Rare earth trade détente could undermine Western investments – industry

The White House's announcement of reaching an understanding with China to ease rare-earth export restrictions should be seen as political positioning rather than a concrete trade commitment, industry experts told Platts, part of S&P Global Energy.

China will address US interest in importing rare earth minerals, according to a White House fact sheet issued after a May 15 summit in Beijing between US President Donald Trump and Chinese President Xi Jinping. China did not mention rare earths in its own summary.

Should Beijing follow through on easing export controls after Xi and Trump meet in October, the move could threaten billions of dollars in US government funds invested in rare earth projects outside China, experts said. The potential easing of trade tensions with Beijing could alleviate supply concerns, push down prices, and undermine the economic viability of supply chains outside China as Western projects struggle to compete with lower production costs.

"I think it is noise until we see concrete steps to a more secure supply chain," Ashley Zumwalt-Forbes, nonresident fellow at Rice University's Center for Energy Studies, told Platts. "Realistically, I do not think the Western world or Western supply chains can ever go back to the 'status quo' as we know China can turn off the tap again at any juncture."

China's shipments of rare earth magnets fell 73.4% year over year in May 2025 to 1,239 metric tons, according to China's General Administration of Customs, after Beijing imposed export restrictions in retaliation for US tariffs. Exports have since rebounded to 5,238 mt as of March 2026, although the risk of a new market disruption persists.

Market impact

China accounts for about 60% of global mine production of rare earth elements — required to produce permanent magnets found in everything from consumer electronics and electric vehicles to airplanes and military defense systems — and as much as 91% of global refining and processing capability, according to the International Energy Agency.

"A relaxation of export restrictions runs the risk of pushing prices down, which brings into question the economic viability of ex-China deposits and downstream supply chains," said Chris Berry, founder and president of House Mountain Partners, a supply chain consultancy.

The US and allied nations have committed substantial resources to building alternative supply chains spanning mining to recycling operations. The US government has provided $1.4 billion to USA Rare Earth Inc. to develop the Round Top rare earths deposit in Texas and has taken a $400 million equity stake in MP Materials Corp., which is constructing a heavy rare-earth separation unit at its Mountain Pass mining operations in California and the Independence magnet production facility in Texas.

"Any resolution on export bans or an acceleration of export authorizations would undermine the economics of US projects," Nick Trickett, head of short-term critical mineral analytics at S&P Global Energy CERA, told Platts. "However, it would not derail them, assuming price floors persist and compensation from the US government is provided to manage the higher costs of production or purchases."

Whether that support proves long-lasting to maintain the buildup of alternative supply chains in the face of potential easing of Chinese rare-earth exports remains uncertain.

Current market prices reflect ongoing supply disruptions, and buyers appear willing to pay more for non-Chinese material, at least with the risk of export controls. Platts assessed the dysprosium oxide price at $2,000/kg CIF North America in April, 10 times the average price in China in the same month, according to China's Rare Earth Industry Association. The Platts-assessed terbium oxide price averaged $4,700/kg CIF North America in April, more than five times the China price of $896/kg.

"If China lifts REE export restrictions, the short-term implications would be a potential fall in the prices of REEs, a reduction in supply uncertainty, and the possibility that certain projects may become uneconomic," Greeshma Gadikota, professor of climate change at Lenfest Earth Institute in Columbia University, told Platts. "Investment in REE projects may slow down. However, if there is continued impetus from the US government to advance domestic supply chain resilience, then long-term investment in domestic REE mining projects will continue. Defense-linked supply chains will likely continue receiving support in the near term and the long term."

Industry experts warned that it would be shortsighted to abandon supply chain diversification efforts based on preliminary statements from the Trump-Xi meeting.

"Taking this statement at face value without continuing to deploy capital into a separate, secure supply chain would be akin to sticking our head in the sand," Zumwalt-Forbes said.