Highlights

• Heavy rare earth prices surge due to Chinese export restrictions.
• Impact on critical industries like defense and electric vehicle manufacturing.
• Western nations face cyclical market manipulation by China.
• China's strategic goals include controlling global rare earth supply and acquiring distressed assets.
• Current geopolitical tensions highlight the urgent need for coordinated industrial strategies.
• Need to counter China's rare earth market dominance.

Prices for heavy rare earths like dysprosium and terbium have surged to near-record highs following aggressive Chinese export restrictions, as reported by Nikkei Asia. These metals, critical for defense systems and electric vehicle motors, tripled in price from April to May, once again reminding Western miners of the boom-bust cycle orchestrated by China's state-backed supply dominance.

This price spike along with trade war and emergency orders and 232 action in the United States has reawakened exploration and financing activity across North America and Australia, but the cycle is well-worn: when prices rise, Western capital flows in; when China chooses, the market floods with cheap supply, crushing margins and bankrupting competitors. The strategic goal is clear—weaponize scarcity to consolidate market share and then acquire distressed Western assets at fire-sale prices.

The stakes have never been higher. China's recent curbs have halted, in a few instances, auto production lines in Japan, the USA, and even India, not to mention European supply chains. Yet, Western governments remain reactive, rather than proactive. While Australia’s Lynas is reporting a breakthrough in heavy rare earths processing, it remains isolated without coordinated procurement, price stabilization tools, or long-term demand guarantees. MP Materials is in the early stages of a powerful mine-to-magnet capability, but time is still needed, along with execution.

China’s rare earth playbook mirrors Mao’s “protracted war (opens in a new tab)” strategy: economic attrition until control is achieved. Without an industrial strategy to counter this tactic—through synchronized stockpiling, joint procurement, and downstream investment—Western nations risk repeating the same cycle of dependence.