Rare-Earth Prices Surge as China Tightens Export Controls on Japan

Rare-earth mineral prices have surged to record levels in recent weeks, driven by China's tightened export controls against Japan and increased global demand for defense manufacturing. The price volatility is affecting critical materials essential for electric vehicle motors, medical equipment, and military applications.

Dysprosium, a key component in EV magnets, hit $960 per kilogram in Europe according to British research firm Argus Media, while terbium reached $4,000 per kg. Both minerals have achieved all-time highs for two consecutive weeks, with data tracking back to 2015. Yttrium, used in medical devices and LEDs, rose sharply to $425 per kilogram as of Thursday, up from $260 at the end of December. Gallium, critical for radar and missile systems, traded at $1,600, reaching record highs since early January.

China's export restrictions appear to be retaliatory measures following Japanese Prime Minister Sanae Takaichi's November comments about a potential Taiwan crisis. The Chinese government designated rare earths as strategic resources and announced in early January that it would tighten export controls on dual-use items bound for Japan.

Most rare-earth production is concentrated in China, giving the country significant leverage over global supply chains. Following trade negotiations with the United States last fall, China had postponed imposing rare-earth export restrictions, which led to some price stabilization toward the end of 2025. However, the recent tightening has reversed this trend.

"In response to the recent tightening of restrictions on Japan, some companies appear to be scrambling to secure inventory," said a source at a specialized trading company. The surge in global defense spending is also contributing to market pressures, with demand for yttrium particularly strong in defense and electronics sectors.

Yoshikiyo Shimamine, senior fellow at the Dai-ichi Life Research Institute, noted that "rare-earth prices are likely to remain volatile at high levels for the time being." The situation underscores Japan's ongoing efforts to diversify its rare-earth supply chain and reduce dependence on Chinese sources, a challenge that has persisted for years.

The price increases highlight the strategic importance of rare-earth minerals in modern technology and defense systems, as well as the geopolitical leverage that control over these resources provides. As tensions between China and Japan continue, the rare-earth market is likely to remain a focal point of economic and strategic competition.