The Two-Price World of Rare Earths

There are a few quotes throughout history that stick with us. 

One of those came from a Chinese Statesman and revolutionary named Deng Xiaoping when he visited the Baotou rare earth mine in Inner Mongolia. 

Looking out on the mine, he ominously said: “The Middle East has oil, China has rare earths.”

Those words ring true to anyone that understands the situation. 

Up until the 1980s, the United States was the undisputed leader in rare earth production. 

Then the work moved to China, where it was cheaper and environmental rules were looser. By 2025, China was mining about 69% of the world’s rare earths and handling up to 90% of the processing.

Beijing put that position to work in April 2025, when it began requiring export licenses for seven rare earths, including dysprosium, terbium and yttrium.

Six months later, it went further and added five more elements to the list.

Then came a trade truce between Washington and Beijing, and China suspended those October measures until November 10th.

But despite the broader trade truce that now runs to January 10, 2027, one peculiar note I’ll make is that it doesn’t include rare earths. And as of today, no extension had shown up on Beijing’s list.

So on paper, the pause still ends November 10th. That’s less than three weeks from now!

That’s when things get chaotic. 

So let’s start with what’s already in effect. 

The April controls were never suspended even with the truce in place, and China’s rare earth exports fell 9.6% in the first nine months of the year, to about 43,700 tonnes.

Looking at the prices, however, and things start to get strange.

This week, dysprosium prices were trading around $1,074 a kilogram in Rotterdam; weigh that against the $227/kg in China. For yttrium, we’re looking at about $9/kg in China versus $1,150/kg everywhere else. 

Yes, that means everyone else is paying 100x more for it. 

Again, that huge gap exists because the cheaper Chinese price is only available if Beijing hands you a license. 

Believe me, nobody has felt that pain worse than Japan, whose dysprosium imports from China fell 82% in the first half of the year, while its yttrium imports crashed 74%. In fact, Japan has received almost no yttrium since November, after its prime minister commented on defending Taiwan.

I know yttrium may sound like a footnote, but this is the key ingredient that goes into the thermal coatings that protect jet engines from extreme heat. 

If you don’t think that matters much, keep in mind that a shortage earlier this year forced production stoppages in the U.S. coating supply chain.

And now, buyers are already acting like it’s the worst case scenario. 

Erbium is one of the five elements in the suspended group, and its price in Europe climbed roughly 50% between early June and August as manufacturers stocked up ahead of the deadline.

The shipments that DO go out aren’t spread evenly, either. 

Magnet shipments from China to the U.S. fell 22% in January and February, while shipments to the EU rose 28%; China is only delivering about two-thirds what it promised us. 

I know, I know, these are tiny parts. Rare earths are roughly 40% of a magnet’s cost, yet under 1% of a car’s value, and tripling their price would only increase a vehicle’s cost by roughly 0.1%.

That’s fair, yet this was never about prices. It doesn’t matter what costs are if you can’t get the part. 

And without it, those cars, jet engines, and robots simply don’t get built. 

The clock is quickly ticking down, too. 

As soon as we ring in the new year, a Pentagon rule takes full effect that bars magnets with any China-linked stage in the supply chain from defense systems.

Mind you, the West is at least trying to hold off a crisis. 

Remember, MP Materials is ramping toward 3,000 tonnes a year of magnets at its Texas plant, with a second plant expected to take U.S. capacity to about 10,000 tonnes around 2028. 

Meanwhile, China’s largest magnet maker alone is targeting 60,000 tonnes by 2027.

That’s a big gap, no matter how you look at it. 

This is why the Trump administration is doing something that Washington rarely does — they’re naming their own price. 

In Brazil, the Pentagon has raised its commitment to $750 million as part of a $1.55 billion vehicle backing the Serra Verde mine, and set a floor of $2,050/kg for terbium, $575/kg for dysprosium and $110/kg for NdPr (the main magnet material).

Granted, MP Materials has had its own floor of $110/kg of NdPr baked in since July 2025, which runs for ten years.

Meanwhile, the dysprosium floor sits well above China’s price, yet far below the Rotterdam price. 

Trust me, that’s not by accident, and the last time a U.S. producer tried this on its own, Chinese price cuts helped push Molycorp into bankruptcy in 2015.

Let’s face it, a floor guarantees a price, but it doesn’t dig the mine or build the plant. 

Whatever Beijing decides on November 10th, the gap between the two price worlds will still be there… and so will the floors. 

The good part is that the companies that can deliver heavy rare earths from outside China are on the right side of that gap.

Perhaps it’s time you find out which ones are in the perfect position.