China's tougher rare earths rules put pressure on supply

China's decision to place 10 US companies under tightened export restrictions could further complicate trade flows, widen price gaps between Chinese and Western markets and increase pressure to build non-Chinese supply chains, industry analysts said.

China's Ministry of Commerce announced June 22 that affected firms, including MP Materials and USA Rare Earth, were added to China's export control list, effectively barring exports of Chinese-origin "dual-use items" to those companies.

The announcement from Beijing comes as leaders from the Group of Seven nations on June 17 set targets to limit imports of rare earths and permanent magnets from any single country outside the bloc as part of efforts to reduce reliance on China.

"This is another timely reminder of the urgency of defanging China's mineral weapon," Conor Bernstein, vice president of communications at the National Mining Association, said in a statement to Platts, a part of S&P Global Energy. "Beijing has only doubled down on its use of mineral supply chains as tools of geopolitical leverage."

He added that the tightened export restrictions underscore the need to build secure supply chains outside of China.

China's move appears more "like a shot across the bow" aimed at underscoring its market leverage, said Chris Berry, a battery metals supply chain analyst with House Mountain Partners.

The restrictions not only stop Chinese exporters from selling to these companies, but it also makes any trader who moves China-origin material to a listed firm responsible, said Ashley Zumwalt-Forbes, a nonresident fellow at the Baker Institute for Public Policy.

"That is bad news for traders," Zumwalt-Forbes said. "The rule pushes the compliance burden onto everyone in the chain, so a trader now has to be sure China-origin material will not end up with a listed company, even several steps down the line."

This could cause traders to walk away from transactions that may involve these firms, bolstering the case for building a stronger independent supply chain, she said.

"That freezes legitimate deals, widens spreads and slows an approval process that was already slow," Zumwalt-Forbes said.

The market is already separating into a China price and a non-China price, Zumwalt-Forbes said, pointing to how dysprosium delivered to North America ran about 4.4 times the Chinese domestic price across 2025. To help secure domestic supply, the Department of Defense also set a $110/kilogram price floor for rare earth neodymium-praseodymium in the MP Materials deal, she said. MP Materials, the largest rare earth producer in the US, entered into a public-private partnership with DOD last year to increase rare-earth magnet manufacturing capacity.

"Spreads and floors like that are why we need a real non-China benchmark rather than financing each project one floor at a time," Zumwalt-Forbes said.

USA Rare Earth is also working to boost US production of rare earths and is developing a refined metals and magnet manufacturing facility in South Carolina. The company recently entered into a deal to acquire Brazil's Serra Verde Pesquisa E Mineracao.