For years a decisive slice of global industry accepted a dependence that seemed hard to avoid. As long as supplies stayed abundant and prices competitive, the problem looked largely theoretical. Then the balance began to shift.
When a raw material becomes a tool of political pressure, its value no longer depends only on scarcity or industrial demand. Security of supply, production continuity and governments’ willingness to prop up activities that might not be economically viable under normal conditions all come into play.
This is where a paradox emerges. The more a country uses its dominance to extract immediate advantages, the more it pushes customers and competitors to build alternatives. The process can take years, but once underway it tends to reshape the structure of the market profoundly.
Why rare earths became strategic
Rare earths comprise 17 elements used across numerous industrial applications. Their strategic weight is especially high in the production of permanent magnets, used in electric motors, wind turbines, aerospace systems, industrial automation, data centers, medical equipment and military technology.
Neodymium-iron-boron (NdFeB) magnets rely mainly on neodymium and praseodymium. Some applications add dysprosium and terbium, needed to maintain performance at high temperatures. These materials are an essential component of industrial products worth far more than the raw materials that go into them.
The vulnerability stems precisely from that imbalance. A relatively limited quantity of rare earths can constrain the production of cars, turbines, robots, electronic systems and defense components. A supply disruption can therefore have consequences far broader than the economic value of the blocked material.
China’s dominance isn’t just about mines
China accounts for roughly 60% of the world’s mining of the rare earths used in magnets. Its position becomes even more dominant, however, in the later stages of the supply chain.
China’s share is estimated at around 91% in separation and refining, and reaches roughly 94% in the production of sintered permanent magnets. Beijing’s main competitive edge, then, does not lie solely in the availability of deposits.
The real barrier to entry is industrial. Rare earths must be separated through complex chemical processes, transformed into oxides, metals and alloys, and then used to produce magnets with consistent characteristics that meet the specifications customers demand.
Opening a mine in Australia, Brazil, Africa or the United States does not automatically create an independent supply chain. The extracted concentrate can still be shipped to China for downstream processing. In that case the main bottleneck remains essentially unchanged.
The export curbs showed Beijing’s leverage
The controls China introduced on exports of certain heavy rare earths, their compounds and some magnets had rapid effects.
Shipments fell, and some US and European automakers had to scale back or temporarily suspend part of their production. Flows later resumed as licenses were granted, but with less predictable timing, quantities and conditions.
The consequences also showed up in prices. Dysprosium and terbium traded outside China reached, in some periods, values far above quotations on China’s domestic market.
The premium buyers paid does not reflect scarcity alone. It also incorporates the value assigned to a supply not directly dependent on Beijing’s authorizations.
The effectiveness of China’s weapon therefore remains high in the short term. The automotive sector, electronics, defense, aerospace and digital infrastructure can all suffer significant consequences even from relatively brief interruptions.
Why that leverage could weaken
The main limit of the restrictions is the reaction they provoke.
When supplies are used as a geopolitical tool, building alternative capacity becomes a strategic priority. Activities once deemed too costly can secure public funding, long-term contracts, price guarantees and purchase commitments.
Supply-chain security thus takes on a value of its own. Companies begin accepting higher costs in order to reduce the risk of disruptions. Governments step in to keep new producers from being pushed out of the market by a later drop in prices.
This mechanism had already appeared after the 2010 crisis between China and Japan. Tokyo backed new suppliers, encouraged recycling and promoted technologies capable of using smaller quantities of rare earths. In the following years, Japanese demand fell sharply from previous levels.
Today’s diversification follows a similar logic, but involves a far larger number of countries and companies.
Lynas Rare Earths: a supply chain spanning Australia and Malaysia
Lynas Rare Earths is one of the leading rare earth producers outside China. The company mines the ore at Mt Weld, in Western Australia, and processes it through plants in Australia and Malaysia.
The group has progressively extended its activity from the production of light rare earths to the separation of dysprosium and terbium. That is a meaningful step, because these two heavy rare earths represent some of the most vulnerable points in the Western supply chain.
Malaysia renewed the operating license for the Lynas plant for ten years, reducing uncertainty over the continuity of operations. The company has also launched a project with a South Korean partner to build a permanent-magnet factory with a planned capacity of 3,000 tons per year.
The industrial goal is to move from simply producing separated oxides to a broader role in the magnet supply chain. It is precisely in that final stage that the gap with China remains widest.
Over the past three months, several brokerages have kept a positive view on the stock while trimming some price targets.
On July 23, JPMorgan reiterated its Buy rating and lowered its price target from A$22 to A$18.50. Relative to the A$15.04 quotation recorded on August 4, 2026, the target was 23.0% higher.
The same day, UBS kept its Buy rating, moving its target from A$23.45 to A$22.75. The gap versus the reference quotation was 51.3%.
On July 6, Jefferies reiterated Buy and cut its target from A$25.50 to A$22, a level 46.3% above the A$15.04 quotation on August 4.
Maintaining favorable ratings alongside lower targets signals a nuanced stance. The brokerages recognize Lynas’s strategic role, but also weigh the costs of the expansions, the ramp-up timelines and the volatility of rare earth prices.
Price targets are valuations built on assumptions made by individual brokerages. They are neither prices the stock is destined to reach nor recommendations addressed to any single investor.
MP Materials builds a US supply chain
MP Materials operates Mountain Pass, in California, one of the main rare earth deposits in the Western Hemisphere.
The company is trying to transform itself from a mining producer into an integrated group. The project spans extraction, separation, refining and magnet production in the United States.
At Mountain Pass, a plant dedicated to the separation of heavy rare earths is under development. The initial planned capacity for dysprosium and terbium is around 200 tons per year.
In Texas, MP Materials has begun producing magnets and is building a new industrial hub. Once the expansions are complete, total capacity should reach 10,000 tons per year.
The project is backed by an agreement with the US Department of Defense. The structure includes public investment, financing, price floors and purchase commitments.
These measures aim to protect the new supply chain from the risk that a fall in prices could make the US plants economically unsustainable. Without long-term guarantees, alternative producers could find themselves in trouble after bearing the high costs of building new capacity.
The recommendations published over the past three months are also mostly favorable, but they must be read in light of the stock’s high volatility.
On July 29, JPMorgan kept its Buy rating and lowered its price target from $75 to $60. Relative to the $43.85 close on August 3, 2026, the target was 36.8% higher.
On July 16, Barclays reiterated Buy and cut its target from $69 to $65, a 48.2% positive gap.
On July 8, Morgan Stanley kept Buy and raised its price target from $70 to $71.50. The distance from the reference quotation was 63.1%.
On June 22, BofA Securities had reiterated Buy with an $85 target, 93.8% above the $43.85 used as the basis of comparison.
On June 1, Needham had initiated coverage with Buy and an $81 target, 84.7% higher.
The wide percentage gaps also reflect the stock’s volatility and the distance between the current quotation and levels reached previously. The cuts by JPMorgan and Barclays further show that a positive stance does not eliminate doubts about timelines, costs and the actual commercial start-up of the new plants.
Solvay and Europe’s refining bottleneck
In Europe, one of the most advanced projects is at Solvay’s plant in La Rochelle, France.
The facility has expertise in rare earth separation and is one of the few European sites potentially able to process both light and heavy elements on an industrial scale.
The company has signed an agreement to receive from Brazil raw materials containing neodymium, praseodymium, dysprosium and terbium. The supplies should help reduce dependence on materials tied to the Chinese supply chain.
Solvay aims to launch the industrial separation of dysprosium and terbium and maintains the goal of covering, by 2030, a significant share of Europe’s demand for magnet materials.
The project remains contingent on the availability of raw materials, the conclusion of definitive agreements and the ability to guarantee regular industrial production.
In Solvay’s case, brokerage ratings cover the entire chemical group and not solely its rare earth activities.
On July 31, Berenberg kept its Sell rating and cut its target from €25 to €24.50. Relative to the €26.56 quotation on July 31, 2026, the target was 7.8% lower.
On July 20, Morgan Stanley reiterated Sell, raising its target from €21 to €23. The new value remained 13.4% lower.
On July 17, Bernstein SocGen Group kept its Hold rating and lowered its target from €26.60 to €26.20, a 1.4% negative gap.
On July 8, Kepler Cheuvreux reiterated Buy and cut its price target from €32 to €29. The target was 9.2% above the reference quotation.
On June 10, Deutsche Bank had upgraded its rating to Hold, raising its target from €23.50 to €26. The value was 2.1% below the July 31 close.
Analysts’ caution does not necessarily contradict the strategic value of the La Rochelle plant. Solvay operates across numerous chemical segments, and the overall valuation also depends on industrial demand, energy costs, the profitability of its other businesses and the general trend of the sector.
The cost problem
Rare earth diversification is not only a technological question. It is also an economic one.
Plants built outside China must bear higher costs, longer permitting processes, stricter environmental requirements and generally smaller production scales.
There is also an imbalance in the composition of deposits. The most sought-after rare earths are extracted alongside less profitable materials, such as cerium and lanthanum. A plant may produce limited quantities of dysprosium or terbium while simultaneously ending up with large volumes of other elements that are harder to place.
A new supply chain therefore cannot rely solely on rising prices during emergency phases. It must be able to survive even when supplies return to normal and quotations fall.
For that reason, governments are deploying price floors, public financing, multi-year contracts and purchase commitments. The continuity of these tools will be decisive in preventing alternative plants from being scaled back once the crisis ends.
The role of recycling and innovation
Dependence can also be reduced through more efficient use of resources.
Companies can cut the quantity of dysprosium and terbium used in magnets, develop different technologies or design motors that require smaller amounts of rare earths.
Recycling represents another possibility. Electric vehicles, wind turbines and industrial equipment contain magnets that, at the end of their working life, can become a secondary source of materials.
The potential is significant, but the timelines remain long. Many of the products in use today have not yet reached the end of their operating cycle. Collection systems, specialized plants and processes capable of recovering materials suitable for producing new magnets are also needed.
China’s leverage stays strong, but less absolute
China retains a dominant position in refining and magnet production. In the short term, the restrictions can still trigger price increases, production stoppages and difficulties for entire industrial sectors.
The situation, however, is different from fifteen years ago. Lynas has built commercial production outside China, MP Materials is developing an integrated supply chain in the United States, and Solvay is preparing the industrial separation of heavy rare earths in Europe.
New projects in Australia, Brazil, Africa, Malaysia and other countries add to these initiatives. The dependence is not disappearing, but China’s monopoly is progressively becoming less absolute.
The real unknown concerns Western governments’ ability to sustain support over time. Mines, chemical plants and magnet factories take many years to come fully online. Discontinuous policies would risk interrupting the process before the new supply chains reach a sustainable scale.
What to watch in the coming years
To gauge the sector’s actual evolution, it will not be enough to count announcements or approved projects.
What will matter is the concrete start-up of the plants, the quality of the materials produced, qualification with industrial customers, the continuity of supplies and the ability to keep costs compatible with the market.
Analysts’ ratings must also be read in context. Lynas and MP Materials offer direct exposure to the construction of alternative supply chains, but also to execution risks and price volatility. For Solvay, rare earths are instead one component of a far more diversified industrial group.
The most balanced conclusion is that China’s weapon is losing part of its force over the long term, precisely because its use accelerates the construction of alternatives. In the short term, however, Beijing still retains the ability to constrain strategic industrial sectors.
Editor’s note
This article was originally published in Italian on money.it by Gerardo Marciano on August 04, 2026 as «Cina sotto pressione sulle terre rare: 3 gruppi stanno cambiando la filiera globale». It has been translated and adapted for an international audience by the Money.it International desk.
