The Complex Dynamics of Rare Earth Element Pricing: A Review of the Literature

Highlights

• China’s dominance in rare earth extraction gives it unprecedented control over global REE pricing and market volatility.
• Geopolitical tensions and policy shifts directly impact rare earth element prices, affecting technological and defense industries worldwide.
• Future REE market stability depends on developing alternative supply chains and understanding complex geopolitical risk factors.

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Talia Buckhouse’s literature review on rare earth element (REE) pricing explores the geopolitical, economic, and structural forces shaping the rare earth market. The core hypothesis asserts that China’s dominance in rare earth extraction and processing gives it unparalleled influence over REE pricing and that pricing fluctuations are not just market-driven but heavily influenced by geopolitical tensions. The study examines how China’s policy shifts—such as its 2010 REE export restrictions and its 2024 ban on processing technology exports—have created extreme volatility in REE prices, impacting global supply chains and technological industries.

Key Supporting Evidence

The paper highlights historical pricing events, such as the 2010–2011 REE price surge following China’s embargo on Japan, showing that supply disruptions driven by political disputes can significantly impact global rare earth markets. The analysis also incorporates the Geopolitical Risk Index (GPR), which tracks political instability and its correlation with commodity price volatility, demonstrating that rare earth pricing is particularly sensitive to geopolitical uncertainty, such as the U.S.-China trade war, Brexit, and military conflicts like the Russia-Ukraine war.

Further, the paper provides economic case studies, such as how China’s rare earth production quotas and environmental regulations have influenced pricing since 2017, contributing to the rise in demand for electric vehicle (EV) components and defense-related applications. These findings reinforce the argument that China’s regulatory decisions have global economic consequences far beyond simple supply-and-demand mechanics.

Limitations and Biases

While the review convincingly ties China’s policy choices to REE price movements, it relies heavily on China as the central actor in market manipulation without thoroughly evaluating Western policy responses. The study does not sufficiently assess whether the lack of U.S. domestic REE production capacity or slow Western investments in alternative supply chains contribute equally to price instability.

Additionally, while the Geopolitical Risk Index provides valuable predictive insights, it is fundamentally media-driven, meaning that its reliability hinges on the accuracy and objectivity of news sources reporting on geopolitical events. This introduces the potential for bias, particularly in assessing perceived versus actual threats in global markets.

Critical Questions Unanswered

The paper raises important yet unresolved questions about the future of rare earth pricing:

• Can the U.S. and its allies develop a viable REE supply chain to counteract China’s dominance, or will they remain vulnerable to pricing shocks?
• To what extent does speculation in financial markets amplify REE price fluctuations beyond geopolitical risk factors?
• How might new rare earth discoveries or technological advancements in recycling impact future pricing trends?

Conclusion

Buckhouse’s review provides a comprehensive analysis of REE pricing trends, emphasizing China’s central role in global supply chain dynamics. However, it does not fully explore the structural weaknesses within Western economies that exacerbate dependence on Chinese REE supply.

As demand for REEs potentially grows, particularly for green energy and defense applications, nations looking to stabilize supply chains must account for geopolitical risks and invest in long-term strategies to secure alternative sources and processing capabilities.