply chains, industry experts warn.
China’s decision to impose export controls on seven rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—in April 2025 could significantly disrupt Thailand’s industries. This article examines the potential impact of these restrictions, highlights Thailand’s key vulnerabilities, and outlines strategies to minimize associated risks.
Thailand’s Reliance on Rare Earths in Key Industries
Thailand’s economy thrives on manufacturing, particularly in automotive and electronics, both of which depend on rare earths. The country is Southeast Asia’s largest auto manufacturing hub, producing over 1.8 million vehicles annually, including a growing share of electric vehicles (EVs). Rare earths like dysprosium and neodymium are critical for EV motors and batteries, as well as for magnets used in hybrid vehicles. Thailand’s electronics sector, which accounts for 15% of its GDP, relies on rare earths for semiconductors, displays, and components in smartphones and appliances. Additionally, Thailand’s push toward renewable energy, with solar and wind projects, requires rare earths for turbine magnets and energy storage systems.
China’s export controls, enacted in retaliation to U.S. tariffs, have halted shipments of these materials, with exporters awaiting licenses from Beijing’s Ministry of Commerce. This has already caused delays, with lead times for magnet shipments extending from 60 to 120 days. For Thailand, which imports most of its rare earths indirectly through Chinese-processed components or via regional partners like Japan, these restrictions could lead to production slowdowns, higher costs, and supply chain bottlenecks.
Vulnerabilities in Thailand’s Supply Chains
Thailand’s supply chains are particularly vulnerable due to limited domestic rare earth resources and heavy reliance on imports. Unlike Australia or Brazil, which are investing in alternative REE supply chains, Thailand has no significant rare earth mining or processing capabilities. The country’s industries depend on just-in-time manufacturing models, leaving little room for stockpiling critical materials. Smaller manufacturers, which form a significant part of Thailand’s supply chain, lack the resources to secure alternative suppliers or absorb cost increases, estimated at 30% for neodymium magnets.
Moreover, Thailand’s position in global value chains amplifies its exposure. Many Thai factories assemble components sourced from China or Chinese-affiliated facilities in Malaysia and Vietnam. With China processing 90% of global rare earth magnets, disruptions upstream ripple through to Thai production lines. Political instability in Myanmar, which supplies 50% of China’s heavy rare earths, further complicates the situation. Since October 2023, rebel control of Myanmar’s mining regions has slashed exports to China by over 70%, tightening global supply and driving up prices, such as a 21.9% surge for terbium oxide.
Geopolitical and Market Risks
China’s export controls are not just a logistical issue but a geopolitical maneuver, raising concerns about supply chain weaponization. Beijing’s 2010 export ban on Japan caused a tenfold price spike, and similar tactics could hit Thailand indirectly through higher global prices or restricted access via regional partners. Thailand’s neutral stance in U.S.-China trade tensions offers some buffer, but its reliance on Chinese imports and investment—China is Thailand’s largest trading partner—limits its leverage. If China prioritizes domestic needs or escalates restrictions, Thai industries could face severe shortages.
Market dynamics add further pressure. Global demand for rare earths is rising, driven by EV adoption and renewable energy targets. Thailand’s ambition to become an EV hub, with investments from Chinese firms like BYD, hinges on stable REE supplies. However, Chinese exporters now require end-user certificates, complicating access for dual-use technologies like drone motors, which are relevant to Thailand’s emerging defense and tech sectors.
Strategies to Mitigate Supply Chain Risks
Thailand can take proactive steps to reduce its vulnerability to Chinese rare earth restrictions:
Diversifying Supply Sources
Thailand could partner with countries like Australia, which is scaling up rare earth production through companies like Lynas Corporation. Japan, which reduced its reliance on Chinese REEs to under 50% by 2025, offers a model for collaboration. Thailand could explore joint ventures or trade agreements to secure processed rare earths from Australia or Brazil, though this would require diplomatic and financial investment.
Investing in Recycling and Urban Mining
Recycling rare earths from electronic waste and end-of-life products is a viable strategy. Thailand’s electronics industry generates significant e-waste, which could be tapped for rare earth recovery. Startups like Phoenix Tailings in the U.S., aiming to scale recycling to 4,000 metric tons by 2027, provide a blueprint. Government incentives could spur local innovation in this area, reducing reliance on virgin materials.
Building Strategic Stockpiles
Thailand lacks strategic reserves for rare earths, unlike Japan or the U.S., which are expanding stockpiles. Creating a national reserve, even if small, could buffer short-term disruptions. This would require coordination between the government and industry to prioritize critical sectors like automotive and electronics.
Strengthening Regional Cooperation
As part of ASEAN, Thailand could advocate for a regional approach to rare earth security. Collaborating with Malaysia, which hosts Lynas’s processing facility, or Vietnam, which has rare earth deposits, could create a more resilient supply chain. ASEAN’s collective bargaining power could also attract investment from Western firms seeking to counter China’s dominance.
Challenges and Long-Term Outlook
Mitigating these risks is not without hurdles. Developing alternative supply chains takes 10–15 years, and Thailand’s limited mining expertise and environmental concerns could hinder domestic production. Scaling recycling requires significant investment and technological know-how, while regional cooperation faces political and economic barriers within ASEAN. Moreover, Thailand must balance its economic ties with China, which invests heavily in its EV and infrastructure sectors, against the need for supply chain resilience.
In the long term, China’s restrictions may accelerate global diversification, benefiting Thailand if it acts swiftly. The U.S., for instance, has invested over $439 million since 2020 to build domestic REE supply chains, though it remains years from self-sufficiency. Thailand could leverage its manufacturing strengths and strategic location to become a processing or recycling hub, attracting investment from firms diversifying away from China.
Thailand’s supply chains face real but not insurmountable threats from China’s rare earth export controls. While immediate disruptions are likely, with cost increases and delays already impacting manufacturers, the crisis presents an opportunity to rethink supply chain strategies. By diversifying sources, investing in recycling, building stockpiles, and fostering regional cooperation, Thailand can reduce its vulnerability and strengthen its position in global manufacturing. The government, industry, and ASEAN partners must act decisively to ensure that Thailand’s economic engine—its supply chains—remains robust in the face of global uncertainties.
Data reflects insights from web sources up to May 19, 2025, including Reuters, CSIS, and The New York Times.
