China’s Rare Earth Spot Exchanges- Strategic Powerhouses or Opaque Price Setters?

Highlights

• China established two rare earth exchanges in Inner Mongolia and Jiangxi province.
• The goal is to enhance control over global rare earth market pricing and supply chains.
• The exchanges focus on different rare earth types:
  • Baotou: Light rare earths
  • Ganzhou: Heavy rare earths
• They operate under state-owned enterprise oversight.
• Challenges faced by these exchanges include:
  • Environmental concerns
  • Market volatility
  • Limited transparency in price discovery

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​China has established two significant rare earth exchanges to enhance its control over the global rare earth elements (REE) market: the Baotou Rare Earth Products Exchange (opens in a new tab) in Inner Mongolia and the Ganzhou Rare Metal Exchange in Jiangxi province. These exchanges serve as platforms for spot transactions of rare earths and minor metals, aiming to bolster China’s influence over pricing and supply chains in this critical sector.

Reuters reported (opens in a new tab) on the emergence of a second exchange in 2020, a spot market, and noted that the Shanghai Futures Exchange (opens in a new tab) (SHFE) was seeking to develop a rare earth futures market.

Background

The Baotou Rare Earth Products Exchange, established in 2014, is located in Baotou, Inner Mongolia, near the Bayan Obo Mining District—the world’s largest rare earth mining site. This location provides strategic access to abundant light and rare earth resources. The exchange facilitates standardized trading and aims to stabilize prices in the volatile rare earth market. ​

In contrast, the Ganzhou Rare Metal Exchange, launched in December 2019, focuses on heavy rare earth elements, such as dysprosium and terbium, which are vital for high-performance magnets used in electric vehicles and wind turbines. Located in Jiangxi Province, a region rich in heavy rare earths, the exchange also trades other minor metals, including molybdenum, tungsten, tin, and cobalt. This diversification aims to enhance China’s pricing power and global influence over these critical materials. ​

Both exchanges operate under the oversight of state-owned enterprises (SOEs), reflecting China’s broader strategy to consolidate its rare earth industry. The formation of the China Rare Earth Group in 2021, through the merger of several major state-owned enterprises (SOEs), exemplifies this approach. Headquartered in Ganzhou, the group integrates various stages of the rare earth supply chain, from extraction to processing, aiming to streamline operations and enforce stricter environmental and production standards, as reported (opens in a new tab) by the Baker Institute.

Challenges

Despite these advancements, the exchanges face challenges, including environmental concerns and market volatility. The extraction and processing of rare earths have led to significant environmental degradation in regions such as Baotou, raising concerns about the sustainability of current practices.

Additionally, China’s recent export restrictions on certain rare earth elements have introduced uncertainties in global supply chains, impacting international markets and prompting calls for diversification of sources. ​ China would counter that these recent restrictions were in response to an American-initiated trade war.

Looking ahead with such volatility and the rush to the “ex-China market,” will China’s rare earth exchanges play a pivotal role in the global supply of critical minerals in the future?  Their success will depend on balancing economic ambitions with environmental responsibilities and navigating the complex dynamics of international trade and geopolitics, as well as the unfolding trade war dynamics.

Summary: No Futures

And what about futures contracts for rare earth elements out of Shanghai?  As of now, the SHFE does not offer futures contracts for rare earth elements, or REEs, like neodymium, dysprosium, or terbium.  Instead, SHFE focuses on more established commodities such as copper, aluminum, nickel, gold, crude oil, and rubber.

To summarize, rare earths in China are traded through two dedicated spot markets—the Baotou Rare Earth Products Exchange in Inner Mongolia (light rare earth elements, REEs) and the Ganzhou Rare Metal Exchange in Jiangxi (heavy rare earth elements, REEs). These exchanges operate under state-linked oversight and are not futures markets.

Despite the strategic value of REEs, factors such as price volatility, limited liquidity, and tight government control have kept them out of SHFE’s offerings, according to all materials Rare Earth Exchanges was able to review.

It appears that Chinese authorities remain cautious, concerned that speculative futures trading could destabilize the prices of critical materials. While the introduction of REE futures has been discussed during past price spikes, no such contracts have been launched on SHFE or any other major global exchange to date.

Are the Two Exchanges Actual Functioning Markets?

Rare earth pricing from China’s two dedicated spot exchanges—the Baotou Rare Earth Products Exchange in Inner Mongolia and the Ganzhou Rare Metal Exchange in Jiangxi—remains opaque and state-influenced, falling short of international standards for transparency and market functionality.

These exchanges operate under tight government oversight, often linked to state-owned giants such as the China Rare Earth Group, with prices shaped more by administrative fiat, export controls, and production quotas than by supply and demand dynamics.

Limited foreign access and low liquidity further hinder genuine price discovery. At the same time, opaque reporting practices—where most trades occur off-exchange and lack third-party verification—undermine trust in published rates. Strategic motivations also influence pricing, as China routinely uses rare earths as a geopolitical lever, reinforcing distortions in global markets.

With no functioning futures market on SHFE or elsewhere, there’s no reliable mechanism for hedging or forward pricing. There are a few Chinese websites that report on pricing, but their accuracy and veracity may fluctuate.  

Ultimately, these spot exchanges centralize trading but do not facilitate transparent, competitive price discovery, posing persistent challenges for global manufacturers and policymakers who rely on stable benchmarks in a strategically vital, China-dominated supply chain.